Full text of Banking Groups and Chains
The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
BJOPCCTQ GROUPS iMD CHAINS Material prepared for the information of the Federal Reserve System hy the Federal Reserve Committee on Branch, Group, and Chain Banking Members of the Committee E. A. Goldenweiser, Director, Division of Research and Statistics, Federal Reserve Board, Chairman Ira Clerk, Depaty Governor, Federal Reserve Bank of San Francisco Um J* Fleming, Deputy Governor, Federal Reserve Bank of Cleveland L. R. Rounds, Deputy Governor, Federal Reserve Bank of New York E. Lm Smead, Chief, Division of Bank Operations, Federal Reserve Board J. H. Riddle, Executive Secretary and Director of Research The Committee was appointed February 2d, 1930* "°7 the Federal Reserve Board 11 • , .to assemble and digest information on "branch banking as practiced in the United States, group and chain hanking systems as developed in the United States and elsewhere, the unit banking system of the country, and the effect of ownership of bank stocks by investment trusts and holding corporations*11 QENERAL LETTER OF TRANSMITTAL (To be inserted in Volume I) To the Federal Reserve Board: The Federal Reserve Committee on Branch, Group, and Chain Banking was appointed on February 26, 1930, by the Federal Reserve Board ". • • to assemble and digest information on branch banking as practiced in the United States, group and chain banking systems as developed in the United States and elsewhere, the unit banking system of the country, and the effect of Ofwnership of bank stocks by investment trusts and holding corporations." Under the terms of its reference the Committee has prepared and is submitting reports on the following topics: (l) Branch Bank- ing in the United States; (2) Branch Banking jln California; (3) Branch Banking in England; (k) Branch Banking in Canada; (5) Banking Groups and Chains; (6) Changes in the Mumber and Size of Banks in the United States,, 183^1931; (7) Bank Suspensions in .the United States, 1892~ 1911? (8) 225 Bank Suspensions. Case Histories from Examiners1 Reports; (9) Banking Profits. 1890-1911; (10) The Dual Banking System in the United States* The appointment of the Committee was prompted by the banking difficulties during the preceding ten years, which had resulted in a large number of bank suspensions, and by the growing trend towards concentration through branches, chains, and groups. When the Committee began its work, speculative activity in the securities market and in other fields had recently culminated in a collapse of security prices, ~ 2 - but the extent and scope of the decline in economic activity that had begun in the summer of 1929 was not then clearly defined* The decade just concluded had witnessed extraordinary activity in construction and rapid expansion of industrial plants, particularly the rapid growth of the automobile industry which has had profound effects on many phases of the country's life. Installment selling had developed on a large scale and had stimulated buying by the consuming public* The decade was characterized by an abundance of credit, to which an inflow of gold from abroad greatly contributed, and by an extraordinarily large volume of security flotations, both domestic and foreign* It witnessed speculation in real estate, in securities, and in business enterprise* Throughout the period, however, commodity prices after a precipitous decline in 1920 and 1921 remained relatively stable around a level somewhat higher than the low point reached early in 1922* Broadly speaking, the decide was one in which industrial and city populations were prosperous, while agriculture was going through a difficult adjustment. While the Committee was conducting its investigation, there developed an economic depression of unprecedented depth and duration which has affected every part of the world* This subjected the banks of the country to new destructive forces* The impact of the depression on the banking system was severe by the end of 1930 and became more -3 - serious in 1931, the last year covered by the organized material accumulated by the Committee. Its studies of bank earnings and expenses cover the five year period I926-I93O; its studies of failures are carried through 1931, but do not include the year 1932 during which the establishment of remedial agencies, such as the Reconstruction Finance Corporation, introduced entirely new elements into the situation. Developments during 1932 are reflected in the study only in a general way and in particular cases where -Information was available and appeared to be essential for completeness. The Committee's investigations were organized and directed by J. H. Riddle, the Executive Secretary and Director of Research* The various reports were written uader his supervision, and the major part of the editorial work was done by him. Mr. G. W. Blattner, of the Board's Division of Research and Statistics, prepared Banking Profits» 1890-1931 and collaborated in two other reports: Branch Banking ip. England and Banking groups and Chains. He also assisted in the editing of other reports and was frequently consulted as to methods and procedure in other research projects. Other members of the research staff participated in one or more projects. Mr. Guy Greer prepared Branch Banking in Canada and Branch Banking in California. He also collaborated in the preparation offfheDual Banking System in the United States. Mr. Oliver S. Powell, of the Federal Reserve Bank of Minneapolis, prepared 225 Bank Suspensions, Case Histories from Examiners' Reports. Mr. Clarence -1* - Hammond prepared Branch Banking in the United States, and collaborated in the preparation of Changes in the Number and Size of Banks M J M United States, 183^-1931» Mr. Clark Warburton collaborated in the preparation of Bank Suspensions in the United States, 18921931, Changes in the Number and Size of Banks in jbhe United States, 183^-1931* and The Dual Banking System in the United States. Mr. Richard Garlock collaborated in the preparation of Bank Suspensions in the United States, 1892-1931; Mr. Cyril B. Upham in Banking groups and Chains; Mr. Jett Lauck in The Dual Banking System in the United States; and Mrs. Louise Sissman in Branch Banking in England. Mr, J. E. Horbett, of the Federal Reserve Board's Division of Bank Operations, helped in the preparation of much of the statistical data used in some of the reports and has participated in the planning and execution of several of the statistical projects. The Committee is indebted to Mr. Carl E. Parry, Assistant Director of the Division of Research and Statistics of the Federal Reserve Board, for having read most of the reports and for many valuable suggestions. The Committee is also indebted to the counsel of the Federal Reserve Board for the preparation of digests of various laws and to members of the Board1s staff for criticisms and suggestions* The Committee expresses its appreciation to the various Federal reserve banks, the Comptroller of the Currency, and the various State banking departments for the assistance they have rendered in this investigation. Some of the projects entailed the collection of a vast amount of statistical and other factual - 5- data, and much of these were supplied by the Federal reserve banks, or through them by the State banking departments. Without this assistance some of the projects could not have been carried out successfully. To the various public officials, bankers, economists, and others in this country, Canada, and England, who have supplied information, given the benefit of their counsel, or ren- dered other assistance, the Committee expresses its thanks* Respectfully, E. A. Goldenweiser, Chairman Ira Clerk M. J. Fleming L. R. Rounds E. L. Smead LETTER OF TRANSMITTAL To the Federal Reserve Board: The Committee on Branch, Group, and Chain Banking transmits herewith a history and statistical analysis of group and chain hanking in the United States. The statistical series in this volume in most instances end with the year 1931- Respectfully, E. A. Goldenweiser Chairman CONTENTS Pag Banking Concentration Through Groups and Chains Chain Banking Group Banking Distinctive Features of Group Banking Diversity of Groups and Their Activities Sources of Information Replies to Questionnaire 1 1 2 5 b 9 15 Earlier History of Group and Chain Banking Obstacles to Growth of Group and Chain Banking An Early Group Scheme Legal Basis for Holding Companies Contemporary Comment (1902-190S) on Early Examples of Group and Chain Banking Pyramid or Promotion Chains Record of Rise of Chains and Groups Early Groups Statistics in 1925 17 IS 19 22 23 2k 27 29 33 Statistical Analysis of Qroup and Chain Banking December ]2Lt 1911 Geographic Distribution Leading Groups Banks in Chains All Groups and Chains Number of Towns Served by Group and Chain Systems Intrastate Group Banking Interstate or Regional Group Banking Hat ion-wide Group Banking Group and Chain Systems Classified by Number of Banks Size of Banks in Groups and Chains Size of Towns in Which Group and Chain Banks Operate 37 37 3? 40 kl U5 1+7 1+g k$ $0 53 59 ractors Associated with the Group Development during 1927-1930 Promotional and Speculative Profits Larger Business Units in Industry Competitive Self-defense and Regional Independence The Position of the Small Country Bank Preparation for Branch Banking A Substitute for Branch Banking Branch Banking among Groups 6l 62 67 69 71 72 73 77 CONTENTS (Cont'd) Page The Bank Holding Company: Ma.ior Systems Western Grain States Northwest Bancorporation and First Bank Stock Corporation Pacific Coast States Transamerica Corporation Marine Bancorporation Anglo National Corporation Miscellaneous Groups New England States First National Bank of Boston The Shawraut National Bank Other Groups Middle Atlantic States Marine Midland Corporation Group Banking in New York City North Central States Wisconsin Bankshares Corporation Guardian Detroit Union Group, Inc. Other Groups Southern Mountain and Southeastern States Southwestern and Rocky Mountain States Exchange National Bank of Tulsa First Security Corporation of Ogden, Utah The Bank Holding Company: Organization and Management Types of Bank Holding Companies Organization of Holding Companies The Shareholder and His Liability Miscellaneous Institutions Associated with Groups Dealing in Securities Trust Operations Extent of Holding Company Direction Group Auditing Local Personnel The Holding Company and the Correspondent Relationship The Holding Company and the Federal Reserve System Attitude of Group Management Toward Supervisory Authorities SO 80 SO Zk 8k 86 89 90 90 91 91 93 93 93 96 97 98 100 100 101 103 103 103 106 107 110 112 Il4 115 lib 116 119 11§ 120 121 123 CONTENTS (Cont'd) Page The 3ank Holding Company; Operating Policies Lending Policies Rates Charged on Loans The Effect on the Bank Borrower Absentee Credit Decisions Larger Lending Capacity Uniforaity in Investments Profits and Costs Gross Income Losses on Loans and Investments Interest on Deposits Wages and Other Costs Seduction of Non-earning Assets High Cost Factors Elements of Strength and Weakness Elements of Strength Elements of Weakness and Unsolved Problems Suspensions among Group and Chain Banks; 1921-1931 Group and Chain Suspensions, I921-I931 Geographic Distribution Suspensions 1930-1931 Suspensions by Size Groups Disposition of Suspended Banks Some Leading Cases of Group and Chain Failures Prior to 1932 The Witham-Manley System BancoKentucky-Caldwell-A. B. Banks Minor Chain Syspensions Federal Regulation Existing Federal Law National Banks as Holding Companies Clayton Act Attitude of Federal Supervisory Authorities Federal Reserve Board Comptroller of the Currency Action Proposed by Members of Congress Beedy Bill McFadden Bills Goldsborough Bill Strong Bill Glass Bill Section 17 of S. UUl2 (April 18, 1932) Federal Reserve Board and Glass Bill Federal Reserve Members in Groups nnd Chains 12k 125 126 12S 129 131 131 132 13*5 134 136 136 137 138 138 139 140 1^3 1U5 1^7 150 152 156 160 l62 170 173 ISO ISO ISO 182 1SU 1SU 1S6 1S7 1SS 1SS 188 189 I89 190 19U CONIENTS (Cont'd) Page State Regulation Banks As Holding Companies Holding of Bank Stocks by Other Corporations West Virginia New Jersey Missouri Wisconsin Indiana Oregon Arkansas Ineffectiveness of State Regulation 201 202 20U 205 206 206 207 207 207 207 20S Summary Group Banking The Problem of Groups Chain Banking 210 210 212 213 Appendix 215 A i B lvi C cii D CHAPTER I BANKING CONCENTRATION THROUGH GROUPS AND CHAINS Public policy in the United States has been opposed to centralisation of the control of banking resources. With banking corporations limited to one office, as has been the tendency since the passage of the National BaJik Act in I863, concentration built on branch offices covering a wide territory has been barred* through other instrumentalities* Concentration, however, has proceeded Banking offices having separate corporate charters have been in many cases identically owned and controlled* In re- cent years such arrangements in the banking structure of this country have come to be referred to as group and chain banking* While students of banking ever since the Civil War have realized that communities of interest existed in chains of banks, systematic effort to measure the extent of banking concentration represented by chain and group banking has been undertaken only in recent years* The amount of concentration existing in America through chain and group banking as shown by official tabulations is smaller, however, than might have been expected* In other fields of American business—public utilities, rail- roads, and various industries—concentration of control has developed much further than in the banking business* Chain Banking The characteristic form of chain banking is ownership of stock 2 in a number of hanks by one individual, or one family, or by a small group of persons, such as the officers of a particular bank. The interrelationship may be tenuous, such as an interlocking of directorates, with no real attempt to control, ownership being a matter of investment only, or it may be a majority or complete ownership of stock, with the purpose of control of operations. The usually accepted distinction between chain banking and group banking, as more recently developed, is that of personal ownership of stock as opposed to corporate ownership. Several of the present group bank organizations had their origin in chains. Groups and chains, however, merge into one another, in a manner that makes absolute distinctions difficult to establish. According to the organized statistics of the Federal Eeserve Board there were approximately personal chain bank systems ex- istent in the country at the end of 1931, each having three or more banks. They included 90S individual banks and most of them were small chains of small banks. The aggregate loans and investments of all these banks were about $927,000,000. Group Banking The movement toward group banking cannot be fully understood (1) A listing of each of these appears in the appendix, Table II # In compiling these statistics mutual savings and private banks were excluded. - 3- without background knov/ledge concerning unit banking, branch banking, and chain banking. Perhaps the most valid concept is that expressed by John Pole, former Comptroller of the Currency, which is based primarily on corporate ownership of stock as contrasted with personal ownership, characteristic of chain banking. Group banking, in his opinion, refers to "the ownership and some element of operating control of several banks through the medium of a bank holding company."'1) Some persons make a distinction between minority interest, majority control, and complete ownership of bank stock as a basis for determination of whether a particular arrangement constitutes group banking or not# Mr. Prank W. Blair, chairman of the board of the Guardian Detroit Union Group, made this distinction in an address on April 2S, 1930, before tae Reserve City Bankers Association in Memphis, Tennessee. Perhaps as good a statement defining the group bank concept as any is that of Lyman E. Wakefield, vice president of the First Bank Stock Corporation of Minneapolis. In his testimony before the House Banking and Currency Committee on April l6, 1930> ^e said: "Essentially group banking is the control through majority stock ownership of a number of banks through a holding company, patterned corporately after the modern investment trust, ^1) United States Congress, 71st, 2nd Session, House Committee on Banking and Currency, Hearings on Branch, Chain, and Group Banking, under H. Res. lUl, February 25, 1930, p. 26. ^ k- but operated as a central management institution." Mr. Wakefield filed a statement with the committee outlining the operations of the First Bank Stock Corporation, which contained the following statement on group bank- "Group banking is the name that has come into common usage for this step in the evolution of the American banking system, which has developed extensively in the Northwest, prompted by a need to meet a definite change in economic conditions. Group banking is not simply chain banking under another name. Chains of banks under common ownership or common control, usually of a single individual, have existed for generations, the majority stockholder or stockholders simply exercising that natural right to supervise the operations of all the corporations in which their holdings represented controlling interests. Chain management generally reflected a single dominant individual. Group banking, on the other hand, is the association of a number of corporately independent institutions within a single holding company for mutual advantages, the group being built around one or more large banks of a territorial nature and its management resting in the hands of the banking interests of the territory served." Ihe years 1927-1929 witnessed a rapid growth of "group banking-,11 The designation of the new development was brought into use partly to escape the odium that had come to be attached in the public mind to much of the so-called "chain banking" of an earlier day'j and partly to characterize and distinguish an essentially new type of banking structure—the management holding corporation, not itself engaged in banking, but owning the stock of banks, and directing, or at least coordinating, their operations. From the incorporation of the Marine Baacorporation of Seattle, Washington, on September 10, 1927, until the end of 1931 the group bank-, ing movement developed in every section of the country and in nearly every city of any considerable si*a. - 5Distinctive Features of Group Banking. - The "banking groups which have taken shape in the past half decade have followed no standard pattern. Their structure and organization are exceedingly diverse. Certain features more or less common to them all, although not necessarily found in each of them, are (l) a holding company which owns the stock of a number of individual banks; (2) some centralized unification or direction of the loans, investments, trust functions, and operating methods and policies of the banks in the group; (3) an exchange of stock, whereby the shareholders of the banks in the group surrender their "bank stock for shares in the holding company; and (U) announcement to the public of the existence of the group and of the names of the banks belonging to it. The holding company may be a subsidiary of one of the banks in the group, usually regarded as the head of or motivating force in the group, owning in its turn the stock of other banks; or it may be, so far as its corporate structure is concerned, the head of the whole group, owning a controlling share of all of the banks which are associated together. It is perhaps only natural that a corporate organization device widely used in other fields, particularly in the financial structure of public utilities, should have found its way into banking. Investment trusts had acquired substantial holdings of bank stocks, and relationships of more or less involved and intricate character had sprung up between the various trusts and financial institutions with which some of them were affiliated and allied. The bank merger or consolidation movement, pro- nounced in some of the larger cities, could be approximated in the rural areas only by a device like a holding company. Where branch banking was permitted, especially in the State of California, the holding company served the purpose of a temporary repository for the shares of - 6banks to be later absorbed into a branch bank organization. Diversity of Groups and Their Activities. - Many variations in structure, in the degree of centralization of operations and control, and in the unification of the units are found among the group "bank organizations. In some the holding company is dominant, in some one bank, in others a small group of banks. The investment trust, the investment company affiliated with a bank, and the trust company affiliate are all used as means of control. The banks which comprise the group organizations are both national and State, members of the Federal Reserve System and nonmenbers, banks with branches and banks without, city banks and country banks, banks with millions of dollars of resources and banks with only a few thousand. Business units, other than commercial banks and trust companies which are included in or affiliated witii the group bank organizations, are equally diverse, although they are not accounted for in the statistics. They include private banking houses, mutual savings banks, investment houses, investment trusts, insurance companies, realty firms, safe deposit companies, building and loan associations, industrial banks, joint stock land banks, and other types of business enterprise. Statistics indicate that there were at the end of 1931t 97 groups in the country controlling 978 banks. Table 1 presents a list of 3U of the leading examples of group banking. All those having 6 or more banks and $25,000,000 or more of loans and investments are included. A list of the 63 other groups appears in the Appendix, Table I« Table 2 gives a list of leading chains. For comparative purposes Table 1 - Leading Groups,(^ December 31, 1931 ; Number Number T o t a l T o t a l l o a n s , Number of S t a t e s i of towns number and i n v e s t of i n which i n which operoperof ments (000 branches ating •banks (2) omitted) a t i n g l) Name of group and location of head office New England Financial Institutions,Inc., Augusta, Me. First National Bank of Boston, Boston, Mass. National Shawmut Bank, Boston, Mass. Vforeester County Bank & Trust Company, Worcester, Mass. Hartford Connecticut Trust Company, Hartford, Conn. 12 20 6 7 9 r addle Atlantic First Trust & Deposit Company, Syracu.se, N. Y. Marine Midland Group Inc., Buffalo, N. Y« Union Trust Company & Melbank Corp., Pittsburgh, Pa. 15 19 26 31 36 97,1^5 1+1+1,553 522,763 13 55 12 5 1 I 1 7 IS 1 6 6 7 1 1 1 15 19 16 1 -L. 62,602 3^,932 ^5,672 15 5 S 1 2 1 15 17 5 9^,723 57,136 50,log 30,838 8 11 1 2 1 1 6 6 3 6 188 17 6 7 7 6 9 1+6 10 10 s 11 IS 1 8 23 26 3 11 1 1 1 1 1 1 1 513,572 333,769 231,391+ 183,602 596,290 25,273 61,306 27 Southern Mountain American National Bank, Nashville, Tenn. Hamilton National Associates Inc., Chattanooga, Tenn. First National Bank Trustees, Louisville, Ky. i 79,871 1+80,1+3!+ 11+2,1+17 69,326 32,3^7 I I North Central Detroit Bankers Inc., Detroit, Mich. Guardian Detroit Union Group Inc., Detroit, Mich. Wisconsin Bankshares Corporation, Milwaukee, Wis. Central Republic Bank & Trust Company, Chicago, 111. First National Bank, Chicago, 111. National Republic Bancorporation, Chicago, 111. Banc Ohio Corporation, Columbus, Ohio Southeastern First National Bank of Atlanta, Atlanta, Ga. Citizens and Southern National Bank, Savannah, Ga. First National Bank, Birmingham, Ala. Atlantic National Bank, Jacksonville, Fla. $ 75 6 1 2 9 Table 1 - Leading Groups/ 1 ' December 31, 1931 (Continued) Number Number T o t a l 1 T o t a l l o a n s Number of S t a t e s of towns number and i n v e s t i n which i n which of ments (000 of operoper"branches ating banks(2) omitted) a t i n g 3) Name of group and l o c a t i o n of head o f f i c e Southwestern Commercial N a t i o n a l Bank, Shreveport, La. Exchange n a t i o n a l Bank, T u l s a , Okla. Western Grain F i r s t Bank S t o c k C o r p o r a t i o n , Minneapolis, Minn. Northwest B a n c o r p o r a t i o n , Minneapolis, Minn. Comaerce T r u s t Company, Kansas C i t y , Mo. Rocky Mountain F i r s t S e c u r i t y Corporation,Ogden, Utah P a c i f i c Coast Marine B a n c o r p o r a t i o n , S e a t t l e , Wash. Old N a t i o n a l C o r p o r a t i o n , Spokane, Wash. F i r s t N a t i o n a l Bank, S e a t t l e , Wash. U. S. N a t i o n a l C o r p o r a t i o n , P o r t l a n d , Ore. Anglo N a t i o n a l C o r p o r a t i o n , San F r a n c i s c o , C a l i f . T r a n s a m e r i c a C o r p o r a t i o n , San F r a n c i s c o , C a l i f . T o t a l (3*+ groups) $ 26,35^ 43,026 3 3 3 6 312,182 316,213 71,59^ 27 33,052 - 7 21 10U 127 • 2 3 5 S 1 , , : ! OQ j 10 22 6 11 1 i 11 1 91 115 1 26 3 67^ | 32,352 29,21+7 69,12S 71,909 160,151+ S77.652 1+07 $6,300,936 29s 2 1 1 2 1 2 2 2 (1) Those with six or more banks and $25,000,000 or more loans and investments. For details for all groups by class of bank see Appendix, Tables I and III. (2) Does not include mutual savings or private banks, (3/ Number of different towns in which head office of a constituent bank is located. (*0 Officials of leading interest also own a small proportion of the stock in several small banks in the vicinity of. Detroit. 1 5 17 s 19 1 7 16 1 7 I ~ 9Table 2 - Leading Chains/ 1 ) December 31, 1931 Number Number of of i ber investtowns States I of ments (000 in v/hich in which (banks omitted) p i r a t i n g operating) (Total Total J num- loans and Name of chain and location of head office North Central C. W. McPhail, Central Lake, Mich. A. E. Sleeper, Bad Axe, Mich, John Clay, Chicago, 111. I j 9 j 13 J 9 $ 2,12s 4,250 l 1 6,1+96 4 9 13 9 l4,l46 1,473 6,533 1 l l 9 7 1,261 1,155 4,254 3,409 1,502 l l 2 2 1 9 S 17 46,316 4,536 3,661 s I 2,131 19 ! 12,496 2,656 3 j 14,454 j 10 j S 2,60s 4 47 l 1 2 IS 3 IS i1 Southeastern Exchange National Bank, Tampa, Fla. First National Bank, Clanton, Ala* Capital National Bank, Jackson, Miss, I 12 j 9 i 3 Southwestern R. C. and D. R. Couch, Haskell, Texas j 9 M. C. Parrish and Associates, Austin, Texas j 9 I. H. Nakdimen, Fort Smith, Ark. j S Thurmond Brothers, Oklahoma City, Okla. j 17 R. A, Vose and Associates, Oklahoma City, Oid.a.1 Western Grain Otto Bremer et al, St. Paul, Minn. Isaac Hazlett et al, Minneapolis, Minn. C. H. Klein, Ohaska, Minn. J. Lamport Company, St. Paul, Minn. James F. Toy, Sioux City, Iowa C. A. McCloud and Associates, York, Nebr. J. M. Kemper et al, Kansas City, Mo» J. H. Collingwood and Family, Topeka, Kans. | j 51 t 17 s i Rocky Mountain j M. D., J. H. and R. C. Thatcher, Pueblo, Colo, j 21,417 J. E. Cosgriff, Salt Lake City, Utah j 9 1 13,079 George Wingfield, Reno, Nevada J 13 19,279 s s s 1 7 3 10 l 7 l 3 6 9 1 10 Those with 8 or more banks• Does not include mutual savings or private banks. For details for all chains by class of bank see Appendix, Tables II and IV. (2) Number of different towns in which head office of a constituent bank is located. Sources of Information The first broad attempt to bring together facts with respect to the extent of chain and group banking was made by the Federal Reserve Board as of June 30, 1929* The Federal reserve banks were instructed to report all cases in which there was a community of control or ownership of three - 10 - or more banks, Where the community of interest related to two banks only, the casec were not asked for. Three hundred and twenty-one group and chain systems including 1,921 banks were reported as of that date. The instructions to the reserve banks were: "It is requested that in general only those systems be included in which any person, group of persons, partnership* association or corporation has actual or potential control over the operations or policies of three or more banking units each working on its own capital and under its own personnel." The statistics were compiled from existing records and knowledge. Ho attempt has ever been made to circularize all the banks in the country with the view of further perfecting this body of data. The data have been collected every half year subsequently, so that figures are available as of June 30 and December 31 i n 1929t 1930» an ea eh of the years & 1931^1^ Those who have worked with the figures have come to believe that they represent within a reasonable margin of error the extent of banking concentration growing out of a community of interest in three or more banks. Between the first and latest tabulations of the movement there were shifts in one direction or the other. At the end of 1931 the tabulation showed 273 systems comprising 1,886 banks. The Committee also made an effort to find out the number of cases in which two banks only were affiliated. The best indications are that as of June 3°t 19311 some 796 additional banks in the country representing 398 affiliations were (1) A tabulation appears in the Appendix, Tables V, VI, VII, and VIII, which gives details for each of these dates. - 11 - involved in relationships of this type. The largest part of the two-bank relationships represents cases of what might be called one bank operating under two charters. Trust companies and State and national banks app'oar in such relationships* Q,uit6 often the two affiliated banks operate under the same roof and with the same officials. The purpose is not to tap business by geographically dispersed outlets but to operate in a variety of lines permitted by the two charters. The location by States and other particulars concerning such banks appear in the appendix, Table n i l . Group and chain systems, each comprised of three of more banks, according to the records of the Federal Reserve Board, may be divided into three -oarts. Table 3 - Group and Chain Systems, December 31, 1931 34 - Leading groups'2) 63 - Other groups 176 - Chains Number of banks'1' Loans and investments Average loans and investments per bank 674 304 908 $6,300,936,000 2,414,843,000 926,733,000 $9,348,570 7,943,562 1,020,631 Does not include mutual savings and private banks. Those with 6 or more banks and $25,000,000 or more loans and investments. Many of the 63 "other groups" and of the chains are very different in character and in degree of centralized control from the 34 listed as representing the leading examples of the group movement. The group develop- ment is, therefore, better measured for most purposes by the figures for ~ 12 - the 3*+ leading groups. For example, the Chase National Bank was included in the miscellaneous group in the figures as of June 30, 19311 tut does not appear as of December 31, 1931* ^or some years the .American Express Trust Company in New York City had been controlled by Chase National Bank interests. According to newspaper reports, the Chase interests in the early part of 1931 assumed control of the Canal Bank and Trust Company of New Orleans in order to protect commitments. Thus, a three-bank relationship came into existence and the loans and investments of the group and chain movement were swelled by nearly $2,000,000,000• In the ensuing six months the American Express Trust Company was merged with the Chase, and the group disappeared from the statistics as of December 31, 1931# others, often cwie Three-bankrelationships,and into being for a variety of fortuitous reasons and are not intended to operate over a wide territory in lieu of branch banking, as is the case with respect to many of the 3*+ loading groups. Another example may be cited, that of the Central Hanover Bank and Trust Company of New York, which is included among "other groups," contributing with its two other associated banks more than a half billion dollars in loans and investments. The Central Hanover owns 35 per cent of the out- standing stock of two Florida banks. Fifteen per cent of the stock of these two banks is owned by the City Bank Farmers Trust Company. However, this trust company and the National City Bank, which dominates it, are not included among miscellaneous groups. Among "other groups," an important element is these three-bank groups, which account for 69 banks and $1,096,3*+31°00 loans and investments - 13 - (see Table 15). Among these are many metropolitan institutions of large size which are in no sense part of the modern group movement, as exemplified by important units in the list of thirty-four. For example, the Central Hanover group contributes about a half billion of loans and investments, and the Peoples Trust Company of Pittsburgh group supplies $167,000,000 in loans and investments. Not only is the aggregate figure of loans and investments in the movement somewhat decaptive for the reasons outlined above, but as Table 4 shows, among the leading groups nearly two-thirds of all the loans and investments are furnished by the 34 key banks around which the leading groups are formed. These banks are large because they are metropolitan banks with large commercial accounts. Their size is derived from this fact and not because they are associated with smaller banking outlets, whose business comes from customers operating on a smaller scale. Public interest in the group and chain bank movement was attracted by the rapid rise of group organizations during 1927-1929, Chains have been in existence for a long time in this country without attracting a great deal of attention. banks. This is also true with respect to groups composed of a few Groups of this class as well as chains have been formed and operate in a variety of forms. It is, therefore, difficult to make generalized observations applicable to all these forms. Among the leading groups, there is more homogeneity. Some of the chapters immediately following deal with the causes of the rise of the leading groups, their methods of management and operation, and their effects and consequences from the point of view of the problem of the banking structure in this country. - lUTrJble h ~ Loans and Investments of Leading Groups and of Largest Baric in Each, Deceriber 31, 1931 __ (In thousands of dollars) Loans and Loans and inNa:ie of group and location of head office investments vestments of largest bank of group . (1) New England 29,302 Financial Institutions, Inc., Augusta, Me. 79,271 1+80,1+31+ 357,026 First National Bank of Boston, Boston, Mass. National Shawmut Bank, Boston, Mass. 132,227 ll+2,l+17 Worcester County Ban.1; & Trust Company, Worcester, Mass. 63,326 36,1+80 38,31*7 Hartford Connecticut Trust Conpany, Hartford, Conn. 27,531 Middle Atlantic First Trust and Deposit Company, Syracuse, N. Y. si,295 97,1^5 Marine Midland Group, Inc., Buffalo, N. Y. ^1,553 198,082 Union Trust Company & Melbank Corporation, Pittsburgh, Pa] 522,763 198,063 North Cantral Detroit Bankers, Inc., Detroit, Mich. l+5l+,66s 513,572 Guardian Detroit Union Group, Inc., Detroit, Mich. 152,337 333,769 Wisconsin Bankshares Corporation, Milwaukee, Wis. 131+, 056 231,39^ Central Republic Bank & Trust Conpany, Chicago, 111. 183,602 153,370 596,290 First National Bank, Chicago, Illinois 1+02,1+37 National Republic Bancorporation, Chicago, 111. 7,21+3 25,273 61,306 BancOhio Corporation, Columbus, Ohio 38,609 Southern Mountain American National Bank, Nashville, Tenn. 62,602 ^,259 Hamilton National Associates, Inc., Chattanooga, Tenn. 3^,932 19,^70 First National Bank Trustees, Louisville, Ky. ^5,672 21.957 Southeastern First National Bank of Atlanta, Atlanta, Ga. 63,61+0 9^,723 Citizens and Southern National Bank, Savannah, Ga. ^7,530 57,136 First National Bank, Birmingham, Ala. 1+7,1+06 50,108 Atlantic National Bank, Jacksonville, Fla. 30,838 21,926 Southwestern : Commercial National Bank, Shreveport, La. 26.35* 15.713 Exchange National Bank, Tulsa, Okla. US,026 33,607 Western Grain First Bank Stock Corporation, Minneapolis, Minn. 312,182 89,588 Northwest Bancorporation, Minneapolis, Minn. 316,213 70,395 Commerce Trust Co., Kansas City, Mo. 65,31+1+ 71,53* Rocky Mountain First Security Corporation, Ogden, Utah 5,615 33.052 Pacific Coast : Marine Bancorporation, Seattle, Wash. 23,900 32,352 'Old National Corporation, Spokane, Wash. 18,01+7 29,21+7 First National Bank, Seattle, Wash. 69,12s 66,371 U. S. National Corporation, Portland, Ore. 63,390 71.909 Anglo National Corporation, San Francisco, Calif. 160,151+ 133,981+ Transamerica Corporation, San Francisco, Calif. 877.652 785.222 Total (3H. groups) 6,300,936 5 4, Ql+1,290 ( l ) The l a r g e s t bank i n each group was s e l e c t e d on the b a s i s of the s i z e cf loans and investments. - 15 Many of the observations with respect to leading groups apply to the less formal groups and the chains as well* For example, Table 2 shows that there are a considerable number of chains which control upwards of a dozen banks, one controlling 51, another 19* It is more than likely that the degree of centralized control in some chains is more analogous to that in branch systems than is the case with respect to some of the less formal groups. Replies to Questionnaire* - The Committee sent a questionnaire to leading groups and about thirty returns were received* The replies form a body of valuable information on the modem group movement and represent the most important source of material developed in the following chapters* The answers were returned in 1930 8n& 193 It and. consequently do not record such changes as may have taken place since that time, under the stress of acute business depression, in the condition and practices of the reporting groups or in the opinions of their representatives* The questionnaire was divided into five major parts: (l) organi- zation and history, (2) economic background, (3) management and supervision, (k) policies and operations, (5) public relations* Each of these subjects was developed by a series of questions* In the first division, information was requested with respect to the incorporation, capitalization, and subsidiaries of the holding company and how subsidiaries were acquired* Under the second division, an attempt was made to bring out some of the motives impelling the organization* The degree of head office con- trol and of local autonozqy among member banks was developed in the third division* The fourth was intended to elicit information with respect to - 16 - portfolio mangement, the control of costs, and the effect of the group on correspondent relationships and on the Federal reserve system. Hie fifth division was concerned with the attitude of the group to governmental regulation and the local attitude towards the group itself. As the Committee was given permission by eight of the groups to publish their responses to the questionnaire, the replies made by them to a number of the more important questions appear in the appendix as case studies. By way of establishing a background for analysis of the modern holding company and its operations in the banking field, and for describing the activities of recent years, the following chapter presents a review of earlier developments. The historical review will be followed by an analysis of the organized statistics of chain and group banking as of December 31? 1931 • CHAPTER II EARLIER HISTORY OP GROUP AND CHAICT BAffKITO There have always been individuals who have invested in stocks of more than one bank with a resultant cross interest sometimes amounting to an interlocking directorate and sometimes to virtual control of several institutions by one person, one family, or one group of persons. There has been little attempt to restrict the individual ownership of bank stocks, and, theoretically at least, in most jurisdictions all the shares of all the banks (except qualifying shares of directors) could be held by one person. There appear to have been no efforts on the part of State law- makers to limit interlocking directorates, and Federal legislation along that line came only relatively recently. However, there have been pro- hibitions in some States, and limitations in others, on banks purchasing stock in other banks, and this fact retarded and made difficult the direct operation of a group of banks by a dominant banking institution. The legis- lative history and status in this connection will be brought out in a subsequent chapter. A review of financial literature indicates that around the end of the last century writers began to take account of community of interest between two or more separately incorporated banks. Most of the cases noted in those days would be classified as chains, although early in this century citations appeared of corporations controlling strings of banks. It was not, however, until recent years that a survey of the situation was made. - 17 - - IS Obstacles to Growth of Group and Chain Banking It is apparent that many believed the spirit of the National Bank Act expressed a public policy to localize the control of banking institutions, setting its face against the centralization of control in the hands of a few* This point of view was well expressed in an opinion of the Solicitor General of the United States rendered in 1911. He said:^1' "The banks created by the national banking act were, and were designed to be, local institutions and independent of each other, but under national control and supervision* Nationalization without centralization was the keynote of the law* This is demonstrated by the structure of the banks provided for*" He based this opinion in part upon the provisions of the act: (1) requiring a national bank to conduct its business in a single place; (2) fixing capital requirements small enough to extend the facilities of national banking to the smallest communities; (3) requiring that threefourths of directors must be residents of the State; (U) providing that natural persons only could participate in the organization of a national bank. In the years following the passage of the National Bank Act industrial development in this country was rapid and about ISSO a period of feverish concentration among industrial companies began* The last two decades of the century witnessed the rapid rise of pools and trusts in almost every part of the country and in practically all industries.(3) (1) Commercial and Financial Chronicle. November H, 1911, p. 1232; November 25, 1911, p* 1^33* United States Congress, 72nd, 1st Session, Senate Document No* 92, May 10, 1932, p. 3. (2) Ibid., pp. 3-5* (3) Trusts, Pools, and Corporations, edited by William Z. Ripley, revised edition, p* xi* ~ 19 - Despite this general tendency, the spirit of the local unit hank, it would seem, was widely accepted and little was attempted during this period "by way of "building concentration on institutions incorporated under State statutes which perhaps did not contain the same implications as the National Bank Act, An Early Group Scheme. ~ The attitude of "bankers towards proposed schemes of concentrating hanking resources is exemplified by an interesting case in the early nineties. Mr. P. W. Hayes, Vice President of the Preston National Bank of Detroit, wrote in the Banking Law Journal for July 15, 1892, "A Plan for Bank Consolidation.,f He proposed the formation of a management holding company for hanks, in some respects not unlike many in existence today. Among other things he said:(l) "The chain of banks thus established should be operated under a supervising central management located in Chicago or New York. "It is not my idea that the several banks should be simply branches, but that each bank should be an entirely separate organization, for the reason that local stockholders and directors would thereby be incited to greater exertion, for they would receive their pro rata of the profit resulting from individual effort, whereas in the case of branch banks, the profits of good management in one branch may be offset by the losses of other branches." Although the plan resulted in nothing concrete so far as the record shows, it was submitted for criticism to leading bankers all over the country. Many of the replies were brought together in a booklet and give some indication of factors which discouraged the development of group ) "A Plan for Bank Consolidation," by P. W. Hayes, Banking Law Journal, July 15, 1892, pp. 56, 57. - 20 - and chain "banking at a time when trusts and pools were common in other fields.(1) The president of the national Exchange Bank of Baltimore, Maryland, feared a group system as suggested would he opposed ,rby other banks uniting their forces against it, calling it a trust, etc. "(2) The cashier of the Southern Banking and Trust Company, Atlanta, G-eorgia, spoke of "the bad odor in which trusts are held by the people of this section. «(3) The president of the First National Bank in Hartford, Connecticut, said: "'Syndicate1 is a name which is not in favor among the larger classes upon whom banks depend for profit- Again, from the cashier of the Deseret national Bank in Salt Lake City, Utah, is the statement "that the organization could be made a powerful one, hut think it likely, on that account, to be antagonized by the other banks as well as by the element in Congress opposed to National Banks."(5) Bankers, thus, seamed to think that group banking would be actively opposed by the anti-trust spirit of the day. Bankers were content to let others take the lead in testing the possibilities of concentration through various manipulations of the corporate form. It is probably true in any case that as banks were under Government supervision and bound by many special laws, bankers were reluctant to undertake any unusual deviations. Changes would be more apparent among banks than in any other type of business. ( i ) An Argument in Favor of the Organization of a Financial Corporation and Union of Banks. Together with Plans of Consolidation (1392). (2) Ibid., p. Sk. (3) Ibid., p. 81. (*0 Ibid., p. gg. (5) Ibid., p. 96. - 21 One of the bankers in commenting upon the proposal pointed out that:^1' "The question may be asked, why do business men form combinations? Not because they prefer to do business that way, but because their profits have been so reduced by competition that it becomes a necessity. "The banking business has not yet reached the point where there is no profit, and will not as long as people have money to deposit for safe-keeping, and their less fortunate fellow-men have not the necessary capital on which to do business •" Pacts brought out in other studies made by the Committee may usefully be recalled in considering the statement of this banker. In the earlier years of this century banking was a profitable and, therefore, attractive field of enterprise. More recent years have witnessed a substantial narrowing in the margin of bank profit per unit of business, and this may have given an important part of the impetus to the modern group movement. Possibly, the American system of correspondent banking represented some vested interests that resisted concentration through chains and groups. The large city banks, which possessed the resources and prestige.to lead such a movement, felt perhaps that they were getting the profitable country business under correspondent relationships without the risk which might accompany actual management of smaller banking outlets. Metropolitan bankers, moreover, may have felt that any attempt to buy into coimtry banks might be resented by the country bank correspondents who would sever their relationships. The thousands of accounts of snail country banks controlled by some of the great metropolitan banks were a part of their business which they did not wish to sacrifice. (1) Ibid., p. 1+5. - 22 Legal Basis for Holding Companies, - Most of the factors named in the preceding paragraphs served to obstruct chain banking as well as groups, but there Y/as another factor which ooartainly operated against the rise of the modem bank holding company. Before 1SS9 the laws of no State provided for a corporation to be chartered for the special purpose of owning stocks in other companies, and most court decisions were contrary to such activity. Hew Jersey was the first to make definite provision for pure holding com** panies. A student of such matters has summarized the situation:^1' " . . . Until about 18"J0 i n England, and twenty years later in our own country, the weight of legal authority had been adverse to the holding of the stock of one corporation by another. Railroads for a generation had, by special provision of law, controlled subsidiary companies in this way. But the passage of a new corporation act by New Jersey in 1SS9 first legalized the practice under general statutes. Vast possibilities were involved in this fundamental change in American corporation law. Companies could hereafter be organized as well to serve the ends of bankers and promoters as those of industrial efficiency. The New Jersey type of corporation need have no operating duties whatsoever, other than to hold the shares of other concerns, elect officers, receive dividends from constituent companies and turn them over to their own stock or bond holders. It was necessary merely to maintain a nominal connection with the chartering state by renting desk room, displaying a sign, going through the form of an annual meeting and rendering meager annual reports. Many American commonwealths, notably Delaware, Maine, West Virginia and North Dakota, promptly followed the example of New Jersey, profiting greatly thereby from the resultant fees. Only two states seem to have wholly resisted the temptation to authorize the holding company by the amendment of their industrial codes." Thus, it was not until 1SS9 that the principle of one corporation's being primarily in the business of owning stock in others came into our law. Until this principle became established, the possibility of the modern holding company for banks did not exist. These factors outlined in previous paragraphs operating against the establishment of groups and chains justify the belief that there was Trusts, Fools, and Corporations, edited by William Z. Ripley, revised edition, pp. xix, xx. - 23 - little of such banking activity in the nineteenth century. It is possible, however, that the situation was more apparent than real. The recording of chains and groups in all parts of the country with the turn of the century suggests their prior existence in covert form. Probably secrecy had been encouraged by a fear of public opposition. Contemporary Comment (1902-1908) on Early Examples of GrouTD and Chain Banking Balanced against these obstructing factors implicit in law and custom, there were other factors which encouraged banking concentration and caused it to take the form of groups and chains* These will be covered more fully in a subsequent chapter, which will analyze the cause of the rise cf the modern group bank holding company* Only those factors will be men- tioned here which were mfetfred to 'by writers around the beginning of the century. One of these factors was the lack of branch "banking powers both among national and State "banks. That chain banking was regarded as a substitute for branch banking, resorted to in the absence of branch banking permission, is evidenced by contemporary discussions of branch banking at bankersf conventions. One such statement in 1902 pointed out that "In the Northwest the branch banking question is apparently solving itself, and 'lines1 or 'chains1 of banks controlled by one or two men are becoming common and the number of banks so controlled, greater.f* The observer quoted also referred to the development of "this style of branch banking. Other studies of this Committee trace the effort made by certain persons to extend the principle of branch (1) "Branch Banking in North Dakota," Commercial West, November, 1902, p. 23. ~2U- bankLng in the national banking system. In the meantime bankers were ex- perimenting with the idea of achieving the same results with separately incorporated banking offices. In 1902 the late A. Barton Hepburn pointed out t h a t : ^ "The prohibition against the establishment of branches and the desirability of close affiliation are developing rapidly a system of joint ownership in banks . . • Such institutions, owned by strong people and in the hands of conservative managers, could certainly render the public great service." An economist writing at the same time said:v ' "To an -unknown, though probably considerable extent, a process of federation has also been going on through the efforts of coteries of individuals to acquire stock in groups of banks—it being forbidden to the institutions themselves to be holders of each other's stock." He was of the opinion that "it could make no progress outside the great cities." Pyramid or Promotion Chains. - Others have observed that chains developed at this time in many cases were dominated by men with promotional instincts, who controlled many banks with small initial investments of their own. Horace White, writing in Sound Currency for June, 1902, referred to this development: (3) "• • • Scarcely a day passes that we do not read of some existing bank passing under the control of a larger one. During the past six months there has been much quiet absorption of snail banks in New York City by large ones, but latterly the process has been extended to banks outside of the city and outside of the State. Not only so, but some of the large banks in cities far distant from each other have been exchanging shares through the persons of men who own controlling interests in each. • ." The affiliations between large and small banks, Mr. White wrote, (1) A. Barton Hepburn, "Branch Banks and the Currency Problem," Sound Currency. March, 1902t p. 36. (2) H* Parker Willis, "Demand for Centralized Banking," Sound Currency, March, 1902, p. 13. (3) Horace White, "Branch Banking: Its Economies and Advantages," Sound Currency, June, 1902, p. 56. - 25 - was supposedly "accomplished b y individuals connected with the large bank, buying the shares of the small one, and borrowing from t h e former the money which pays for them, the shares being pledged as collateral security for the l o a n . " ^ 1 ) That the Heinze-Morse chain, which was conspicuous in the banking difficulties of 1907, w a s only one of several similar developments is evidenced ^oy the Re-port of the New York Special Commission on Banks in It s a i d : ( 2 ) 1907. "A method of a certain class of promoters, well illustrated b y the recent developments in certain embarrassed financial institutions, is to b u y stock of a bank or trust company, and b y using that as collateral, borrow money with which to b u y stock of another banking institution. B y repeating this process a n d ^oy claiming the indulgence due a stockholder in the matter of extending credit in other directions, it is possible for adroit and unscrupulous m e n to acquire the nominal ownership of a very considerable amount of stock in a number of institutions, b y the investment of a comparatively small amount of capital. The object of such a procedure is to obtain a standing with such i n stitutions, which will enable the promoters to utilise their credit and obtain funds to carry on their various enterprises." Noyes in Forty Years of American Finance refers to the Heinze operations as having b e e n in progress for half a dozen years prior to 1907* A number of banking institutions of "second rank" were brought u p , h e wrote, b y a "speculating financier" and a type of "chain banking" developed as a characteristic incident of the era of speculation, "watched b y conservative financiers with m u c h uneasiness."(3) H. M. P. Sckardt, in A Rational Banking System. (M) tells of a dispatch from Omaha, Nebraska, to the N e w York Evening Post, in the issue U ) Ibid., p. 57. (2) Report of the New York Special Commission on Banks, 1907, pp. &*9* (3) Alexander Dana H o y e s , Forty Years of American Finance, p . 3^5. (*-0 H . M . P. Eckardt, A Rational Banking System, p p . I9U-I.95. - 26 - of April 25, 1902, describing how bank chains were built up in the West. After describing how towns sprang up along the right of way of new railway lines, he explained that among the first institutions in the new towns were banks. ,n The next step in the development of these banks, 1 " the Omaha corre- spondent declared, ,f, has been their combination into chains. The farm mort- gages given by the farmers who move on the new lands which they wish to improve, and borrow money for the purpose, have to be sold; hence the president goes to a large Western city and starts an investment company which makes a specialty of selling farm loans. He leaves the bank in charge of a cashier, who is usually a young man anxious to make a showing. The president establishes other banks of this sort until he has a string reaching across several counties.1" Reference is made to one banker who was president of 20 banks of this sort and who ,f 'lived in luxury without visiting them oftener than enough to keep in touch with their management.1" This author also refers to a person associated with a tank in Oklahoma Gity who was making arrangements to start a string of fifteen banks throughout the .State*'**-' Ee mentioned the purchase by the National City Bank of New York of a controlling interest in the Exchange National Bank of Spokane, and a large block of the stock of the Tracers1 National Bank of the same city. Eiese last transactions referred to as "apparently being part of a preparatory plan of the Standard Oil interests to make large investments on the Pacific Coast, ..(2) but these holdings were subsequently disposed of* Another author, reviewing the situation in the Northwest, is disposed to emphasize other motives: (3) (1) Ibid.. p. 195. (2) Ibid., v. 196. (3) Mildred Lucille Hartsough, The Twin Cities As a Metropolitan Market. pp. 1^5-1^6. - 27 - lJ . . • The practice seems to have spread rapidly, and, though it aroused considerable comment, it did not apparently give rise to much opposition. Indeed, there would not have been much cause for it, for the individuals responsible were men of capital who were furnishing banking facilities where they had not existed before, and who had no more ulterior motive than the making of additional profits by the furnishing of these services. Investments of additional capital were made by a diffusion of banking establishments in agricultural communities, because that procedure offered more profits, as well as more benefits, than the building up of a large institution in any one center. There was no apparent motive of concentration of control, such as may have been influential in later developments. It is worthy of notice, as bearing out this point, that the earliest instances of community of interest were all in North Dakota, a purely agricultural district which was just being settled, where banking facilities were scantily distributed and where the capital with which to increase them was mostly in the hands of a few men." Record of Rise of Chains and Groups The early rise of chains and groups was not made the subject of an enumeration, but the evidence of their existence consists of bits of fragmentary information and comments gathered from a variety of sources. The first citation relates to the middle eighties. Mildred L. Hartsough in The Twin Cities As a Metropolitan Market speaks of instances of chains beginning to appear in the Northwest about IS90. The first instance of chain banking of which she found record in the region was the case of Mr. David H- Beecher who established one bank in North Dakota in 1SS4, and another in lSgy.C1) Miss Hartsough seems to feel that the practice of buying into other banks spread rapidly in the Northwest, but it was probably after the turn of the century. The Witham organization in the Southeast, more or less a cross between a chain and a group, was one of the best known of the earlier systems. Starting in 1896 under Mr. W S. Witham, it cperated a string of banks ultimately located in (1) Ibid., p. IU5. - 28 - Georgia, Florida, Hew York, and Hew Jersey. Before its failure in 1926 it controlled nearly 200 banks, many of which were located in small comnranities. The record of this system is reviewed in some detail in the chapter on suspensions (Chapter VIII). By 1900 close communities of interest between two or more banks were becoming a familiar thing. It was said that: (1) "About the year 1900 there was some open talk of combinations being favored between the larger banks in Hew York City and some of the large trust companies in that and other cities." In 1903 the following observation was made: (2) ". . . A glance through a bank directory of any Western State shows the names of several men frequently repeated as presidents or vice-presidents of a number of banks. In each case the man, or interests represented by him, probably controls the banks of which he is an officer. The banks so connected are called a chain. . ." This author refers to the largest system of banks in Kansas as being made up of IS institutions, and with deposits of $3,500,000 and controlled by interests connected with the largest bank in Kansas City, Missouri. (3) Tor the most part, what interbank control there was down to 1900, and even later in most sections, was largely individual or personal in character, but in the years following 1900 non-banking companies were organized to acquire bank stock and centralize to some degree bank operations, but these were infrequent and the number of banks in each chain remained relatively few. The territory covered by a particular system was, for the most part, not extensive, in many cases being confined to a county or area of similar size. t 1 ' Charles A. Lindbergh, Banking and Currency and the Money Trust, p. SI. (2) Thornton Cook, "Branch Banking for the West and South," Quarterly Journal of Economics. 1903-19C&, Vol. IS, p. 107. (3) Ibid. - 29 ~ Early Groups. ~ One of the earliest recorded instances of a forerunner of the modern group "banking movement is the case of the Old National Bank of Spokane, Washington, and the Union Securities Company. This company was organized in 1909, more than a controlling interest being held by the stockholders of the Old National Bank, and it began to acquire stockholdings in banks. About this time also a trust company in Texas with branches, following the adoption of a branch bank prohibitory law, although perhaps not because of it, converted into a group bank system, making use of the trust company as a holding company for the stock of the separately incorporated institutions into which the former branches were converted.(1> Another example is the Atlantic Trust Company of Jacksonville, Florida, incorporated in 1908, for the purpose of acquiring a bank building. Later it began to purchase bank stock. According to information recently made public, the stockholders of one of the largest of the country's banks, the National City Bank of Hew York, also chartered a subsidiary, known as the National City Company, to carry on activities not possible under the charter of the bank. In the three weeks subsequent to its organization on July 5» 19H> it had acqiiired among its various investments stock in (1) H. H. Preston, "The Trend to Chain Banking,rt American Bankers Association Journal« April, 1923, pp. 7&WI&2.* - 30 ~ l6 banks and trust companies, 9 °$ which were national banks. The following table indicates the relative strength of the company's holdings in these national banks at that date, ( i ) although information with respect to the trust companies was not published. Table 5 - National City Company's Eoldings of National Bank Stock in 1911 Company's holdings Name and location of bank Second National Bank of New York Pletcher American National Bank of Indianapolis American National Bank of Indianapolis (2) 1 Fourth Street National Bank of Philadelphia National Shawmut Bank of Boston Riggs National Bank of Washington National Butchers and Drovers Bank of New York Lincoln National Bank of New York National Bank of Commerce of New York 10 167 250 500 1,000 2,2U0 3,000 U.32U 9,200 lotal number of shares of capital stock of hank 10,000 20,000 30,000 35,000 10,000 3,000 10,000 250,000 (2) No such bank shown in the American Bank Reporter. The degree of control over the banks that was represented by these holdings was small in some of the cases, as the tabulation shows, although in one it was complete and in two others appreciable. Shortly after the date to which this tabulation relates, the National City Company is said to have divested itself of all its holdings of bank stock. The Morris Plan system of industrial banks, originated by Mr. Morris, bears some analogy to a group system. The first of its banks was opened in Norfolk, Virginia, in (1) United States Congress, 72nd, 1st Session, Senate Document No. 92, May 10, 1932, p. ik. - 31 ~ 1910, and later others were started in different cities* As each hank was organized, Mr- Morris took some stock, hut in order to widen the scope of his activities, he organized the fidelity Corporation of .America on July 15, 1912, designed to hold stock in the "banks and to "be active in organizing them.'*' While the Morris Plan hanks are not commercial banks, hut so-called rt industrial" or small loan institutions, the development was not unlike its successors- in the commercial group "banking field. In 1909 the commissioner of "banking of Wisconsin found that group "banking was becoming an important factor in that region ,(2) "A new feature in "banking has manifested itself of late which, if permitted to go on unhindered, will eventually result in a monopoly control of the banking business. I refer to the so-called holding companies which are increasing with alarming rapidity in various parts of the country. One of these companies with headquarters in Minneapolis, Minnesota, own (sic.) a controlling interest in more than 50 banks in Minnesota, Iowa, Wisconsin and the Dakotas. In Wisconsin, eight or ten banks are now controlled by this one company; two other companies have recently been organized at Minneapolis, Minnesota, for the purpose of getting control of banks either "by buying up a majority interest in banks now in existence or by organizing new banks." In 19OS the national Monetary Commission deemed this banking movement to have attained such proportions as to merit a query about it in a circular letter which invited suggestions for changes in the national banking laws. Out of S5 letters published over SO per cent, from all parts of the country, contained opinions on this phase of banking, thus indicating that it was not unknown to the authors of the letters. (3) CD Louis !?. Robinson, "The Morris Plan," .American Economic Review, June, 1931, p. 222. (2) Fifteenth Annual Report of the Commissioner of BaaMng of Wisconsin, 1909, p. xi. (3) Administrative Features of National Banking Laws and European Fiscal and Postal Savings Systems, national Monetary Commission, Vol. 19, pp. 5-180. - 32 Iii July, 1911, the Government became interested in the development of the affiliation movement so far as national banks were concerned, and made an investigation. It was found that about 300 national banks had at that time formed affiliations with other banks.(!) Both the President of the United States and the Secretary of the Treasury felt the movement to be of such importance as to merit special legislation. In his annual report for 1911,' 2 ' Secretary McVeagh asked for legislation denying: " . . . with great precision to any bank included within its provisions, whether national or state, the right to own stock in any other independent bank. . . There is no immediate danger to be apprehended from such holdings; but now is the time to protect for the future the independence and individuality of the banks; and to forestall in their case the general tendency to the formation of undue combinations and trusts. The -prohibition should be so explicit that its spirit as well as its letter could be enforced. . ." In a special message to Congress President Taft incorporated a request for the assuring of "the individuality and the independence of each bank. "(3) The suggested legislation was never enacted and both group and chain banking continued to grow. The so-called Money Trust Investigation in 1913 found marked evidence of chain banking through interlocldlng directors. The complexity and extent of the connections between the financial organiza* tions, especially in the large cities, of the country were brought out by witnesses. It appeared, for example, that the Guaranty Trust Company of New York had 63 directors interlocking 19 other banks and trust companies UT77 Laurence Laughlin, Banking Reform, p. 205. (2) Annual Report of the Secretary of the Treasury, 1911, vp. 3, 4. ^3/ "Special Message to the Senate and House on the Financial Condition of the Treasury, Heeded Banking and Currency Refoim and Departmental Questions, December 21, 1911," A Compilation of the Messages and Papers of the Presidents, prepared under the direction of the Joint Committee on Printing, of the House and Senate, Vol. X, p. S06^. with the trust company; the Bankers1 Trust Company had 59 directors common with 19 other banks and trust companies; and the National City Bank had 32 directors in common with lo banks and trust companies in Chicago, Pittsburgh, Washington, and New York. (1) By I916 it was claimed that Minneapolis alone was the headquarters for chains operating over 300 banks.vw Six years later the Federal Reserve Board spoke of the "considerable development" of groups and chains, the largest of which included "some 175 small banks. Statistics in 1925. - All these scattered instances serve to indicate that group and chain banking appeared in all parts of the country at least as early as the "beginning of the century, and became increasingly important subsequently. Unfortunately no statistics are available before 1925 showing the strength of the movement. In that year, some data were collected under the supervision of H. Parker Willis in a Report of an Inquiry into Contemporary Banking in the United States. These figures are admitted to be probably an underestimate, but they give some idea of the scope of the tendency at that time. It is not clear whether a chain or group was defined to consist of two or more banks or some larger number. At any rate as shown in Table 6, adapted from the table in the report, more than 130 chains and groups were accounted for with more than 900 banks. (1) United States Congress, 62nd, 2nd and 3 r & Sessions, House Subcommittee on Banking and Currency, Investigation of Financial and Monetary Conditions in the United States under H. Res. U29 and 50U, Exhibit I3U-C, PP- 5-7(2) Mildred Lucille Hartsough, The Twin Cities As a Metropolitan Market, P. 1^7. (3) Annual Re-port of the Federal Reserve Board, 1922, p. 6. Re-port of an Inquiry into Contemporary Banking in the United States, compiled under H. Parker Willis, Vol. VI, Ch. XIV, p. 9. - 3UTable 6 - Banking Chains and Affiliations in the United States Daring the Year 1925U) State Arkansas Arizona California Colorado Florida Georgia Idaho Illinois Iowa Massachusetts Minnesota Mississippi Missouri Montana Nebraska Nevada New Jersey New Mexico New York North Dakota Oklahoma Oregon Pennsylvania South Dakota Texas Utah Washington Wisconsin Wyoming Total Number of chains Number of banks 2 2U 15 66 4 20 (2) 1 2 IS (2) 5^ 163 73 3 18 s i+5 (3) 5 2 1 (2) 103 17 6 (2) 2 l 2 2 10 (2) 6 6 2 1 2 9 (2) 11 9 26 s 35 (2) >»5 22 16 6 2S 52 16 2 1 69 13U 933 Ik g ("*-) Report of an Inquiry into Contemporary Banking in the United States, compiled under H. Parker Willis, Vol, VI, Chap, XIV, p. 9. (2) Exact number not reported. (3) One reported for an earlier date. The first tabulation which approximated completeness was that of the Federal Reserve Board for June 30, 1929, the result of which was given in the first chapter with more details in the Appendix, Table V, and the - 35 - Board has tabulated the situation at half yearly periods subsequently as shown in Table 7. It is true that the Board did some canvassing in 1922, I926, and again in 192S. The results obtained, however, were not believed to be complete enough to warrant publication. Table 7 - lumber and Loans and Investments of Banks in Chains and Groups June 30, 1929-December 31, I93I Date J-une 30, December June 30, December June 30, December 1929 31, 1929 1930 31, 1930 1931 31. 1931 Number of chain and group systems Number of banks Loans and investments (millions of dollars) 321 332 325 316 305 273 1,921 2,165 2,229 2,154 2.071 1,SS6 $ 9,768 12,093 12,766 11,856 13,355 9,643 Appendix Tables VIII and IX show the numbers of groups and chains by geographic divisions and by States. As the table indicates, a large part of the organization of groups and chains was over by the time the first record was made. The first record showed 321 chains and groups with 1,921 banks. One year later 2,229 tanks were reported as belonging to chains and groups. Since that date, the numbers of systems and member banks included have been diminishing at the same time that the number of all banks was decreasing owing to failures and consolidations. Sable S serves to show that most of the leading bank holding companies were incorporated at comparatively recent dates. - 36- Tahle g - Chronology of the Appearance of Some of Leading Names in Bank Holding Company yield Name Marine Bancorporation Citizens and Southern Holding Company Old Colony Trust Associates United States National Corporation Shawmut Association First Security Corporation of Ogden Pacific Bancorporation Transarnerica Corporation Anglo National Corporation Date of Incorporation Date of incorporation Name Jan. 2k9 1929 April 1, 1929 May 9, 1929 1929 Sept. 1§29 Sept. 23, 1929 Sept. 10, 1927 Northwest Bancorporation First Bank Stock Corporation April 9, 192S Guardian Detroit union G-roup Financial Institutions, Inc. May Ik, 192S BancOliio Corporation Marine Midland Corporation May 8, 1922 Wisconsin Bankshares CorpoMay 21, 192S ration Detroit Bankers Company June 15, 192S Hamilton Natlonal Associates July 7, 192S Southwest Bankshares CorpoOct. 11, 192S ration Dec. k, 192S Dec, 10, 1929 Jan. S, I93O Jan. 20, 1930 Feh. 6, 1930 i 1 CHAPITER III STATISTICAL ANALYSIS OF GROUP AND CHAIN BANKING DECEMBER J l . ^ J i Banks belonging to groups and chains are found in practically every section of the country and among all sizes of banks. Only a few States, located in the East, such as Virginia, Maryland, Delaware, New Hampshire, and Vermont, are without any group or chain "banks• The great majority of chain banks, however, are located in the agricultural States of the Middle West where "branch hanking is prohibited. Many of the banks in groups are also located in the agricultural regions, but a large proportion of them is found in and around the large cities, especially those located in the Northeastern and North Central States. Charts 1 and 2, outline maps of the United States, show the location of banks in groups and chains respectively. Geographic Distribution Leading Groups« - Seven of the 3U leading groups have their head offices in the North Central States, as indicated in Table 1. The Pacific Coast States have 6 of the leading groups; New England, 5; a &d the Southeastern States, k. The Middle Atlantic, Southern Mountain, and Western Grain divisions each have 3> Southwestern, 2; and Rocky Mountain, 1# However, from the point of view of the number of banks the Western Grain States are the most important as they account for the 2 groups which have the greatest number of banks, the Northwest Bancorporation and the First Bank Stock Corporation. Moreover, as Table 9 shows, the number of - 37 - - Jg - CHART 1 Where many banks in a large city belong to groups, a congregation of dots representing both downtown and suburban banks appears on the map f as for example in the Chicago and Minneapolis areas. - 39 - CHART 2 Where many banks in a large city belong to chains, a congregation of dots representing both downtown and suburban banks appears on the map, as for example in the Chicago and Minneapolis areas* - Uo banks belonging to leading groups is largest in these States. Of the 67^ banks belonging to leading groups 195 are located there. The next largest number, I32, appears in the North Central States, and the smallest number, 27t in the Southwestern States. As Table 10 shows, the amount of loans and investments controlled by leading groups is largest in the North Central States, amounting to $1,961,^53,000. These States include the two Detroit organizations and the Wisconsin Bankshares Corporation. Owing to the size of the Transamerica Corporation, the Pacific Coast States rank second in terms of loans and investments. And even the Middle Atlantic States contributed more loans and investments than the Western Grain States, which are represented by the largest number of banks. Banks in Chains. - The Western Grain States have many banking chains. Of the 90S banks belonging to chains, UOS are situated there. The organized statistics as of December 31* 19311 account for 22 chains in the United States which have 8 or more "banks. As Table 2 shows, 8 of those are located in the Western Grain States on the basis of the location of their head office, and most of their banks are located in these States. The largest chain in the country both with respect to number of banks and total loans and investments as of December 31» 1931 > v/as Paul. t]lat c f Mr. Otto Bremer of St. This chain comprised 51 banks with over $H6,000,000 of loans and in- vestments. Prom the point of view of number of banks, it is exceeded in the whole United States by only two groups, the Northwest Bancorporation and the First Bank Stock Corporation. The North Central and Southwestern States also account for a large number of banks in chain systems. On the other hand, there are practically - Ill ~ no banks belonging to chains reported in the Southern Mountain and Hew England States and but few in the Pacific Coast States. All Groups and Chains. - With respect to the 1,886 banks in all chains and groups the Western Grain States also have the largest representation with 629. respect. No other geographical division is a near conpetitor in this The large number in the Western Grain States reflects largely the existence of kOZ chain banks. Table 9 - Nunber of Group and Chain Banks l>y States and by Geographic Divisions Compared with All Commercial Banks, December 31, 1931 Number of banks _J Group and chain banks Leading Other Total commercial groups groups Chains groups and per 100 chains active ban3':s ; State' by geographic division Hew England Maine Hew Hampshire Vermont Massachusetts Hhode Island Connecticut Middle Atlantic New York Hew Jersey Delaware Pennsylvania Maryland Dist. of Col. Horth Central Michigan Wisconsin Illinois Indiana Ohio Southern Mountain West Virginia Virginia Kentucky Tennessee All 625 SI 66 81 229 25 1*3 54 ; 17 1+ 12 3 - — •«• — 33 ~ 9 60 3^ k 3 7 k — - 38 ^9 52 23 21 -. — 26 17 - ~ - M75 132 5S9 S69 ho 1,29* 2S 651 772 - 9 11 - 1.505 35 3 218 392 — U97 39S 6 — - 29 3 2,S26 S3* ^ 1+6 1,266 187 38 ~ 53 X0>+ 75 15 12.0 is.5 «. — — in 3 1 17.9 12.0 11.2 16 7.9 222. u.k 95 70 15.^ M — ih 57 — - M - - 13 107 252 ~ ~ 55 95 29 S2 1+ 6.0 1 16.1 9.^ 55 9 h - 11 i.h 1 l 39 ~ — — r 2.6 0.5 23 d l 0 32 1 1»2 i 2.0 - k2 ~ Table 9 - Number of Group and Chain Banks by States and by Greographic Divisions Compared with All Commercial Banks, December 31, 1931 (Continued) Numb sr of banks State by geographic division All commercial Southeastern itforth Carolina South Carolina Georgia Florida Alabama Mississippi Southwestern Louisiana Texas Arkansas Oklahoma Western Grain Minnesota North Dakota South Dakota Iowa Nebraska Missouri Kansas 1,389 283 114 321 167 256 22s ! ! Leading j Other groups groups 35 i 1 0 - 2,102 200 1,102 276 ~ 524 19 ~ 195 104 26 10 886, 246 133 - 1r 6 25 13 24 s 60 9 75 408 142 40 5 263 935 633 992 34 ~ r 0 - 923 l - 63 15 89 30 - 22 2 15 12 8 14 16 % 5 7 6 : 122 ! Pacific Coast Washington Oregon California 78 233 50 32 8S 9 32 - 875 286 73 199 390 19,167 36 14 23 674 19 50 46 5 - — - \ ! 0 11 23 152 ! \ 38 792 157 6 36 62 18 42 27 5 Rocky Mountain Montana Idaho Wyoming Colorado New Mexico Arizona Utah Nevada UNITED STATES - 1 21 5 5 9r M78 i u 2 18 : Chains •50 1 - 1 Group and Total chain banlcs groups and per 100 • chains active banks J 16 : 95 1 9.6 0.4 5.3 7.5 29.4 S.4 10.1 221 10.5 19 99 9-5 9.0 3-3 si 17.9 629 256 S3 53 61 53 27 96 12.9 2S.9 33.7 20.2 6.5 8.4 2.7 10.4 167 42 4^ 16 16 : 21.1 26.8 36.9 20.5 6.9 10.0 18.8 23.9 50.0 6 5 6 12 21 16 16 Us 27 148 23 14 12 13 ~ 13 73 26 49 16.9 25.5 13.1 12.6 304 90S 1,886 Q.8 -^ 3 - Although the Western Grain States show the largest number of chain and group banks, "both the Rocky Mountain and Pacific Coast States surpass them as to the proportion of active commercial "banks included in groups and chains. These two divisions have respectively 21.1 and l6«9 per cent of their banks in groups and chains against 12.9 per cent in thetfestern Grain States. The Rocky Mountain area is, of course,, a sparsely settled country of few hanks and the Pacific Coast situation is heavily weighted "by California, where "banks are fewer in number "by reason of state-wide "branch "banking, privilegea. Only 2.6 per cent of all active commercial banks are included in groups and chains in the Southern Mountain States. Table 10 - Loans and Investments of Group and Chain Banks by State Compared with All Commei*cial Bankst December 31> 193^ State by geographic division Loans and investment Total Leading Other Chainp groups and groups groups (000 chains (000 (000 (000 omitted) omitte ^) omitted) omitted) All commercial (000 omitted) Hew England Maine New Hampshire Vermont Massachusetts Rhode Island Connecticut $ 3,05S,527 $ 284,510 96,665 137,361 1,648,682 336,728 554,581 Middle Atlantic New York New Jersey Delaware Pennsylvania Maryland Dist. of Col. 17,367,662 10,336,64s 1,78^,027 134,032 4,317,614 546,254 249,087 North Centx'al Michigan Wisconsin Illinois Indiana Ohio 7,410,744 I,4s9,si4 782,060 2,712,360 563,844 1,862,666 Eatio of group and chain to all commercial 810,395 $ 79,371 512,349 $ 10,258 8,229 $1,030,973 90,129 33.7 692,177 7,456 139,201 55,434 8,229 707,862 139,201 93,781 42.9 4i.3 16.9 1,121,461 1,388,636 263,^ 538,698 60, £•22 928,695 219,901 I63 ,Q949 2,773.689 1,527,615 3S3.250 16.0 l4.S 21.5 39,421! 862,224 20.0 43,454 133. 362 2,138,269 28.9 61.3 35.3 31.3 6.9 3.3 3S,3^7 582,763 1,9.61,453 855,971 239,011 805,165 61,306 24o,o4o 57,7 851 4,324 39,130 913,720 275,362 848,251 35,130 61,306 31.7 - Ill* - Table 10 - Loans and Investments of Group and Chain Banks by State Compared with'All Commercial Ban'cs, December 3l« 1931 (Continued) Loans and investments Total E a t i o of Leading Other 1 group and and groups Chains groups groups c h a i n s (000 (000 1 (000 1 / ~.—^ 1 c h a i n to (000 a l l como m i t t e d ) omitted) omitted) omitted) mercial All commercial (000 omitted) S t a t e by geographic division 152,845 1.494 45.672 105,679 10.6 .6 11.3 32.4 62,595 3,112 2,924 60,355! 3,757 34.9S6 4,209 17,403 399,156 2,908 35,755 154,318! 12S,4i9 57.4291 20,3271 35.3 1.2 31.7 57.2 71.5 27.7 16.8 73.75S 22,933: 4,164; — 46,66l 96,169 20,917 75.252 _ - 83,081 30,361 19,110 11,120 22,490 253,008 74,211 98,526 11,120 69.151 16.5 20.9 12.6 10.4 24.0 2,970,0^5 709,373 74,182 88,210 546,624 245,493 996,103 310,060 615,794 407,837 32,219 32.985 35,730 34,807 7L594 622 44,259 32,795 - 24o,424 81,501 14,952 7,217 28,171 20,060 31.755 56,768 900,477 496,19 s 48,317 40,202 67,359 54,867 136,144 57.390 30.3 69.9 65.1 45.6 12.3 22.3 13.7 IS.5 698,130 109,134 60,331 47,305 226,110 30,839 56,590 133,936 33,S25 95,699 58,881 17,027 1,67s _ 18,113 - 13,62s 13,628 _ _ _ - 105,796 4,667 3,469 11,964 22,564 1,240 i4,l45 26,479 21,268 3,567,942 331*050 211,137 3,025,755 1,246,365 137,SSO 107,853 1,000,632 502,207 29,000 14,767 45s,44o 30,4oo 15,882 14,512 Southern Mountain $ 1,439,194 $ West V i r g i n i a 254,111 Virginia 454,731 Kentucky 403,775 Tennessee 326,577 139,088 $ 45,672 93,4i6 i 12,263 Southeastern North C a r o l i n a South C a r o l i n a Georgia Florida Alabama Mississippi 1,130,690 2H0,l429 112,854 269,733 179,622 207,177 120,875 236,923 5,4i6 150,561 30,83s 50,10s - 101,873 2,908 30,339 Southwestern Louisiana Texas Arkansas Oklahoma 1.531t765 355,416 781,289 106,670 288,390 Western Grain Minnesota North Dakota South Dakota Iowa Nebraska Missouri Kansas Rocky Mountain Montana Idaho Wyoming Colorado New Mexico Arizona Utah Nevada P a c i f i c Coast Washington Oregon California UNITED STATES 12,263 $ 6,s6o 1,146 - 3,45s 1,494 $ 1,494 - ; 215,123 63,548 34,124 13,642 22,564 1,240 i4,l45 44,592 21,268 30.8 58.2 56.6 2S.3 10.0 4.0 25.0 33.3 62.3 1,778,972 182,762 122,620 1,473,590 49.9 55.2 58.1 4S.7 $39,174,699 !$6,300,936 i$2,4i4,s43 1926,733 |$9,642,512 24.6 : ! 1 ! 1 1 - U5. The preceding paragraphs have brought out the areas in which group and chain banking have seen their greatest development. The treatment in this connection made use of the conventional geographic groupings of States, A later section will group the States from the point of view of the provisions of their statutes bearing upon the right of banks to operate branch offices. That section will show that groups and chains have shown their greatest development in those States where branches have been wholly prohibited or largely restricted. Number of Towns Served by Group and Chain Systems Three of the leading groups operate in one town only, as Table 11 shows. Fourteen of them operate in fifteen or more towns; one operates in 115 towns; and one, in 91» Table 11 - Group and Chain Systems by the Number of Towns in Which Their Banks Operate f U ) December 31, 1931 Total Leading groups Other 1groups 1 Chains Number of towns Number | Number Number 1 Number Number Number Number Number in which banks of of of of of of of of operate systems "banks systems ; "banks systems banks systems banks 1 2 1 .5 6 7 8 9 10 11 13 l 2 22 8 16 - - 2 13 3 1 i I 2 1 19 11 - - 2 2 2 1 16 17 18 15 23 26 'dL 3S 20 Ui 1 2 73 ^7 - 91 115 1 _l Total 34 % 23 56 56 - 10U 12I _ _ - Slk 63 27 - 1 7 16 15 7 5 2 1 5 3 l l 30 26 1U J *3 28 10 11 — _ - 8 11 53 h5 ik 17 10 6 5 2 29 37 166 18U 75 106 73 11 23 _ - 1 13 1 1 l 17 17 19 -. - ... - 1 51 IS 28 70 52 21 2k 15 13 9 3 l l 2 3 — - - 3 2 2 1 2 1 1 1 30^ j 176 908 273 Ik 101 23S 2lU 114 156 123 H? 33 11 13 60 55 l\ 27 73 51 io4 127 1,886 (1) This represents the number of towns in which there is located the head office of a constituent bank of the groups - Ub - There is thus a wider geographical dispersion among the leading groups than among the miscellaneous ones and among chainse The number of towns served by some of the leading groups through the instrument of the separate i icorporation of banking offices is commensurate with some of the leading statewide branch banking systems in the branch banking States. Among miscellaneous groupsy 3S out of 63 operate in three towns or less, and among chains, 72 out of 176 operate in three towns or less. Table 12 - Loans and Investments of Group and Chain Systems by the Number of Towns in Which. Their Banks Operate! 1) December 31> 1931 Loans and investments i n thousands of d o l l a r s Leading Other Total Chains groups groups Number of towns | i n which "banks operate 1 2 3 4 5 b 7 8 9 10 11 13 15 16 17 18 19 23 26 47 91 115 Total $ 737,012 25,273 233,710 72,026 394,44o 1,067,779 545,924 61,306 159,747 742,917 82,958 480,434 470,800 333,769 264,446 312,182 316,21,3 $6,300,936 $ 83,834 516,582 1,536,337 S3,l6l 44,94o 27,688 9,325 66,997 28,811 11,035 6,133 _ — — - $ 64,29b 85,291 192,143 214,159 70,921 33,399 59,393 26,955 24,331 34,333 4,250 4 , 5 " ;6 3»^B 12,4s 6 ~ — 46,33 6 — $ $2,4i4,843 $926,73 3 $9,642,512 885,142 627,146 1,962,190 297,320 137,887 506,027 1,136,502 639,376 114,448 45,368 6,133 4,250 159,747 747,453 86,367 492,930 470,800 333.769 264,446 46,316 312,182 316,213 (1) This r e p r e s s n t s t h e numb*3r of towns :m which the sre i s locate the head off ice of a cons3 t i t u e n t ban!c of the grc )UPc - U7- Intrastate Group Banking Most of the group hanking corporations limit t|heir hank stci. acquisitions to institutions within a single State or ev^n,smaller ar ^ X A° Twenty-three out of the thirty-four leading groups confine their activities to one State, as Table 13 shows0 Perhaps the test known) of these, both be- cause of its national advertising, and because one unit lof the group is a New York City bank, is the Marine Midland Corporation Table 13 - Group and Chain Systems by the Numbeh: of States in Which Their Banks Operate, December 31>| 1931 Leading groups Other groups Chains Total Number of s t a t e s ] Number Number Number Number Number N|umber| Namber Number i n which banks of of of of of of of of operate systems banks systems banks systems banks systems banks 1 2 23 1 17 2 7 303 32 53 s 2 242 50 12 5 2 104 g 642 160 46 60 137 32 47 9 1,187 302 106 60 2 1 io4 213 121 Total 3* 674 127 63 304 176 90S 273 1,886 Tat>le l4 - Loans and Investments of Group and Chain Sy btems "by the Number of States in Which Their Banks Operate, Decembe * 3l» 1931 Number of states Loans and investments in thousands of dollars in which "banks Leading Other Chains Total operate groups groups 1 2 $4,33^,079 1,257,384 81,078 5 6 7 $1,771,^30 606,657 36,756 $704,79k 97,901 71, 227 c 812 52, 312,182 8 Total $6,810,302 1,961,942 189,061 52,812 312,182 316,213 $6,300,936 $2,414,843 $926,733 $9,642,512 ~ Hs Some of the better known organizations, operating throughout an entire State or a major portion of it, are the Wisconsin Bankshares Corporation of Milwaukee, the Guardian Detroit Union Group of Detroit, Financial Institutions, Inc., of Augusta, Maine, BancOhio Corporation of Columbus, the First National and National Shawmut both of Boston, and Detroit Bankers Company, Inc., of Detroit. It should be stated that the last company named does not regard itself as engaged in group banking outside of Detroit, if at all. In its annual report to stockholders, dated January 12, 1931, it states that "The units of.the Detroit Bankers Company are all located within Metropolitan Detroit." Interests associated with one of its principal Detroit banks, the First National Bank, are minority stockholders in several up-state Michigan banks. Interstate or Regional group Banking The Northwest Bancorporation of Minneapolis covers the widest geographical area of any group bank organization of the management type. On December 31, 1931, it had 127 individual banks in eight States stretching from Wisconsin to Washington. Second with respect to area covered is the First Bank Stock Corporation, also of Minneapolis, which, on December 31* 1931, had 10U banks in five States. It should be remarked that this group has no units in the State of Wisconsin, but does have in the northern peninsula of Michigan, where the Northwest Bancorporation is not represented. While the other group banking organizations are more restricted geographically, a number of them have banks in more than one State. The First Security Corporation of Ogden, Utah, operates in the inter-mountain country, having units in Utah, Idaho, and Wyoming. The Southwest Bankshares Cor- poration of Tulsa, Oklahoma, dominated by the Exchange National Bank, -Ug- operates hanks in Oklahoma, Kansas, and Texas, A number of the Southern banking groups cross State lines also. Only k of the 3*+ leading groups operate in more than 2 States, 7 operating in 2 States, This tabulation also indicates that among the miscellaneous groups and among chains the crossing of State lines is less than among leading groups. Nation-wide Group Banking, - None of the group banking organizations which are in operation today can be said to be engaged in group banking on a nation-wide scale. One company, at lea^t, had plans which contemplated activity that extensive in its scope. The American Financial Holding Corporation (the name of which was subsequently changed to the American Financial Corporation of New York) was incorporated January 9t 192S, in Delaware. Poor1 s Bank, Government and Municipal Volume for 1931 indicates that the corporation was organized "to investigate group banking and to establish a program for a group banking system through the acquisition of securities of financial institutions. The corporation, through a management board, will extend its cooperation to each bank acquired," The . American Financial Corporation of New York is referred to as a "super-holding company" by Charles B, Cheney in the Minneapolis Journal for July 29, 1929• According to the plan as charted by this concern in its prospectus, and described by Mr. Cheney, "six great regional holding companies are to acquire control of banks, each in its own territory, and manage them, with the parent company over them all. One regional company is to cover New England, another New York, a third Pennsylvania, and ~ 50 - the others are to be southern, central, and western in scope." Apparently the paper plans of this organization were never carried out. Perhaps the most widely advertised and best known of the companies which hold stocks of banks widely scattered is Ttansamerica Corporation. While it is true that this corporation owns stock in a number of banks in New York, California, and Oregon, as well as in foreign countries, its activities perhaps are more typically those of an investment trust, rather than of a group banking institution of the management type. The corporate holding company form of organization was utilized in the early stages both in New York and in California for the purpose of acquiring banks which were later merged into some one of the principal banks of the system. In addition to the Transamerica Bank Holding Company, this or- ganization included a mortgage holding company, an insurance holding company, a public utilities holding company, an investment securities company, and a service company. Details by specific groups and chains with respect to the number of States and towns in which operating appear in the appendix, Tables I-I^j. Group and Chain Systems Classified by Number of Banks The largest of the group organizations from the point of view of the number of banks, the Northwest Bancorporation, included 127 banks as of the end of 1931- The next largest, the First Bank Stock Corporation, had IOM* banlcs. A third organization accounted for U6 banks, while there were 5 others each with 21 to 30 "banks. These 8 leading groups accounted for more than $1,885,000,000 of loans and investments. - 51 - imong the 63 miscellaneous groups, ^9 k&i f i v ^ banks or less, which had $2,2^3,000,000 in loans and investments. It has been pointed out earlier that many of the groups in this class center around very large metropolitan banks, and that it is the large holdings of loans and investments by the latter that account for the larger part of the loans and investments of the banks in these 63 miscellaneous groups. imong the 176 chains, 127 were composed of five banks or less. One chain was reported of 51 banks, a larger number than that of any leading group with the exception of the two mentioned in a preceding paragraph. These details are shown in Table 15» Table 15 - Group and Chain Systems "by Number of Banks, December 31, 1931 Number Number of systems ITumber of "banks of "banks Reading Other : :Leading Other Chains T o t a l in Chains T o t a l groups 1 groups system 1 groups groups 3 k 5 6 7 g 10 n-15 15-20 21-30 46 51 104 127 — 5 4 1 3 3 5 5 5 1 1 _i Total i 3* 0 s 12 1 3 3 3 3 1 — — 63 52 53 lb 17 10 8 6 1 3 3 1 .. 176 ; 81 67 28 23 17 12 12 7 9 8 5 l 1 1 l 273 i 69 56 — 1 30 ! 28 8 27 30 60 91 123 46 104 121 j 60 6 21 24 27 30 11 ~" — — 30^ 67^ ! 1 1 - 1 nk 2i+3 268 i4o 138 119 96 108 70 109 11*1+ 123 46 51 io4 127 212 80 102 70 64 54 10 3S 53 51 — 908 ]joans and i n v e s t m e n t s i n1 tnousancls 01 d o l l a r s i Leading groups $ 372,919 247,539 25,273 522,757 812,244 1,187,883 1,179,675 1,026,857 231,394 312,182 T)-6,217 j ; Other groups Chains Total 1$1,096,343 $247,376 $1,343,719 922,333 240,917 ; 1,163,250 229,600 110,972 3^,572 65,768 16,572 461,265 37,013 356,406 71,254 44,762 27,332 97,367 659,902 25,592 51,559 14,454 854,650 27,952 1,232,291 32,275 6,133 2 0 , 4 4 i 1,200,116 — — 1,026,857 23L394 46,316 46,316 312,182 — — 316,213 1,886: $6,300,936 $ 2 , 4 i 4 , s 4 3 $926,733 $9,642,512 II..I.M .1 . 53 t Size of Banks in Groups and Chains Other studies of the Committee based on statistics of failures for 1921-1931 and statistics of earnings for 1926-1930 have brought out the fact that banks of less than $500,000 of loans and investments have experienced a larger proportion of suspensions and less satisfactory earnings than larger banks. Leading groups have accumulated a small number op banks in this class; only a little more than one-fourth of their banks) are of this size, as shown in Table 16 and Chart 3 • imong miscellaneous groups and chains the proportion is higher so that for the total chain and group movement nearly half of the banks are in this class (Table 16 and Chart h). Table 16 - Number of Group and Chain Banks by Size of I|oans and Investments December 31» !93! Chains Leading grout) s Other groups Total Number Ber flsntNumber Per cent Number [Per cent Number Per cent Size group of of of of of of of loans and investments of total total banks total banks banks total banks Under $150,000 150,000 - 250,000 250,000 - 500,000 500,000 - 750,000 750,000 - 1,000,000 1,000,000 - 2,000,000 2,000,000 - 5,000,000 5,000,000 -10,000,000 10,000,000-50,000,000 50,000,000 and over Total 37 50 105 73 62 113 117 kS hi 5..5 7. i5-.6 10.8 9.2 16.s 17.U 6.8 7-0 ^5 20 5^ 25 2U U6 37 23 2U -Li -1 100.0 30k lk.S 6.6 17.S s 7 15 12 7 7 2 100.0 250 15U 208 81 U8 6^ 27.5 332 17.0 22.9 8 •9 22k 5 •3 12 1 7 .0 6 •9 3 .0 l •3 .1 90S 100.0 63 27 367 13S+ 223 217 96 S3 _21 1,886 17 11 •9 19 • 5 9 •5 7 .1 11.s 11,5 5.1 U.U 1.6 100.0 - 55 - CHART 3 NUMBER OF BANKS IN 3 ^ PRINCIPAL GROUP SYSTEMS NUMBER NUMBER BY SIZE OF BANK 300 300 200 200 100 100 » Z E & 0 U P S UNDER 150 TO 250 250 500 750 500 750 1.000 2.000 5,000 10,000 50.000 OVER TO TO TO 1,000 2,00C1 5.000 10,000 50000 TO TO T TO TO AND Number of banks in 34 principal group systems as of December 31, 1931, Banks c l a s s i f i e d according to si| ze of loans and investments - 56- CHART h NUMBER NUMBER OF BANKS IN CHAIN AND GROUP SYSTEMS BY SIZE OF BANK NUMBER 400 400 300 300 200 200 too too 0 _ SIZE GROUPS . _ , „ - IN THOUSANDS Of DOLLARS UNDER I,SOO U 150 250 500 250 500 750 TO TO TO 750 TO 1,000 TO TO 5,000 10,000 saooo TO TO 5Q0O0 1,000 2,000 5,000 10,000 AND OVER Number of banks in chain and group systems as of December 31f 1931. Banks classified according to size of loans and investments - 57 - The data appearing in Chart 5 a&d Table iZ show that from 6 to 9 ou * of every 100 hanks in the country with loans and investments of less than $500,000 were embraced in the group and chain movement as of June 30, 1930« On the other hand, hk out of every 100 active "banks with loans and investments of $50,000,000 and over were included in the movement. Of the 31 banks of this size in all chains and groups, 2^ belonged to leading groups; 6, to miscellaneous groups; and 1, to a chain. June 30, 1930, is the latest date for which all active banks have been distributed on a size basis. The relative position eighteen months later, however, was in all probability little different. Table 18 - Number of Banks in Chain and Group Systems per 100 Active Banks, by Size of loans and Investments, June 30, 1930 Size group loans and investments Under $150,000 150,000 - 250,000 250,000 - 500,000 500,000 - 750,000 750,000 - 1,000,000 1,000,000 - 2,000,000 2,000,000 - 5,000,000 5,000,000 - 10,000,000 10,000,000 - 50,000,000 50,000,000 and over Total IJumber of "banks in chain and group systems •per hundred active "banks 6.3 S.3 S.3 9.0 10.0 10.5 15.2 IU.S 27.s U1.6 9.7 - 58 - CHART 5 PER HUNDRED NUMBER OF BANKS IN CHAIN AND GROUP SYSTEMS PER HUNDRED ACTIVE BAJ1KS BY SIZE OF BANK PER HUNDRED 50 50 40 40 30 30 20 20 10 10 0 I SIZE 6B0UPSfm„_ I C Q IN UNDER ' 2 r THOUSANDS 1i 3sUn ™ OF DOLLARS 250 SyOOO 10000 50,000 TO TO AND 1QO00 50,000 OVER Number of banks in chain and group systems per hundred active banks as of June 30, 1930. Banks c las si f;ied according to size of loans and investment s - 59 - Size of Towns in Which group and Chain Banks Operate Table 19 shows that the leading groups have avoided the towns with a population of less than 5*000 to a greater extent than miscellaneous groups and chains "but indicates the relative!y large extent to which chain hanking has -developec in small towns. Table 19 - Number of Group and Chain Banks by Si}ze of Town December 31» 1931 Population of town Under 500 500 - 1,000 1,000 - 2,500 2,500 - 5,000 5,000 - 10,000 10,000 - 25,000 25,000 ~ 50,000 50,000 - 100,000 Chains Other groups Leading groups Total Uumber Per cent Number Per cent Number Peri cent Number Per cent of of of of of of of of banks hanks banks total tal total hanks total tb s +9 113 79 100 3^ 35 k.6 7-3 16.s 11.7 12.^ lU.g 5.0 5.2 67U XX Hi 2S 27 36 22 12 30U 100.0 12.2 10.9 13.5 9.2 8.9 11. S 7- 2 7. 22. k 22.1 100,000 and over Total 37 100.0 236 I7I+ 186 86 60 50 30 30 56 26.0 19.2 20.5 9-5 90S 00.0 0.0 5-5 3-3 3-3 6.1 30U 256 3U0 193 171 186 Sb 77 lo.l 13.6 18.0 10.2 9.1 •9 2:d i4.q 1,886 100.0 Table 20 - Loans and Investments of G-roup and Chain Banks by Size of Town December 31, 1931 Leading groups Other groups Total Chains Loans and Per cent Loans and Per cent Loans and Per cent Loans and Per cent of of of investments investments investments ! of investments (000 omitted) t o t a l (000 omitted) t o t a l (000 omitted) t o t a l (000 omitted) t o t a l Population of town Under 500 500 - 1,000 1,000 - 2,500 2,500 - 5.000 5,000 - 10,000 10,000 - 25,000 25,000 - 50,000 50,000 - 100,000 lOOyOOO and over $ Total 5.3SO 20,349 61,232 72,9^3 123.335 2SS.62S 1^5,675 342,708 5,2Ho,686 8^.2 7,133 9,516 22,472 17.777 3L335 109,057 102,767 78,670 2,0^6,116 $6,300,936 100.0 $2,4l4,84^ 1 . ? .1 . •3 1.0 1.2 1.9 4.6 2.3 5.4 $ 3 3 * 84.-5 $ 43,093 42,277 72,931 65,886 66,596 114,952 99,83S 109,070 312,090 100.0 $926,733 •3 .4 .9 .7 1.3 4.5 *-3 4.6 4.6 7.8 7.1 7.2 $ r .0 55,606 72,142 156,635 156,006 221,266 512,637 348,280 530,44s .8 1.6 1.6 2.3 5.3 3.6 5.5 33.7 7,588,892 78.7 100.0 $9,64?,51 ? 12.4 10.8 11.8 , 100.0 O 1 ChAPTER IY FACTORS ASSOCIATED WITH THE GROUP D5VSLOPLENT DIEIH6 1927-193Q It is desirable to examine some of the factors that were directly associated with the extraordinary formation of groups!, particularly in the holding company form, during the years IS27-1930* Reference to Table 8 will serve to recall the fact that most of tne leading names in the group field came into being in the years 1927, 1928, 1929, and early 1930. Various reasons have been assigned for the recent development of group bank holding companies. Underlying all of t jhem were changes in economic conditions. Specific causes waich have beenl advanced as operative in individual instances are low earnings, failures, and difficulties genrerally of the small country banks, the development of larger units in business and industry generally, a development of regional consciousness, desire for personal importance or power, imitativeness, competitive self-defense, attractiveness of bank stocks as investments, the growth of bank mergers and consolidations, promotional activity, and preparation for permissive branch bank legislation. Of all the factors, however, the trend towards concentration, which has been checked in one direction by restrictions against branch banking, seems to be the most fundamental. Concentration of banking re- sources in other great commercial countries, particularly in Canada and the British Isles, was effected by fusion of separate banking organizations 61- 62 - under one corporate charter. This is entirely possnible where there is no limitation on "brancn office activity. In tne Unitecd States, however, where national and State "banking laws require in general the separate in~ corporation of "banking offices, the trend towards concentration could not he met directly. Therefore, these indirect methods have been resorted to« In the cities it was possible to combine banks through the processes of merger and consolidation, to meet the need for largpr banking units de manded by larger industrial units. In the smaller [centers this was more difficult, and in tne country districts, especially] where branch banking was prohibited, it was impossible. The group metho li was the only way open for the development of large scale banking operations in the agricultural regions of the Middle i/est and tne Southwest, The tatter part of this chapter will show from the statistics that group banking has had its greatest development in those States where prohibitions on branch offices are most rigid. The trend towards concentration is not neikr, and, therefore, it becomes necessary to look for some special characteristic of the era 19271930 which gave the holding company movement impetus at that time. This characteristic appears to have been the promotional and speculative spirit of that period. Promotional and Speculative Profits It mast be recalled that during tne time iJrhen the bank holding I -63companies were being launched there was much activity in corporate promotion generally which was clearly of a speculative sort, It would hardly have been natural for the element of speculation not to creep into group organisations* la the pjiblij?utility and railroad fields promotion of companies to buy the stock of operating units was common. Stock bought by the hold- ing companies rose continuously in the upsweep of the grbat bull market. The rise of operating company stocks carried the holding company stocks with them, and doubtless at times it was the other way around. There was always the s?/irling around of stock from one buyer to another. As soon as a speculator turned over one holding at a profit, he incurred a new commitment. Until the final accounting there were profits yo be made on these shifts. It is clear enough that promoters who bought bknks for cash in behalf of a holding company looked forward to the possibilpity of seeing the holding company stock rise in the current bull market wifth resultant profit to them. Moreover, the owner of stock in an obscure bahjs that had no access to the organized market, by trading his stock for shares| in a holding company, came into possession of a security which could be J30ld in the organized markets. The years from 1926 through 1929, furthermore,!were characterized by high levels of corporate profits generally, including bank profits. The shares of metropolitan "banks were bid up with the rest of the stock market to exceptional levels, eren taking into a ccount the high level of earnings. Mergers and consolidations were the order of the day among banks as among other corporations. It was not uncommon to hear the statement that the directors were led to sell a bank, tempted by the high valuation the market was placing upon it. -ftNot only was the movement related to these aspects of security speculation hut doubtless to others. There was a widespread desire to share in the profits of the business of security merchandising in its various phases of origination, underwriting, wholesaling, and retailing. Group organizers realized that, by bringing together the resources characteristic of several of the groups, sufficient financial strength would be marshaled to make it feasible to enter this business. At the same time the banks in a group afforded a final market in their portfolios for some of the securities not retailed to other investors. The number of leading group organizations which have indicated their activity in the merchandising of securities will be brought ou|t in subsequent paragraphs « Although the relation of the organization o|f groups to promotional activities of the era of security speculation is unmistakable, the .testimony of the group managers minimizes it. One grloup, however, answering the Committee's questionnaire acknowledged that there had been a promotional element in its formation which it was trying to live down. The prevailing practice when independent banks are brought into a group has been for the holding company or other controlling agdncy to exchange its stock for that of the newly acquired subsidiary. In throe cases out of four some of the stock at least of the holding compan|ies was issued for cash* -65~ The majority of the groups made a rather detailed examination of the condition of "banks before absorbing them. As a result of examination, a value was set upon the shares of a particular bank, based upon an appraisal of assets, and upon earnings. Frequently allowances were made for good-will, quality of management, past growth L and future prospects. The value was sometimes determined with thfe purpose of enabling the holding company to earn a definite rate, fo^ example, 8 or 10 per cent. Groups were asked to indicate the price paidl per share for the stocks of any of their banks that were purchased outright, and the book value of the same shares at the tine of purchase and at the time when the questionnaire was answered. An analysis of replies inflicated that in about half of the instances book value and sale price were close. In the other half of the replies, however, the value fixed onj the member bank shares was considerably above book value. The questionnaire was answered before the trbugh of the depression was reached, and none of the groups reported a general shrinkage in the value of their bank shares since their acquisition. In a few instances, however, the book value of the shares of individual banks had undergone considerable decline. On the other hand, the holdings in a few of the groups had appreciated to a considerable extent at the time -fc jt questionnaire was he answered. Most groups have used more than one method olf acquiring their subsidiary banks. Various combinations of outright purchase for cash, exchange - 66 - of stock, and organization of new institutions have been employed by most of the organizations. However, five of them secured all affiliations by exchanging their stock for that of independent banks, and five ethers were formed entirely by purchase of the stock of the unit banks. After the collapse of the security markets in the autumn of 1929* there has been little activity in organizing groups. It is unfortunate that the historical statistics of the movement are so limited that they do not trace completely conditions in the formative period. By the time the first comprehensive figures were gathered as of June 30> 1929» a large proportion of the promotional activity in group banking'systems was at an end. It has been shown that there were 321 chain and group systems with 1,921 banks at that time. Six months later the number was 33 2 and since that time it has declined, 273 "being in existence at the end of 1931» The maximum number of banks associated with group and chain systems was recorded as of June 30, 1930* of 1931* a<t 2,229, which had been reduced to 1,886 by the end The temporary inclusion of the Chase National Bank in the figures as of June 30> 1*93!» ^ o r reasons explained earlier, caused the loans and investments of the movement to reach $13,355>000,000 as of that date. Because of the elimination of this and other banks, $,nd because of the heavy liquidation of bank credit, loans and investments 0f group and chain banks had declined to $9,6-43,000,000 as of December 31, 1931. While the depression has checked the movement, there is no indication that the group and chain development will not be resumed with the return of more normal conditions, unless the tendency towards concentration is given another direction. - 67- Larger Business Units in Industry The merger of many small independent business enterprises in the smaller cities of the country into national organizations, and the consequent centralization of their headquarters in the largest cities have operated to make larger banking units necessary to accommodate them. It has worked also to the disadvantage of the smaller banks in the cities which lost the headquarters of the enterprises merged. This factor is given as an important element in the original decision to form the Marine Midland Corporation of Hew York State, and in its decision to acquire a bank in New York City, as a means of retaining the accounts of some of the firms which moved their headquarters to that city. The Committee included the following in its questionnaire directed to important groups: "Presumably many formerly independent enterprises (stores,fixctories,etc.) operating in your region have been absorbed in recent years by larger companies, witn the result that the local banking connections have been disturbed. list of such cases? If so, can you give a representative Are your banks seriously affected by this tendency?" About half of the replies to this question indicated that the banks of the organizations concerned were either not affected at all, or - 68 - at least not seriously, by this tendency. On the other hand, about a fifth admitted that it had influenced the formation of their groups, or had affected the "banks in their territory, in varying degrees. The larger size and scope of the group organization have enabled it to handle transactions which would have "been too large for any of the members operating independently. This has meant that some of the groups have made it unnecessary for growing concerns in their trade areas to go to the larger financial centers for funds. On the other hand, a large number of the answers denied any adverse effect on local banks from the increase in the size of business enterprise. A few replies even indicated that because the consolidated commercial and industrial concerns were in a strengthened position, their accounts were worth more than those formerly kept by the larger number of smaller firms. In reply to more general questions as to the cause of the formation of groups, the answers represented that the group banking development has grown in part out of a desire to afford a type of service not possible under the unit system. Some statjed that the organizations were formed in order to provide broader banking facilities on a more economical basis. About a fourth of the replies ~ 69- indicated that changed economic conditions v/ore influential in the formation of the group, while about a third declared that the development was mainly a matter of choice with them. In a few instances the constituent banks had already been loosely connected by virtue of their stock being held by the same individuals, i.e., by a chain set-up. These groups were organized merely to consolidate control. Other considerations mentioned in two or more replies were: legal restrictions on branch banking, the general concentration trend in "banking, and the threatened control of the banks in the area by interests in the larger financial centers. Competitive Self-defense and Regional Independence Many of the bankers in commenting on the movement have stated that if they had not acted in their territory, someone else would have done so. Tims, Mr. Decker of the Northwest Incorporation in his testimony before the House Committee^-*-/ suggested that a number of instances had come to his attention in the Northwest of Eastern interests offering to purchase the ktock of banks. He cited as a specific example of this, a purchase Of stock of the (l) ttld., P. 792- - 70 - First National Bank of St.. Paul by Blair & Company. The Wisconsin Bankshares Corporation was influenced by the invasion of Wisconsin "by one of the Minneapolis groups. The Detroit Bankers Company perhaps felt that it had to follow the lead of the Guardian Detroit Union Group. This motive is associated with the matter of regional independence. Building up the banking business—commercial, investment, and trust—of a territory, and preventing the loss of business to other centers and other regions, have undoubtedly been among the important causes for the formation of a number of the groups. The case of the UTorthwest national Bank does not seem to have been an isolated one. Many of the dominant banks of regional groups feared that financiers located in the large centers such as Hew York and Chicago were about to obtain control of their country correspondents. That their forma- tion of groups in self-defense has been generally successful in keeping this control in the region in which they operate is indicated by the replies to questions as to the distribution of tije stock holdings in the group. Most of the groups indicated that upwards of 75 P e r cent of the stock, of the holding corporation was hel& within the State in which the head office is located. - 71 - The Position of the Small Country Bank Those engaged in the operation of group qanking systems frequently refer to changing economic conditions asl being fundamentally responsible for current evolution in banki|ng . Generally speaking, changing economic conditions are asssociated with the concentration of business in the larger centers of th^ country. It is often stated that automobiles and good roads have r educed the inn portance of the smaller communities, made for largej: er business -units, and made existence difficult for the small-town banfc Other sections of the Committee's report sho\7 that the failure record of banks with limited resources in ilar. •tl areas has been high and that earnings of this class of banks [generally have been unsatisfactory. As has been shown in Chapter I I I , however, the banks which have been combined in groups are no|t for the most part the small-town country banks, but banks in coufnity-seat towns and larger cities. - 72 - Preparation for Branch Banking A good many of the group hank systems hkve "been organized with the avowed purpose of converting into "branch systems when and if possible. The Fletcher American Group in Indianapolis promptly so converted when a change in Indiana law e a r l y in 1931 made i t possible* Some of the sponsors of holding companies declare that their groups would have been set up under the branch form of organization, i f t h a t had been possible, and that they w i l l change as soon as permitted. The p a r t that laws l i m i t i n g branch officfes have played in the organization of the holding companies may be rjudged by the r e p l i e s made to the following question in the Commitfctee questionnaire: !l If the law permitted, would the management prefer to organize t h i s group into a branch banking system? If not, woulfi your banks or- ganize branches in the smaller communities?11 Out of 25 answers to t h i s question only| k were p o s i t i v e in t h e i r preference for the group as against the ^ranch system. A majority would adopt the branch bank organization! in one degree or another i f the law permitted. Some systems would convert a l l banks to branches of the leading bank. the group and branch systems. Others would usfc a combination of Since the questionnaires were returned, several of the group bankers who were formerly dojibtful have indicated a desire to convert into branch systems. - 73 A Substitute for Branch Banking Some of the statistical facts, which suggest that the group movement is a method of banking concentration usedj as a substitute for branch banking systems, are brought out in Tab^ e 21. Of the Gfk banks belonging to the leading groups, 3^7 were in States prohibiting the establishment of branches as of December 31, l4)31» States where administrative ruling did ani 93 were in not allow hew branches although the statute was silent on the subject. Moreover, ^>f the banks in leading groups, 2^+9TOre located in States which allowetp. branch offices only in limited areas adjacent to the head office. Because of such limitation most of this group could not then be converted into branches of the dominant "bank. A very small number, 25, of th^ banks in the lead1 ing groups were located in state-wide branch banking States. In gen- eral these banks could not then be converted into ^ranches of the leading bank, when it, as a member of the Federal Reserve System, could not further extent its branch activities outside of the head office city under existing law, | In the States of Vermont, Maryland, Delat/are, and Virginia!1) and the District of Columbia, all of which accorded their banks statewide branch privileges, no banks belonging to groups or chains were reported. North Carolina, also in this class of Spates, had but one group bank. In Arizona, Ehode Island, and South Carolina the repre- sentation in groups and chains was much less than in California. T/ In Virginia banks may establish branches in their home city or in other cities of more than 50f000 inhabitants. They may also acquire banks in the same or adjoining counties through mejrger and connect them into branches. Table 21 - Number of Banks in Group and Chain Systems, December 31, 1931 Number of banks States classiLeading groups Chains Other groups Total fied according Nation- State NonNation- State NonNation- State Nonto law regard- Nation- State NonAll Total Total Total ing branch member member member member banks al al member member al member member al banking State-wide branch banking peraitted IS Branches restricted as to location 122 27 7 25 10 1 10 21 9 100 2^-9 52 2k 61* 1U0 70 11 10 19 37 1 27 65 130 211 2kk 62 29U 600 t —•> Establishment of branches prohibited lk 150 138 86 9 ^3 307 12+3 201 8 321 530 33k 31 -t 550 975 ' No provision in State law _I2 Total 362 • - - - 1 , - , 1 ,- - • } .. kl . . I ! 21 -21 2 271 67k 107 , « ...-. - ...,. > . . . . . _1 3. . . 1 . . . . . . 30^ 163 . ...• • . . . — Data by States appear in the Appendix, Tables X, X I , and XII. 336 _k 88 1kg 112 23 5ks 908 8O5 112 38 9S3 2U6 1,886 Table 22 - Loans and Investments of Banks in Group and Chain Systems, December 31, 1931 Loans and i n v e s t m e n t s i n m i l l i o n s of d o l l a r s States c l a s s i Leading groups j Other groups fied according Chains Total f t o law r e g a r d - Nation- S t a t e ITon- „ , _ JEiation- S t a t e NonAll Nation- S t a t e UonNation- S t a t e NonTotal Total Total ing b r a n c h member member member member banks 1 al member member al al 1 a l member member banking State-wide b r a n c h banki n g pennitted $ 9^0 $ 66 $1,006 $1*26 $ 129 $ 16 $ 631 $ 16 $ 13 Branches r e s t r i c t e d as to location 2,03s $ 802 37S 3,218 221 1,101 163 1,1*25 193 $33 122 Establishment of b r a n c h e s prohibited 1,335 269 360 1,963 16S 5^ 76 292 223 9 135 11 11»J 1 1 1 _i -12. $2,1*15 $522 $1*3 $356 Ho p r o v i s i o n i n S t a t e law Total $ 29 $1,1*1*2 $ 129 $ 95 $1,666 1 102 $U,i+i6 $1,070 $215 $6,301 $275 $1,285 $255 1 i 1*22 2,1*52 1,936 1,725 332 139 1 729 5 , 1 1 7 ^ 571 2,629 31 171 $927 $5,212 $2,392 $1,1*26 $9,61*3 . , . . . , , . , - „ • ...... -76 In many of the States in which no new branches were permitted, and where very few branches existed, a|i important proportion of all banks was included in groups and chains. For example, in Minnesota there were 8S6 active incorporated commercial banks as of December 31, 1931* One hundred and four of these belonged to leading groups and 256 in all belonged to groups aftd chains. As Table 23 shows, half of the banks in Nevada and a third of those in North Dakota and Idaho belonged to group and chain systems. In some of the States in which there were numerous branch offices the proportion of individual banks numbered among groups and chains was large. It is difficult in such cases, however, to assess accurately the meaning of this condition. The relative importance of banking concentration through groups and chains is only clearly isolated in States that require the separate incorporation of banking offices. The proportion of the banking strength as measured ^oy loans and investments included in the group movement in any particular State is also somewhat misleading, because under the definition used many great metropolitan banks are included in the statistics. Such banks in many instances represent concentration not by reason of covering a wide geographical ejxpanse through a multiplicity of offices, either branch or separately incorporated, but because they have on their books many commercial banking accounts of large size. - 77 - Table 23 - Group and Chain Banks in States not Pernitting N e w Branches December 3 1 . 1931 Number of "banks Group and All (proup and chain "banks In In incorporated In per hundred chain) commercial leading other chains total active banks groups groups banks State Alabama Arkansas Colorado Connecticut Florida Idaho Illinois Kansas Minnesota Missouri Nebraska Nevada New Mexico Oregon Texas Utah Washington West Virginia Wisconsin 256 276 3 187 122 ,29U 923 886 992 633 32 50 199 ,102 88 286 218 S69 66 246 524 263 9 9 22 28 1 104 6 7 Ik 3 9 36 7 21 1 I 10 5 12 36 23 53 New Hampshire^1/ North Dakota'l) Oklahoma^ l) South Dakota' •*•> Wyoming'1) _I§ 2 Total 9,966 400 38 19 5 3* 1*3 13 2* 9.* J J 6.9 16 55 25 g 23 1+5 55, 96 256 5 ? 142 16 46 16 5 27 S i99 60 12 14 1 29 21 73 1 82 40 75 19 _i* 67s 11.2 29.U 36.9 *•? 10.4 28.9 2.7 8.4 50.0 10.0 13.1 9.0 23.9 25.5 ,2 23 9H 53 16 33-7 17.9 20,2 20.5 1,221 12.3 (l) There is no specific legal prohibition in these Stp-tes, but because of administrative rulings or other reasons, n o "branch]bs of State banks are in opere/tion therein• Branch Banking among Groups. - There i s a t Dre r sent a not inconsiderable amount of branch banking among the leading groups . Table 2k shows that within the 3U leading groups there were 898 brand |i offices as of December 31, 193!• With the 67^ constituent banks t h i s mad^ a t o t a l of 1,572 banking offices, about half of the figure of 3,206 for a l l chains and groups • One member of the Transamerica group contributed 3W+ of the branch offices. - 78 ~ Table 2^ - Banking Offices in Group and Chain Systems December 31, 1931 Number Branch Total Banks (head office) offices "banking offices 3^ leading groups 63 other groups 176 chains Total S98 321 101 67^ 30U 908 1,320 1,2S6 1,572 625 iaOQa 3,206 There are not many branches among the chain systems although some of the miscellaneous groups which center around large metropolitan banks in States where at least some branch banking is permitted have numerous branches. It is worthy of note that the banks belonging to the miscellaneous groups and chains are mao&cdf, as is the case with leading groups, in States where limitations on branch extension exist, as shown in Table 21. Table 25 shows that a majority of the branches among leading groups are in the head office city of theTOopogtarcodominant bank* Among miscel- laneous groups two-thirds of the branch offices are in the head office city, and among chains nearly three-quarters. Table 25 - Branches in Group and Chain Systems, December 31, 1931 Number of branches H Number of Outside head "banks In head office city Tot41 operating office city In own In other county counties branches 3*+ leading groups 63 other groups 176 chains Total 1 2k U91 214 1+!+ 11 -a 778 77 383 63 1+65 ggs 3211 lqi 63 33 1,320 121 *1 - 79 ~ A majority of the branches among all chains and groups are in States permitting limited branch banking, as Table 26 shows. Most of the others are in those States allowing offices over the whole State. In such States, large banks which cannot establish offices outside the State, may spread their services outside it through the instrumentality of the group. Table 26 - Banking Offices in Group and Chain Systems December 31, 1931 States classified a c c o r d i n g to law r e g a r d i n g b r a n c h banking ITumber Banks (head o f f i c e ) B^nch { offices Total "banking o f f i c e s S t a t e - w i d e b r a n c h banking permitted 65 575 61+0 Branches r e s t r i c t e d a s t o location 600 728 1,328 E s t a b l i s h m e n t of b r a n c h e s prohibited 975 17 992 Ho p r o v i s i o n i n S t a t e law 2U6 Total i,ss6 — 1,320 2l46 3,206 Appendix Tables X, XI, and XII supply information under these classifications by States. CHAPTER V TK5 B A M HOLDING COMPANY; MAJOR SYSTEMS The following pages will be devoted to important phases of the organization, management, and policies of leading examples of bank holding companies. The cases will be grouped geographically for the sake of convenience, but geographic divisions will not be taken up in their ordinary sequence. Those which have some of the more significant representations will be discussed first. A general analysis of the holding company will be given in succeeding chapters. Western Grain States Uorthwest Bancorporation and First Bank Stock Corporation. «- There are no better examples of the modern group banking movement than the two groups, the Northwest Bancorporation and the Pirst Bank Stock Corporation, both with head offices in Minneapolis, most of whose banks are located in the Western Grain States. In organization and policy they are much alike and are typical of the dominant holding company-management type. Both cor*porations were formed under Delaware law early in 1929. There is only one class of stock in each corporation. In nearly all cases the stock of sub- sidiary banks is fully controlled and was acquired by exchanging for it stock in the holding company. No double liability provisions attach to the shares of the holding company, but the Northwest Bancorporation has stated that it follows the policy of carrying other investments equal to 10 per cent of its bank stock ~ 80 ~ - 81 holdings* These additional assets are a partial assurance to bank depositors with respect to the holding company!s making good on the double liability of stock owned by it* These corporations take the position that as a practical matter greater protection is offered to the depositors and other creditors of the banks owned by the corporations than is customarily true of those owned by natural persons. The First Bank Stock Corporation started its operations with the idea not of exchanging stock in the corporation for stock in the banks included within the group, as was done by the Northwest Bancorporation, but of employing the method of direct purchase of bank stocks. It was soon found,*KA*t*htAiU*, they have explained, that banks in the territory did not wish to sell out, but preferred the exchange of stock method of affiliation. Accordingly the First Bank Stock Corporation shifted to that method of procedure. The organizers of these groups have stated that they were motivated by the long period of banking distress in thafc territory which affected principally farmers and business men in the small towns* Another consideration which brought about the organizations was the activity of large Eastern financial groups in the territory, an outstanding instance df which was the purchase by Blair & Company of New York of a large interestt in the First National Bank of St* Paul. It was desired by Twin City bahkepIrs to keep the terri- tory more independent within itself. It was also believed that bringing the banks together in what was regarded by some of its organizers as a sort of a cooperative movement might add to the profits of the banks* One reason for the bank failures in the district had been the inability of the small banks to make money. It was thought, too, that a strong group organization - 82 - could offer better and more varieties of service to the smaller communities and country districts. Constant contact is maintained^ with the various units, examinations are made, central records of loans and investments are maintained, and frequent visits and conferences are a part of the group program. A central auditing force is employed. The Pirst Bank Stock Corporation has the reputation locally of exercising a considerable degree of centralized control over its banks. While loans are made locally as heretofore, daily reports of loans made and loans repaid are required. Officers of the corporation consider all new loans and criticize those of doubtful merit. Detailed information from these two groups as to the size of backs owned, size of towns in which their member banks are located, distribution of stock holdings, policies, and operations is contained in the questionnaires and tabulations in the appendix. The location of banks in these groups is illustrated in Chart 6. In addition to these two outstanding groups the Western Grain States have a few minor groups and a number of chains. The Commerce Trust Company of Kansas City and the Lafayette South Side B^tnk and Trust Company of St. Louis each dominates a small group of banks in its respective city. The Bank Shares Corporation of Minneapolis, incorporateed in South Dakota, operates 5 small banks in Minneapolis. Two other combinations, as much chains as groups, appear on the group list. St. Olafs College and P. 0. Holland of Eforthfield, Minnesota, are reported to control 8 small banks, - 83 - CHART 6 BANKS IN THE NORTHWEST BANCORPORAtlON AND IN THE FIRST BANK STOCK CORPORATION DECEMBER 31, 1931 / <fi *»/ / ( • \ I I • • MONT. 0 • • • • s ! • % A • o V/yo. ^^L____J c MINN. MICH. •MINNEAPOLIS ~ i °n» A# ° o • Wise. < * S.DAK. «*• g o O NORTHWEST BANCORPORATION % FIRST BANK STOCK CORPORATION 1 1 •• $0 1 • * A#° •• • A N.DAK. •* *• • ••• * • / • * l — % % V -4 • \ 0 o o 8 O 10VVA 0 NEBR. 0 1 e — SI ~ sU~ and C. J. Weiser, Inc., Decorah, Iowa, controls S small banks. This organization is merely the incorporation of a family interest and is not really a group in the normal sense. Pacific Coast States It is often stated that the present era of gijoup banking originated on the Pacific Coast. The second chapter, however, whijch described early examples of chain and group banking, showed that a considerable number of systems had existed for decades in many parts of the country. The State of California with its permission to State banks to operate state-wide branch banking systems set a pace in multiple banking that majt have had an influence in adjoining States where other means were used to attain banking concentration. Undoubtedly the banking developments in the Western States were influenced by the active operations of the Bank of Italy and interests associated with that institution. Transamerica Corporation* - Incorporated in 3i90U, the Bank of Italy early became an instroment for setting up in California a state-wide branch banking system. Because California law did not permit one bank to purchase the stock of another bank, it became the practice of the principal officers of the Bank of Italy to buy the stock of independent unit banks, consolidating the purchased institution with the Bank 6f Italy, and operating it thereafter as a branch. As transactions of this character increased in number and in size, it seemed desirable to organize a corporation or holding company to acquire and hold the stock of independent uijiit banks, pending conversion of the institutions into branches of the Bai^c of Italy. ~ 85 - Accordingly, the Stockholders Auxiliary Corporation was incorporated under the laws of the State of California, June 20, 1917, and subsequent to that date "became the purchaser of the hanks intended to he converted into the Bank of Italy system. In 1919 the Bancitaly Corporation was formed under the laws of the State of Now York to foster a branch qanking system in New York City, The activities of these two corporations, land a score of other interrelated and allied organizations, became nationwide and even international in their scope. In 1928 Transamerica Corporation was organised to take over the various Bank of Italy interests, banking, utility, insb.ra.nce, and otherwise. It was much more than a group "banking concern. Indeed,, in 1930 it was rc~ organized along functional lines, and one of its affilpliates^n become Transamerica Bonk Holding Company. As a matter of fact, Transamerica Corporation had been more of an investment trust and trading corpopration than a bank management or operating company. While it held the stock of banks in several States and foreign countries, and negotiated for bank Stocks in other States in the United States, it cannot be regarded as the sam| sort of institution as the typically "group banking" corporations which developed elsewhere simultaneously with it. This is particularly true sine;e its reorganization in 1932, which will be referred to in the next chapterLL The early operations of Transamerica, on the other hand, -pointed the way for a number of holding companies in the banking field not only in the West but throughout the country generally, some of which, however, were almost purely promotional in character^ ~ 86 - Marine Banco^ooration. ~ The date of incorporation of the Marine Bancorporation of Seattle, Washington, September 10, 1927, may be tpken as the opening of the present group "bank era. The officers of that institution originated the term "bancorporation," and it is probably true that the later development of group banking has been very much influenced by the Marine Bancorporation. What is now the Marine Bancorporation group banking activity began in 1924 when the Marine National Company, subsidiary of the Marine National Bank,acquired the control of the King County State Bank, located in the University district in Seattle. It was the operation of this bank in con- junction with the Marine National Bank which convinced the officials that economies could be effected, credits and investments better supervised, greater public confidence inspired, and profits increased with no serious impairment of local popularity or service by the adoption of a group organiza- tion. Each of these affiliated institutions, the Marine National Company and the King County State Bank,had some stockholders who were not stockholders of the dominant bank, and the Marine Bancorporation wap organized in 1927 under the general corporation laws of the State of Washington to consolidate the interests of these various groups of stockholders and "to provide a corporate vehicle for the further expansion of the group banking plan,11 The stock was of two classes and the voting stock of no par value is in the hands of a limited number of persons• Sixty per cent of it was owned by directors of the bancorporation, most of whom in turn are identified with the National Bank of Commerce in Seattle, a consolidation of the Marine National Bank with the National City Bank and the National Bank of Commerce, ~ S7 ~ all of Seattle. Since it was realized that there would "be no double lia- bility attaching to the shareholders of the holding company, the Bancorporatiori*s stated policy is to maintain assets, other than bank stocks, in an amount not less than the par value of bank stocks owned. Advantages of group banking as seen by the directors of this group are: (a) improved credit standards and facilities for credit investigation; (b) improved facilities and more advantageous handling of investment accounts; (c) ability to supplement local banking resources for the accommodation of larger local borrowers; (d) improved opportunity for Employment of surplus funds originating with local banks; (e) reduction in some items of expense; and (f) increasing the marketability of investments in local banks and removing the uncertainties incident to probable change in management upon the resignation or death of individual principals• Andrew Price, President of Marine Bancorporation, in an address before the convention of the American Bankers Association in San Francisco, California, in 1929, described group banking as "a legal adaptation of, and substitute for, branch banking." It provides, in his opinion, "the means for an orderly transition from the present form of unijt banking into a new system which will be acceptable to the public, which ^ill be better adapted to the changed conditions of the times, and will cure |the deficiencies so well recognized to exist in our present system." Further details with respect to this group ^xe to be found in the questionnaire and tabulations in the appendix. Chart 7 shows the location of banks in the group. - g9 - Anglo National Corporation* - The corporatiqn was organized tinder Delaware law, December k, 192Sf All of the Class B vdting stock is owned by the Consolidated Securities Company, the stock of whidh is held in trust for the -pro rata beneficial interest of the stockholders of the Anglo and London Paris national Bank. The shareholders of this bank then, in addition to their individual holdings of stock in the Anglo National Corporation, have the beneficial ownership of a corporation, Consolidated Securities Company, which in turn owns all of the voting stock in the Anglo National Corporation, which in turn owns 30 per cent of the stock of the Anglo and London Paris National Bank, and a controlling interest in l6 other banks, all of which are in California with the exception of one in I,ongview, Washington. The corporation does not buy all of the stock of a local bank when taking it over. The management avers that it does not take away the financial interest or administrative responsibilities and initiative of the local management; its activities are wholly supplemental, giving to the banks the experience and facilities which their limited size would otherwise make impossible. The development was partly to maintain a relative position of prestige in a competitive growth of branch bank systems in the territory. This group, could, through the conversion of the dominant national bank to a State bank and the surrender of membership jln the Federal reserve system, become a branch system rather than a group organization. It can be readily understood, of course, that a bank which had 'been for years a member of the national system, would prize that connection aid the advantages of membership in the reserve system and be unwilling to forego them for the sake of any advantages believed to inhere in branch banking as opposed to group banking. The officers of this group, however, have said that they prefer group organization to branch organization, and have expressed the opinion that they would not change the type of structure even if branch bank- - 90 ~ ing were permitted under the National Bank Act, except to have the units of the group organise their own near-by branches. Details with respect to this group appear in the questionnaire and tabulations in the appendix, Miscellaneous Groups. ~ Another leading group on the Pacific Coast operates out of Seattle and offers a number of contrasts to the Marine Bancorporation. This is the Pirst National Company of Seattle, the investment af- filiate of the Jirst National Bank of Seattle, and owned by the stockholders of that bank. It is thus not a management-service corporation designed for that purpose alone but owns a majority control in several banks. The Old National Corporation, operating out of Spokane, a group bank holding company on the order of the Marine Bancorporation, acquired most of its banks in the inter-mountain country. which is non-voting. It has two classes of stock, one of Two groups of banks operate out of Portland. The Pacific Bancorporation, incorporated July 17, 1928, is controlled through stock ownership by the Anerican National Corporation. The Bancorporation has two classes of stock, only one of which has voting rights. The United States National Corporation is owned by trustees for the benefit of the shareholders of the United States National Bank of Portland. Most of its banks were acquired from the West Coast Bancorporation, organized on May 8, 1928, by interests connected with the West Coast National Bank, which later merged with the United States National Bank. There i^ only one class of stock, all of which is owned l>y trustees for the benefit of the shareholders of the United States National Bank. New England States Some of the group organizations in New England in general organization are in contrast to the leading groups of the Northwest and the Pacific Coast. Each of two of the largest banks in Boston ha^ control of a small group of banks operating in Boston and its vicinity. - 91 - First National Bank of Boston, - Old Colony Trust Associates, a Massachusetts trust, was organized by the Old Colony Trust Company;, at the present time tue trust division of the First National Bank, in May, 192S. The prospectus issued at the time and offering first series trust shares of no par value, stated that the Old Colony Trust Associates had purchased a substantial interest in l6 strategically located banks representing a coi>siderable portion of the invested funds of the t:ust» The prospectus made the further staturrent that: "Tne local at- mosphere of each bank is continued and fostered by directorates and a staff of officers composed of local men of ability who have intimate first-hand knowledge of the problems peculiar to the section served by the bank which they manage. The greatest care has been taken to ifiaintain the local identity of each bank and augment the pleasant personal contacts of a helpful local institution.11 The Shawmat National Bank, ~ The Shawmut Association, also a voluntary trust under the laws of Massachusetts, was organized May 21, 192S, by Shawniut National Bank of Boston interests* Seventh-five per cent of the snares were subscribed for by the stockholders of| the Shawmut Bank# At the end of 1929 > about 12 per cent of the investments of the association were in the shares of affiliated banks, -and roughly another 2^ per cent in other bank stocks. Locations of banks in the National Shawmut Bank group and the First National Bank of Boston group are to be found in Chart 8, - 92 - CHART 6 BANKS IN THE NATIONAL SHAWMUT BANK dROUP AND IN THE FIRST NATIONAL BANK OF BOSTON GROUP DECEMBER 31,1931 MASSACHUSETTS "IT O WT/ONAL SHAWMUT BANK GROUP mfmST NAT/ONAL BANK OF BOSTON GROUP - 93- An agent of the Shawmut Association visits the different banks regularly, making reconmendations; and there are audflt s by examiners of the National Shawmut Bank. The local management is bontrolled in large measure "by one or more directors living in the comma;nity who are officers of the Shawmut Bank, Other Groups* - Financial Institutions, Inc., of Portland, Maine, was incorporated in that State in 1929* Its by-laws prescribe that not less than 80 per cent of its assets, exclusive of cash on hand and on deposit, shall at all times be invested in shares of national banks or trust companies. It has both common and preferred stock. Another New England group is headed by the Worcester Bank and Trust Company of Worcester, Massachusetts. When thi^ bank in 1930 acquired over 99 Per cent of the snares of the Worcester County National Bank, it thereby acquired also control of five other banks, whose stock is held in trust for the pro rata benefit of Worcester County National Bank shareholders, of which the Worcester Bank and Txjust Coinpany is, of course, the principal one. Middle Atlantic States Marine Midland Corporation. - The Marine Midland Corporation was established as a Delaware corporation on September 23|, 1929• by interests _ gU- Closely identified with the Marine Trust Company of Buffalo. Many of the banks comprising this group had been more or less affiliated for a number of years through common stock ownership and close business relationships. The absorption of local organizations by larger companies and the growth of local enterprises into national enterprises were major inducements in the organization of the group. Many of the business units in the sizeable cities of western and northernNew York were being absorbed by other units in the trend towards larger companies and in the general merger and consolidation movement. It was felt that by combining into one organization with a bank in Hew York City, the banking business of these concerns could be retained rather than lost to a Hew York bank not connected with the group. The corporation has only one class of stock. Operating control of each bank is exercised through its own board of directors and officers with the advice from Marine Midland Group, Inc., a separate subsidiary service corporation organized under the laws of the State of New York, the stock of which is owned by the trust companies and by various individuals representing the State and national banks. The board of directors |of Marine Midland Group, Inc., consists of the presidents and certain other officers of the constituent banks. Its capital is nominal, and its expenses are m|.pt by an assessment each quarter on the constituent banks. This arrangement is carried out under ser~ vice contracts entered into between Marine Midland Group, Inc., and each of the banks. The holding company itself takes no part in the management of the affiliated banks, leaving that entirely to the seryice corporation. Additional information with respect to this (group i s to be found in the questionnaire and tabulations in the appendix, persion of its banks. Chiart 9 gives the dis- - 95 - CHART 9 BANKS INTHE MARINE MIDLAND CORPORATION DECEMBER 31,1931 *. * NEW YORK >BUFFALO NEW YORK.CUV' - 96- Group Banking in New York City. - While g^oup banking organizations were being formed in other parts of the country, the movement was making very little headway among New York City banks t some of which openly opposed it# A number of investment trusts, however, had acquired bank stock holdings of considerable size representing interest in banks the country over* Prominent among these were Goldman, Sachs Trading Corporation with substantial holdings in the Manufacturers Trust Company of New York, the American Trust Company of San Francisco, Foreman*State National Bank of Chicago., Pennsylvania Company for Insuring of Lives and Granting Annuities (a bank) of Philadelphia, and other banks and financial institutions on the Pacific Coast and elsewhere. Goldman, Sachs Trading Corpora- tion, however, was usually thought of as an investment trust with bank stock holdings as an investment. In recent months it is reported to have largely divested itself of bank stock holdings, and was not included in the group banking statistics as of December 31, 1931*I The Bank of Manhattan Trust Company has asspciated with it some I small banks in up-state New York. There have been rujnors from time to time of New York interests negotiating for the purchase of I stock of country banks as promotional efforts with the idea of building up group systems which could then be turned over at a profit to some later cdmer in the field. - 97 - Little is known with definiteness of these activities. The Bank of America N. A. in New York City was largely owned by the Trandamerica Corporation, but was merged with the National City Bank of New York in the autumn of 1931 > &&<! as a result a block of National City Bank ^tock^ia owned by Transamerica Corporation, In up-state New York interests associated ujfith the First National Bank and Trust Company of Slmira, the First Trubt andi Deposit Company of Syracuse, the Northern New York Trust Company of Watdrtown, and the Ogdensburg Trust Company, are all engaged to some extent in group banking. In northern New Jersey there are also several groups of a few banks each. In Pennsylvania a community of interest exists in a number of banks in and around Pittsburgh, centering in the Union Trust Company and the Melbank Corporation. North Central States In this area there are several important groups of the holding company-management type, the Detroit Bankers, Inc., Guardian Detroit Union Group, the Wisconsin Bankshares Corporation, and the pancOhio Corporation, Other organizations center up in Chicago around great metropolitan banks— First National Bank and the Central Republic Bank andj Trust Company. Since Illinois allows no branches, all banking offices in the metropolitan area of Chicago must be independently chartered, but the gtreat downtown banks have spheres of influence in outlying banks. - 98 - Wisconsin Bankshares Corporation* - The Wisconsin Bankshares Corporation unlike its Minneapolis neighbors did not take out a Delaware charter* hut incorporated under the laws of the Stat$ of Wisconsin on December 10, 1929, with hut one class of stock. The Corporation has a contingent liability under Wisconsin statutes for th£ double liability assessment which may be made against shareholders ofj Wisconsin banks. Ihis contingent liability is anticipated by the maintenance of a reserve in cash and securities, it is reported, equal to 70 per cent of the full amount which could be assessed against it •'•*•' !pie policy is to own practically all of the stock of subsidiary banks. TJie corporation follows! much the same policies in connection with the direction and supervision of local units, in the main, as have been described und^r the discussions of the two large Minneapolis groups. Detail information with respect to the group will be found in the questionnaire and tabulations in the appendix, a^id Chart 10 shows the location of banks owned by this corporation. At the time the answers to the questionnaire were received. - 99 - CHART 10 =4 BANKS IN THE WISCONSIN BANKSHARES CORPORATION DECEMBER 31,1931 - 100 - Guardian Detroit Union Group, Inc. - The Guardian Detroit Group was incorporated in May, 1929, under the laws of the State of Michigan. During the period of its organization another company, the Union Commerce Corporation, was being formed, within which ?/ere included a number of banking institutions. In the latter part of 1929 the Guardian Detroit Group, Inc., acquired the stock of the Union Commerce Corporation through exchange of shares and the title was changed to Guardian Detroit Union Group, Inc. There is but one class of stock in the dorporation. By the provisions of one of the articles of association of the corporation, it is provided that holders of stock of the corporation shall be individually and severally liable for any statutory liability of the holding company because of bank stock owned. Detailed infoimation wi|th respect to this group appears in the questionnaire and tabulations in| the appendix, Other Groups. - The Detroit Bankers Company was incorporated under Michigan laws on January g, 1930• Its stated purpose was "to provide greater financial stability through common ownership, to extend the scope of service rendered by its component units and to perjnit of a more economical operation." In its first annual report the company staties that it was necessary to incorporate a holding compaziy to accomplish these purposes and maintain the separate banking institutions. reads, "an endorsement of group banking." "It is not," the report There had existed between the Detroit banks in Detroit proper and banks located in municipalities, in - 101 - fact included within the metropolitan district, an iinterlocking of directors and officers, carrying with it all or a portion of t he control of +lne outlying hanks. The BancOhio Corporation was organized und^r the laws of Ohio in September, 1929- The development grew, its organize ts say, from social and economic changes all leading to larger business units. Southern Mountain and Southeastern Stages Group activity in the Southern Mountain States is largely accounted for by the Hamilton National Associates and the American National group. Hamilton National Associates, Inc., organized Jaraary 20, 193°, under Tennessee laws, has an interest in seventeen b^nks of which the Hamilton National Bank of Chattanooga, Tennessee, is the most important. The American National Bank in Nashville through its Affiliate trust companies controls banks in the territory, the group totaling eighteen banks in all. The group headed by the Atlantic National ^ank of Jacksonville is illustrative of a number of small groups in Florida. The shareholders of this bank own ratably an affiliated holding company, the Atlantic Trust Company, organized in 1908, under the laws of Florida. The operation of the trust company is controlled by three trustees, who are active senior officers of the Atlantic National Bank. affiliated banks The trust coppany owns the all of which,with the exception of lone, were organized by persons controlling the Atlantic National Bank. The development of the group is said by its organizers to have been broU)Jght about by an - 102 economic need for banking facilities in the localities where banks have been established, with due consideration to earning possibilities. The First National Bank of Miami and the Barnett National Bank of Jacksonville are other national banks of Florida the controlling interests of which dominate small groups. The First National Bank of Atlanta also operates a group- Its shareholders own all of the shares of the Trust Company of Georgia, which in turn owns all of the shares of the First National] Associates, which in turn owns a controlling interest in four subsidiary banks. A second group is controlled by the Citizens and Southern Holding Company which was incorporated in Georgia, April 9> fL928, under Georgia law, thus antedating the Minneapolis groups. It was organized by the Citi- zens and Southern National Bank for ,?the purpose of purchasing the control or in entirety stock in certain banks, and for organizing new banks from time to time.11 It is the policy of the company to purchase at least 66 per cent of the stock in its banks, which for the most part has been done. The South Carolina National Bank of Charleston also sponsors a group banking organization, known as Socamat Bank Corporation, incorporated July 11, 1929> under the laws of Delaware. In the case of the First National Bank of Binningham, each share of stock in the bank carries with it ownership of one share of stock in the First National Company, a successor to Anerican-Traders Securities Corporati o n , incorporated July 9i 1927* * n addition to performing the functions of the bond department of the First National Bank, the First National Company owns 51 P$ r cent or more of the stock in a group of suburban banks^ - 103 - Southwestern and Rocky Mountain Statejs Exchange National Bank of Tulsa. ~ The most important element in the group and chain movement in the Southwestern Staftes operates out of Tulsa, Oklahoma. The Southwest Bank Shares Corporation was organized under Delaware law, February 6, 1930 > ^y interests connected with the Exchange national Bank of Tulsa. Control of banks was acquired by this corporation by outright purchase for cash. In explaining the origin of the group, its sponsors have written: ,f It seemed to us the trend of the country was towards group banking and it seemed desirable that at least a nucleus be formed alround the Exchange ETa*» tional so that its interests would be protected in axiy advantages that might arise out of this apparent economic change in banking methods. It was thought that the undertaking would be beneficial in stabilizing banking conditions." The Republic National Company, owned by the shareholders of the Republic National Bank and Trust Company of Dallas, owns in turn a controlling interest in several Texas banks. Groups of 10 banks each center around the Mercantile Trust Company of Dallas and J. M. Cr^ws and Associates of Childress. First Security Corporation of Ogden, Utah, HChe largest group with headquarters in the Twelfth Federal Reserve Diditrict, measured by number of separately incorporated banking units controlled, is headed by the First Security Corporation of Ogden, Utah, organized under the laws of Delaware. This corporation has two classes of stock, the voting stock being; con- trolled by a handful of stockholders. The group incjludes banks in Utah, - Idaho, and western Wyoming. IOU - Twenty-two of the banks in this group have the name "First Security Bank. " The First Security Corporation wa.s organized June 15, 1923, "but the .original conception dates back several years before that. The organizers individually owned stock, either majority or minority interest, in a number of banks in the inter-mountain country. It was found that increased atten- tion had to be given the management and supervision of these various properties in order to protect the investment. It was also the conviction of the organ- izers that the territory in which they operated would never receive safe and adequate banking service until a group organization was developed with sufficient capacity to handle legitimate requirements found in many of the communities to be beyond the legal lending limits of unit banks. The corporation uses many of the methods of supervision and.control previously described with respect to some of the other leading groups. It has purchased several weak and unprofitable banks, and in one ca.se reorganized a bank which had suspended operations. The capital of these banks has been rehabilitated by the elimination of dead assets. New management has been put in or old management closely supervised. Additional details with respect to this organization may be found in the questionnaire and tabulations in the appendix, location of banks in this group. Chart 11 shows the - 105 - CHART 11 BANKS IN THE FIRST SECURny CORPORATION OF 0GDF.N. UTAH DECEkfflER 3 1 , « k l WYOMING OEAPTEB VI THE BASK HOLDING COMPANY: OHGMIZATIOH AND ^ANASMENT The bank holding company, as it has developed in the United States during recent years, has been of varying types# A description of these types is presented in this chapter, based primarily on information furnished by a number of banking groups in the replies made by them during the latter part of 1930 and the early part of 1931 to a questionnaire sent out by the Con*mittee (see p* 15)* Throughout the digest of these replies, an attempt has been made to indicate by appropriate references and citations the nature of the source material• Types of Bank Holding Companies The different methods of grouping banks through coav porate onmership of stock, as set forth in the replies to the Committee's questionnaire, are exceedingly diverse. The various - 106 - 107 - forms overlap in such fashion that it is difficult and, as a matter of fact, impossible, to draw lines separating them into rigid classifications. Within limits, however, and with the understanding that the division is a very "broad and general one, group hanking organizations may he classified as of three types: (l) the invest- ment trust, with no management or direction of the member hanks; (2) the over-all holding company type, where the stock of all the "banks in the group is owned by the holding company; and (3) the subsidiary holding company type, where a hank through a security affiliate or trust company .affiliate, or holding company affiliate or subsidiary of other character, owns the stock of a group of banks. Eheoretically at least, in any one of these types of organization the ownership of stock may bo complete (with the exception of directors' qualifying shares), or it may be majority ownership, or less than majority. Sransamerica Corporation, since it reorganization in 1932, may be cited as illustrative of the first type of group bank organization. Prior to its recent reorganization, that company operated in - 108 - a wider field than bank stocks, but uracil of its bank stock holdings may be regarded more as group ownership and less as group operation of the banks whose stocks were held. With respect to some of its leading interests this was not true, however. Its domination of the Bank of America in San Francisco and the Bank of America U. A. in Hew York was effective. With the sale of the Hew York unit to the National City Bank and the announcement that Irans&merica would divest itself of other majority holdings, it became, from the point of view of bank stock holdings, an investor, at least for a time. Subsequently a new management came into control and its policies have not as yet become clear. The best examples in the group banking field belong to the over-all holding company-management type, as Table ZJ brings out. In each of these cases all, or practically fell, of the shares of each individual bank in the group (agaiji with the exception of the directors1 qualifying- shares), arej owned outright IDJ the bancorporation. One important distinction^ however, should be noted. While the Northwest Bancorporation, fojr example, has but one class of stock, each share of which has equal voting rights with every other share, there are two classes of stockj in the Marine Bancorporation, a small amount of voting stock, closely held by 109 - persons intimately identified with the dominant bank of the group, and a larger issue of non-voting stock, held more [widely. The subsidiary holding company type is Well illustrated "by the First National Associates of Atlanta, Georgia. The Trust Company of Georgia is affiliated with the First National Bank of Atlanta, the stock of the former "being held by trustees for the •pro rata benefit of the shareholders of the latter. The Trust Company of Georgia owns the entire capital stock of the First National Associates, which in turn owns a controlling interest in six Georgia banks and an investment company. Most groups of this type are characterised by a large amount of centralized management. Another variation of this type is a group of banks owned through the securities affiliate of the leading bank* The primary activity of the stock-owning company is that of dealer in securities. The ownership of a majority of the stock in banks and the exercise of managerial supervision over banks are secondary activities. Some of the Boston organizations, for example, are in this class. The securities company is not the only company used in this way in the banking field. In certain States trust companies may own corporate stocks with very little limitatfion. Thus, in ad- dition to their main operating activity, a fiducifary business, they may become holding companies for banks and exercise management - 110 - control over such "banks. The case of the Atlantic National Bank and the Atlantic Trust Company of Jacksonville, Florida, is a good example of this. Table 2.1 - Leading groups (as of December 3[U 1931) Classified by Type of Organization Over-all holding company Subsidiary holding company Investment trust or indeterminate Hartford Connecticut Tr. Co. Financial Institutions, Inc.]First 2!at!l 3k., Boston Union Tr. & Melbank Corp. Marine Midland Group, Inc. national Shawmut Bank Worcester Co. Bk. & Tr. Co. Central Republic Bk. & Tr. Detroit Bankers, Inc. Co. Guardian Detroit Union Group First Tr. & Deposit Co., Fills t ITat'l Bk., Chicago Syracuse Wisconsin 3ankshares Corp. American national Bank Fiijst ITatfl Bk., Trustees, National Republic Bancor1 First Hat ! Brjik, Atlanta Louisville poration Citizens & Southern Nat'l Bk. Commercial Natfl, Shreveport BancOhio Corp. First natfl Bk., Birmingham Conperce Tr. Co., Kansas City Hamilton national AssoAtlantic national Bank Transamerica Corp. ciates, Inc. Exchange Nat!l Bk., Tulsa First Bank Stock Corp. First nat'l Bk., Seattle Northwest Bancorporation U.S. Bfat'l Corp., Portland, First Security Corp. Oregon Marine Bancorporation Anglo national Corp. Old National Corn. Organization of Holding Companies Many of the holding companies were organised under a Delaware charter, presumably to take advantage of the liberal corporation laws of that State. This was by no means always true, however, since many of the incorpora- tions were effected under the laws of the State where the most important banks of the groups are located (see Table 28). It was oftin the case that articles of incorporation of the holding company enumerated a multitude of powers. Even though the new corporation had no intention of covering a wide field of activities, it had seemed wise to look to any contingencies that might arise in the future. 111 - It has been previously indicated that the scheme of organization in many cases was to trade the holding company stock for stock in the bank being acquired. In most cases the stock of the bjanks which were jaken over by the holding companies had no ready market, so that a value for the stock was fixed upon the basis of the book value and earning power. Reference was made in the previous chapter to the degree to which stocks might have been overvalued by this process. In many cases, only one class of stock was issued. In these in- stances, stockholders of individual banks who wuri good traders were able to obtain their pro rata representation and voice in the holding company. In those cases where the local stockholders received non-voting stock, however, the control passed to a small coterie of men usual]ly surrounding the dominating bank of the goup. The following table includes some of the cases in which two classes of stock were issued. Table 28 - Organization Details of Selected Holding Companies(l) Name State of incorporation Marine Midland Corporation Guardian Detroit Union Group Wisconsin Bank Shares Corp. First Bank Stock Corp. Northwest Bancorporation First Security Corp. of Ogden Delaware Michigan Wisconsin Delaware Delaware Delaware Marine Bancorporation Washington Anglo National Corporation Delaware Classes of stock One One One One One two Voting stock closely held Two yoting stock closely held Two (1) Those organizations which have given permiss ion to print answers to the questionnaire in full. - 112 It will be recalled also that in the case of many holding companies the policy has been to acquire a majority of the stock in all banks. Other cases are on record where the holding company acquires only -.n amount sufficient to insure control. In many instances this nay be less than $0 per cent. It often happens that even within one group the degree of control varies from one bank to another. The Shareholder arid His Liability. - The stockholder who exchanges his stock in the local bank for stock in the holding corporation ordinarily gets a more marketable security, according to statements by group bankers. For the most part, holding company shares are listed on some exchange, and there is a more definite market for them than for the shares of many local institutions. Whether or not the return to the shareholder is enhanced by the transaction depends on whether the group organization has greater earning power than the original bank. Under some of the set-ups, where the bulk of the shares are nonvoting, the shareholder loses some of the ordinary rights and privileges of stock ovmership. He may obtain, however, a wider interest in banking affairs and regional business than he formerly had. Since in most instances there is no statutory double liability attaching to the ownership of holding company shares, the stockholder in many cases escapes that obligation. Tho hold- ing company itself is, of course, responsible for dpubLe liability assessments because of bank stock held by it. Such assessments are collectible in general only to the extent that the holding company^ has valuable assets. Pour out of five groups, in answer to an (inquiry, stated that stockholders in the holding company had no liability beyond their actual investments. Double liability in the case of the real owners may apply in a few cases because the subsidiary banks are controlled through direct owner- - 113 - ship of stock by the dominant banks whose stocMiolders are subject to double liability provisions. In such cases the stockholders of the dominant bank naturally have the same liability as they had before the group was formed. In two cases the articles of incorporation of a holding company, it is reported, specifically provide for liability of shareholders over and above their investment. Several groups reported that the holding company under its articles of incorporation must hold assets other than bank stock. The amount of these other assets required by charter varies from case to case. One charter requires that such assets equal the amount of bank stock held, a provision designed to insure that even if all member banks failed simultaneously, there would be assets against which the double liability assessment would hold. In answer to a. question as to whether the protection offered bank creditors because of double liability had been lessened or not, only 15 out of 30 groups ventured an opinion. None of these expressed the view that this protection had been lessened, while two-thirds of them said that it had been bettered by the affiliation of the individual banks with the group. There is reason to believe that this view applied in particular to the case in which a single member of a group, or only a few of its less important members, failed. This would involve the holding company, owning the shares and called upon to meet the double liability, in| obligations well within the company's means. It doubtless reflects also common knowledge of the fact that for suspended unit banks the collections from assessment of stockholders under the double liability clauae have [frequently fallen far short of the par value of the stock. - lli| - Miscellaneous Institutions Associated witjh Groups This report deals chiefly with those activities of hank holding companies that "bring several commercial "banks under unity of control. All of the statistical material presented in this study is concerned exclusively with the relationships of three or more "banks engaged wholly or in part in commercial "banking. The "bank holding companies, however, have created a close community of interest "between commercial hanks and corporations engaged in a variety of enterprises, financial and otherwise. In some cases, the style of enterprise is one which it is quite possible to carry on under the charters of some commercial hanks, even national hanks. On the other hand, some of the enterprises are not within the scope of the charters under which most commercial "banks operate. One-fourth of the groups reporting on the matter had no non-hanking affiliates, and another fourth had hut one affiliate each. The other groups reported varying numbers of non-banking affiliates, one having as many as fourteen. Of approximately 50 affiliates which were listed by function, about half were reported to be securities or investment companies; a quarter, safe deposit companies; a fifth, realty and insurance companies. Three land banks and two building and loan companies were mentioned. And finally, there was a variety of concerns which were represented on^.y once on the list, among which may be mentioned an employees1 stock purchase company, a restaurant, and a municipal heating plant. Of non-banking affiliates nearly 'half were acquired through exchange of stock; a quarter, by the stock purchase method; some were organized as new concerns; and some were previous!}- owned by banks which became - 115 - members of the group. Stock OY/nership by the group in these non-banking affiliates is generally reported as close to 100 per cent. Control of the non-banking affiliates in half the cases is directly in the holding company. In the remaining cases trustee relationships exist, or subsidiary banks exercise control. Dealing in Securities. •* Many commercial banks can deal in securities under their own charters. National banks may do so within limits prescribed by law and regulation. The prevalence of securities affiliates in the holding company set-ups, as indicated in the preceding paragraphs, is due in part no doubt to a desire to carry security merchandising to a point beyond that possible "under bank charters. Again, lending on real estate mortgage security is a type of investment banking* Most commercial banks possess the power to make such loans to a limited extent. The prevalence of various types of mortgage companies under the bank holding companies is also an indication of a desire to go further into the field than bank charters permit. More than a third of the groups stated that all the member banks sell securities to the public, and no group indicated that it did nothing in this line. Many of the answers did not directly indicate the relative importance of securities business, but, on the whole, group banking has apparently extended this service quite generally, but as yet it has not been widely used by the public. Two out of every three groups originate issues directly or through affiliates, but over half of these stated that the amount of their originations had been small. Three stated that they did no originating. In a few cases issues originated by an affiliate are not sold through the member banks. ~ 116 - Trust Operations, - Operations of group hanks in the trust field have been confined for the most part to the larger banks. It is perhaps natural that in connection with this function, group bank organizations would tend towards centralization of activity. Trust business has been potentially available in the outlying cities and country districts, but it has been more or less neglected. It is argued that the trust departments of the city banks can be made readily available to the smaller institutions through the group set-up. Several groups reported that trust business was being referred by outlying banks to the dominant bank or other large banks in the system. The most prevalent method of supervision of trust estates is through the examinations and audits conducted by the regular examining force or by special trust experts. The trust department of the dominant bank, trust committees of the holding compariy, or general trust officers are employed in several cases* Extent of Holding Company Direction The officers of the holding companies are in most cases officials of the leading bank and may receive additional compensation from the holding company for supervising the activities of subsidiary banks* In some cases there is a small staff which devotes its time exclusively to holding company affairs. In several cases subsidiary banks are charged with periodical ser- vice or management fees. The extent to which group bank holding corporations engage in the management of the banks whose stocks they own varies greatly. It ranges ~ 117 ~ from the holding company on the one hand which leaves the individual "banks almost entirely free to direct their affairs to the holding company at the other extreme which practically operates the "banks under its control. Some of the group operators state that they exercise a high degree of intimate control over the "banks in the group, in a few cases group operation "being scarcely distinguishable from branch banking. Others state that there is little interference with local policies and practices* other than a broad general attempt at insuring that good banking practices be followed. The Committee's inquiry contained the following: does your holding company share in the management of banks? "To what extent Has it a staff devoted to supervising thern and coordinating their activities?" Of the replies to this question three-fifths said that the holding company shared in the management of the member banks to a considerable extent, while the remainder stated that they did so only to a limited extent. In many cases the head office theoretically acts in merely an advisory capacity, but no doubt the local units accept the advice in most cases. The form of the staff that devotes its time to supervising and coordinating member bank activities varies considerably. In some cases employees of the dominant bank devote considerable time to the affairs of the other units. In others the only agency for the purpose consists of one or more examiners who report the condition of the members to the head office. One group employs a supervisor but no complete staff. In another the staff of the securities affiliate of the dominant bank acts in this capacity. - us - Still another has organized a separate management corporation, and the holding company takes no part in the management. Some groups attain uniformity of policy by means of interlocking directorates and officers. That is to say, officers or directors of the dominant hank, or more frequently of the holding company, are either officers or directors of the local institutions. There are some contradictions in the replies to the questionnaire in the matter of the degree of local autonomy allowed members of groups. The amount of control from head office indicated in the preceding discussion is not wholly consistent with allowing local directors a free hand in running a particular bank. The groups were practically unanimous, however, in stating that local directors were free to run their banks as they saw fit, but in almost all of these cases the clause was inserted, "so long as they conform to the stated group policies," or words to that effect. Obviously the holding company, with its control of the stock of the member banks, may remove a board of directors and substitute one which is willing to follow the policies laid down by the head office. Furthermore, the system of frequent and detailed reports employed hy most of the groups serves as a check upon the operations of each bank, and in those systems which have representatives of the holding company or dominant bank upon the local boards, this personal contact is able to forestall any radical departures from the established regulations. It is clear that the degree of legal ownership and control of the leading corporations over members of groups is - 119 - sufficiently great to be effective. For example, a survey of yd.2. banks belonging to leading groups at the end of 1930 showed that in the care of nearly half of them more than 90 per cent of their stock was owned by the leading corporation. In nine out of ten cases the degree of control was up- wards of 50 per cent. Neither of the two large Minneapolis groups was included in this analysis and in the case of each of these the proportion of stock ownership in the 100 odd banks composing the group is high. Group Auditing. - Most of the group bank holding companies maintain central auditing activities. The auditing force is responsible, in most cases, to an officer or officers of the dominant bank or holding company. In a few cases the responsibility \?as said to be directly to the board of directors of the holding' corporation. About half of the reports indicated that the audits included loan investigations. In some cases a separate credit department investigates loans, and generally speaking, the controlling agency of a group keeps a fairly detailed and accurate check on the portfolios of its subsidiary banks. Local Personnel, - The answers to the questionnaires indicated that local directors of baiiks acquired by group organizations are for the most part retained. In some instances, they are reported to have taken a new interest in the affairs of the bank. It is true that they are elected "by the corporation which owns the stock of their bank, but it has been pointed out that in order to retain the good-will of the community, there must bo no clash of interest between the local directors and the group headquarters. Two out of three of the groups state that practically all the directors of each cf their subsidiary banks aae residents cf the community in which tie bank is located. Some ~ 120 ~ of the groups place one or two representatives of the head office on each local board, and appoint the remaining members from the local residents, who are acquainted with the needs of the local community and the character of the bank's customers. So long as local directors are given some scope, local sympathy appears to remain with the management. Hie almost universal testimony of the group organization operators is to the effect that wherever possible they retain, in addition to local directors, the other local personnel, officers, and clerks,rchichwere operating the local "bank at the time of its acquisition. The Holding Company and the Correspondent Relationship With respect to the correspondent relationship, replies to the Committee's questionnaire indicate a tendency for the correspondent accounts of large numbers of country banks collected into group organizations to be consolidated by the groups. More than a third of the groups reported little or no change in correspondent relationships, but indicated that group members are favored with business whenever possible. A few indicated a policy of changing such relationships only where necessary to eliminate duplicate or excessive balances. In a few the members of groups have correspondent accounts almost exclusively in the leading banks of the group. The outside accounts of this bank then serve the other members of the group. In one case, all correspondent accounts outside the group have been closed. - 121 - Nearly half of tne groups reported that aggregate correspondent balances are smaller than would have been the case with the member? operating independently. This results in part from the lending of surplus fur is among members, as well as from increased investments in readily marketable securities, in lieu of deposit in metropolitan centers, A few groups stated that correspondent balances were larger for the group as a whole, because of the improved cash position of the constituent banks. Another phase of the correspondent problem is illustrated by an experience of the STisconsin Bankshares Corporation, Some independent unit banks objected to tne advertising policy of tnis organization on the ground that it cast reflections on the comparative safety of unit banks. The protests carried with them threats of severing correspondent relationships with the First Wisconsin National Bank, the leading unit of the Wisconsin Bankshares Corporation, It is said this bank has, however, suffered no loss in its general correspondent business. The EoIding Company and the Federal Rose I've System One of the questions which arises in connection with the development of group banking systems is whether it will tend to increase or to diminish membership in the Federal reserve system* Another is the effect which it may have on the use of Federal reserve facilities. Still another is the possibility of influence and control which the holding companies might exercise over the regional reserve banks. Some indication of the effect which group banking has had upon membership in the system so far may be found in the answers to a question - 122 - asked by the Committee: "When a member of the Federal Heserve System joins your group, are its relations with its Federal reserve bank modified in any way?' What effect does membership in the group have upon borrowing or rediscount ing with the Federal reserve bank?" Edghteen of the twenty-four groups replying to this question maintained that the relations of their banks with the Federal reserve system were not affected in any way because of their group affiliation. One group reported that it was nationalizing all the State banks it controled. In one, banks gave up their memberships, except those which would probably make frequent use of the facilities of the system. quent use of the rediscount privilege. Some groups reported less fre- Some of the group bank organizations have developed check clearing activities within their own group, but in general members of groups make the same use of Federal reserve facilities as do independent unit banks. As the method of electing directors of the Federal reserve banks under the law gives each member bank one vote, a group which controls many banks could dominate a Federal reserve bank. The Comptroller of the Currency prepared a memorandum showing that the First Bank Stock Corporation and the Horthwest Bancorooration could dominate the election of some of the directors of the ITinth Federal Reserve District. His statement in this connection appears in the appendix. This matter will be referred to in later para- graphs dealing with some.of the unsolved problems of group banking and public regulation of bank holding companies. - 123 Attitude of Group Management Toward Supervisory Authorities Although at present neither the National Bank Act nor the State hanking laws generally provide that holding companies controlling hanks shall he under the supervision of the hanking authorities, most of the groups have consulted either the Comptroller of the Currency or their respective State hanking supervisors in regard to their activities. Two-thirds of the groups indicated that they had cooperated in this manner, although a few of these stated that their consultations had been with the State departments only. One group stated that both the Comptroller and the State supervisor were in full accord with its operations. Another said that supervisory officials had been consulted on every move made by the organization. A third reported that the State banking department had asked the group to allow certain banks to affiliate with it in order to strengthen them. Two-thirds of the groups expressed the conviction that bank holding companies should be supervised by governmental authorities, while a few stated that they should not. Several of those in favor of supervision thought that because of the possible widespread activities of groups, the Comptroller alone should have this power, and another said that all groups should be composed of either all national or all State banks. One which was not in favor of supervision could not see how it would be effective as long as groups were composed of both national and State banks. Some, while not enthusiastically in favor of supervision, stated that they would have no objection to it. The question was not important with respect to two of the answering groups since the stock of the subsidiary banks in these cases is held by trust companies, which are already supervised by the State banking department. CHAPTEB VII THE BANK HOLDING COMPANY: OPERATING POLICIES Public interest in banks and banking structures may be said to focus upon the matters of safety and service, !Ehe depositor wants to feel secure with respect to his deposits and, at the same time, the community demands service from its banks. Too generous service, however, may be inconsistent with safety, and it is a major problem of good banking to combine safety with adequate service. With respect to these matters, group banking must be tested in comparison with unit banking on one hand and branch banking on the other. Because of the relative youth of the movement, statistical measurements are largely lacking. Chapter VIII shows that during the 11 years ending with 1931 banks belonging to chains and groups had a somewhat better record in respect to failure than banks in general. The advantage, however, was not decisive. Information relating to the operating policies of bank holding companies has been assembled by the Committee from the replies made in 1930 and 1931 to its questionnaire already referred to (see page 15). The information obtained from this source is digested in this chapter. - 12k ~ ~ 125 Lending Policies According to replies to the Committee's inquiry, the lending policies and operations of the "banks within a group ate unified and coordinated in various ways. Nearly all of the groups require daily or weekly reports from the individual "banks. In some cases loans over and above a certain minimum must be approved at the head office of the group. a joint loan committee meets to consider credit commitments. In others Officers in some of the groups make periodic visits to the units to inspect and supervise credit extensions. Almost uniformly the holding companies maintain central credit information files on prospective and active borrowers. In some groups, this includes detailed information with respect to the types of collateral, a classification of the purposes for which borrowings were made, and much other pertinent information which is usually collected by city banks with large and efficient credit departments. All but three groups reported some form of coordination of lending policies. Meetings and conferences of loan officers of the member banks are held by several groups, at which loan policies are formulated, while others direct loan operations through personal representatives of the head office. One out of every four groups stated that there had been little or no change in the lending policies of its members. A slightly larger proportion, however, maintained that their portfolios now possess & higher degree of liquidity and several that their policies were more conservative, than was true of the banks as independent institutions. An intention to decrease real estate loans was expressed in some cases. Installations of more seien* tific credit systems, attempts to secure greater diversity, and annual cleanups are policies emphasized by some managements. - 126 ~ About a third of the groups reported that the ratio of loans and discounts to deposits had undergone little change, while about an equal representation stated that such changes as had occurred were due to economic conditions which have reduced the demand for loans. A few stated, however, that loans had been purposely reduced in the effort to attain liquidity. One reply made the point that the possibility of shifting surplus deposits to members with heavy demands for loans had altered the deposit ratio in several cases. The banks in the groups have not set any minimum size for loans they are willing to make. Some of them try to avoid too many small loans, and say this is the general practice of banks, owing to the high cost of making them. A minimum charge for small loans, running from fifty cents to a dollar, is usual. One or two of the groups have a number of banks operating small loan departments. Morris Plan banks are sometimes associated with groups. On the other hand, one of the groups relinquished ownership of an industrial bank, in order to confine its activities to commercial banking and fiduciary activities. Hates Charged on Loans Answers to the questionnaire sent out by the Committee indicate that group bank organization has had little effect on the rates charged by the member banks to their customers for loans made. The almost universal testimony is that rates have continued, as before, to be determined largely by local conditions. Since the usual loaning rate at country banks changes slowly, even variations in market rates in the money centers have been little reflected in the banks outside of the larger cities. - 127 ~ Rates of interest charged ay group banks do not vary in general from those charged by independent banks in the sane community, according to the group bankers1 testimony, competition being the determining factor in fixing rates. One reply said: "It has been impossible to make any changes by way of reduction of rates in many localities, for the reason that they are also being served by independent banks whose income night be seriously impaired by such changes." Another reply: "We have not undertaken to attract business from our local competitors by cutting rates in any case, but have sought rather to fully cooperative with such competitors. A number of such competitors have told us that they feel much more secure in this respect with our competition than they had previously felt with the independent unit bank competition." Pew of the groups operate upon a uniform rate basis. Hates are determined by the same considerations as those in a loan made by any bank: locality, competition, quality of the risk, character or type of loan, and the value of the account of the borrower. "Naturally in the larger communities where there are choicer loans and money is more plentiful, rates are lower on many classes of loans," one group replied, "whereas in the small outlying communities with small lines of credit and greater hazard, the rates are naturally more." Another replied: "Out- lying banks by virtue of small loan accommodations have a higher average yield than down-town banks*" A few of the answers indicate that the tendency has been for a lowering of rates to customers, particularly for better names, due to the fact that as prime risks can ordinarily get better rates at city banks, and since the group member is supposed to have access to a city institution, - 128 these borrowers have demanded a lower rate. One group replied, for instance: "On the more favorable lines, our rates have in some cases been reduced from what the independent bank had previously charged, as the inability of the unit bank to meet rate competition and in some cases to provide the size of lines required has been throwing this most desirable business to the large centers." Another replied: "As applied to larger and better borrowers, we have found that the result has been to lower their rates because these borrowers have felt that they were doing business in effect with a city organization and have asked city rates, and being entitled according to city standards to such rates, have been allowed them. We believe this is a natural result of a group or branch banking operation which is helpful to a local situation rather than otherwise." The Effect on the Bank Borrower The following is another inquiry made by the Committee: "Have there been any changes in the credit policies of any of your banks since they were acquired, with the result that certain types of borrowers find it more difficult to get credit? If so, have you had an undue amount of protest from these quarters with perhaps some propaganda against your group system?" About half of the groups answered that they have become more strict in their requirements regarding applications for loans, but that no "legitimate" borrower is ever refused accommodation. Nearly half of the answers stated that there had been some criticism or propaganda against them because of their loan restrictions, but in no case was this opposition reported to be of any considerable importance. Nearly all of those that have adopted more conservative policies have received some protests on this - 129 account. inhere ill will has arisen from this source, it is stated, a compensating growth in good-will has been experienced among customers who have felt the group to be offering stronger and safer facilities* A certain amount of ill will they attribute to the class of borrower who should not be granted credit by any bank that has a proper sense of its responsibility for the interest of its depositors and its community• It is incorrect to consider the bank borrower as a separate entity from the bank depositor, or even the bank stockholder, since in most small country banks, at leasts many of the customers of the bank are all three at the same time* In so far, however, as the borrowing function is a different phase of bank relationship from bank depositing, it may be pertinent to consider the effect of the new type of bonk organization upon the person who borrows from a group unit, as exhibited in the replies made by leading banking groups to the Committee1 s questionnaire, apart from the effect of the sano development upon possibly the same person as a depositor* Absentee Credit Decisions* - It is often alleged that the group organization like a branch organization tends towards credit decisions at head office, and that the local borrower is not given the same sympathetic and neighborly consideration that he gets from the purely local banker, who is familiar with his peculiar needs and credit standing* The credit risk, which is acceptable from the customary standpoint of neighborhood banking, may not be acceptable under the methods of credit extension in use at the city bank which heads the group* To combat this allegation, several of the groups insist that credit decisions are made locally to the same degree that they were before the group was formed* It is to be noted, however, that it is difficult to reconcile this with claims of these groups to increased efficiency and higher standards of management* - 130 - Group operators do not concede that local "borrowers necessarily get less consideration when the credit decisions are made at group headquarters, "but reply that if such is the case, it is probably because many of the local borrowers should not have had accommodation, and that it is only inferior bank management which has enabled them to get it. Indeed, an occasional independent banker will testify that the existence of the group as a competitor has made it possible for him to deny credit applications which he would otherwise have felt it necessary to grant, while feeling them unjustified. Some of the independent bankers in the areas where group banking has had its greatest development agree that banking standards have been raised as a result of the group development, and that less poor credit is being extended. The credit decision is an extremely difficult one to make, and it is still an open question in the minds of many whether the liberality of the old style banker may not be better than the coldly analytical methods of the new school. With respect to this matter, as in other phases of group banking, short experience and an unusual era are handicaps in making proper estimates. Under some conditions it might be possible to compare the rela- tive merits of group banking and independent unit banking by a statistical analysis of the amounts loaned and the number of borrowers accommodated by a bank before and after joining a group. The last few years have been of - 131 such a character, however, as to make such a comparison unfair and lacking in significance. Credit has been granted with caution in recent months, by banks of all descriptions* Larger Lending Capacity* - One of the advantages claimed for the group bank set-up from the standpoint of the bank borrower is that it enables larger loans to be made to single customers whose credit needs are of a size that exceeds the legal limits of many of the smaller banks* Through the affiliation of many banks, it is argued, large lines may be carried within the group organization* This is regarded by some as of even greater advantage to the local bank or to the dominant bank of the group than to the borrower, although it is recognized as being of some advantage to the latter as well* The statement is also made by some proponents of the traditional banking system that correspondent banking accomplishes the same result with respect to large lines as group banking* According to the testimony of four-fifths of the groups a demand for loans beyond the resources of the local bank is often met by other member banks, while several stated that such a situation had not yet arisen in their group* Within the groups, situations of the sort are handled in a variety of ways* Local applications may be sent up to the dominant bank for consideration there, or paper already acquired may be sold to it or other institutions within the group, usually without recourse* Uniformity in Investments* - Speaking generally, the investment function of the banks is more centralized under the group bank holding con- - 132 - pany than the lending function. This is, of course, also characteristic of the great branch systems of Canada and England. In some of the groups the holding corporation, or the dominant bank, does all of the buying for the group; in others, purchases are made "by the unit banks from a list of approved securities furnished by the head office. A central file of investments held by the various members of the group is frequently maintained, and sometimes analyses of the investment position of individual banks are made • About a third of the groups reported that the controlling agency acted merely in an advisory capacity as to the purchase of security investments. One in four indicated that a uniform policy of supervision over the bond accounts of member banks existed. In a few organizations practically all investments are purchased by the head office, and thence distributed to the subsidiary banks. In these cases, it may be assumed that the autonomy of the member banks in regard to investment policy has practically disap*. peared. Profits and Costs In any process of concentration in business enterprise, such as the bank holding company movement, it is generally assumed that managers see in the amalgamated concern the possibility of increasing the rate of profit on invested capital. It is generally assumed that profit motives have been of first importance in the growth of the concentrated branch banking system of England. Better profits may come about throtigh increasing gross returns or by cutting down the costs of handling a unit of business. The group banking movement is so young and the period since its inception has been so abnormal that any attempt to measure statistically its accom- - 133 plisliments in improving profits would be futile. frross Income, - There are nevertheless some observations which can be made with respect to profit possibilities. The rate of return on invested capital of the members of a group would be improved if the volume of business could be increased without increasing capital. There are doubtless conditions under which this may be done with safety and conservatism, but the ratio of capital to deposits can not be lowered indefinitely without lessening safety. The minimum limit varies from locality to locality and from bank to bank and many of touched this limit. the banks in the groups have already It is not likely that group managers expect to improve their average gross return on loans, since they are subject to local competition. In fact, if a group brings more conservative bank management to an individual bank, the higher grade portfolio might actually result in a lower rate of gross return per $100 of loans and investments. Perhaps, the best possibility of increasing gross income as a result of group management rests in the matter of miscellaneous activities, in the fields of fiduciary business and of merchandising securities and in miscellaneous other undertakings. The extent to which leading groups have become interested in these fields was bought out in a previous chapter. In the matter of reducing banking costs or expenses, a group management might be expected to achieve results at some points. With respect to interest on deposits local competition would probably be controlling, but handling the same business in a member bank at a lower payroll cost is a possibility. So also among miscellaneous expenses, includ- ing office supplies, and advertising, group management makes claims of cutting down costs. Two-thirds of the groups indicated that weak banks were taken over which became profit makers under their management* Various reasons for being able to turn unprofitable institutions into profitable ones were given* It was stated that sound banking principles were substituted by the group management for the inefficient practices formerly employed. In a number of cases announcement of the fact that the group had assumed control restored public confidence to institutions which had been losing deposits* Most of the groups stated that they have not established new banks, as distinguished from taking over existing banks, where unit banks can not profitably operate, while three maintained they had* In some isolated cases, with the hope that future developments will enable a favorable return to be secured, banks are being operated which are returning very low dividends to the group or just breaking even* One group reported that the cost of acquiring the weaker banks had been so low that they were able to make money with them whereas their former owners, with a relatively larger investment, could not* In the case of two groups, un- profitable banks which had been acquired were said to be giving promise of becoming profitable* Losses on Loans and Investments* «- At the time when this survey was concluded, in the early months of 1931i the leading groups were still too young to have acquired much actual experience as groups with respect to losses on loans and investments* Interpretation of the experience record, furthermore, was complicated in some cases by the nature of relations between banks and affiliates* In these circumstances, groups replying to the Committee's questionnaire stressed the general principle that diversification of assets has an important bearing on the loss record of banks* The unit bank operating in a small town usually employs a large part of its funds in that locality*.. If the industry upon which the community is mainly dependent suffers from unfavorable conditions, the bank is often faced with - 135 substantial losses* A group, since it operates institutions in various communities, usually achieves as a whole more diversification than any one of its member banks. If one community in which the group operates is adversely affected by local economic conditions, the others may be prosperous, and the losses in some places may be offset against earnings in others. It is stated that the individual member bank of a group has not been able to increase diversification to the same extent, as it is under pressure to use a largo part of its funds locally. About half of the groups indicated that their member banks had not secured any greater diversification than it is possible for independent unit banks to achieve. The remainder, however, stated that their members had achieved somewhat better diversification. In some cases this has been accomplished by making loans to customers of other members of the group, or to the other member banks directly. In line with minimizing losses, practically all of the groups have undertaken some method of handling the slow and doubtful assets held by banks when they became members of the group. Upwards of a third of the groups reported that the head office carefully watches over such assets and makes suggestions to the banks owning them as to how they may bb most readily and efficiently liquidated. Several groups stated that all puch assets were liqui- dated by the former stockholders of the individual banks, and in two others reserves were set up at the time of acquisition which were sufficient to absorb any loss that might be incurred from this source. In another group the doubtful assets were not used in calculating the price at which the subsidiary banks were purchased. Other - 136 - methods employed in individual cases were the purchase of doubtful assets by the holding company itself, and the organization of a separate company to work out the doubtful paper. One group stated that it was not bothered by this problem for it purchased only "clean banks." Still another frankly admits that it has never found a satisfactory method of handling slow and doubtful assets. Interest on Deposits. - Interest paid to the depositor is one of the major costs of doing a banking business in this country. It would appear that banks belonging to groups generally pay about the same rate of interest as other banks. Answers to questions indicate that the member of a group must be guided by the local competition with respect to interest paid on deposits. One group replied that the "rates paid on deposits by our banks are for the most part more liberal than rates paid by independent banks here," while another stated that "I think our rate of interest, if anything, is smaller than that of independent banks*" One group spoke of cooperative effort with competitors to lower rates. Another said that "in some instances our rates are lower." Still another contributed the statement that "We have been outbid in cases of deposits of public moneys." It should be remembered, of course, and some of the replies indicated this, that recent months have witnessed a reduction in tho interest paid on deposits by all banks, group and unij;. It would seem clear that whatever changes there have been have no| been due so much to group bank organization as to other causes. j Wages and Other Costs. - A fourth of the groups reported that a reduction in payroll costs had been accomplished* in some cases replace- - 137 - ments were made at lower salaries, while others had not replaced those leaving the organization. Salary reductions had "been instituted in some cases and in one case forty-four employees were eliminated through consolidating three banks. A great number of groups Reported economies in the consolidated purchase of supplies and equipment. In one group, 97 of the 117 members were using the central purchasing service at an average saving of 12 per cent. Supplies and equipment, however, represent a rather small proportion of the total costs of banking operations, and saving in these items does not go far towards reducing operating expenses in the aggregate. A number of organizations have economized time and labor by standardizing5 forms and operations. The forms used by all the banks of a group mast be fairly uniform before any great saving can be secured in their purchase price. Other economies which were mentioned were: the making of a consolidated State income tax return, so that the losses of some banks could be set off against the profits of others; taking out a blanket bond for all affiliated institutions; reducing the aggregate cost to from 50 to 70 per cent of the total of the individual bonds; discouraging excessive activity among the member banks jin lines which were not profitable. Reduction of Non-earning Assets. - Seduction of cash reserves and other non-earning assets among the members of a group would be in the direction of lowering costs or increasing profits. Indications are that little change has been made along this line. According to their statements, - 138 none of the groups load established a definite rule as to how nuch cash each of its banks oust keep in its own vault. Instead, tlie local requirements of each community are allowed to determine the amount of till money, as a rule. As some group banks operate under laws which Require them to keep a certain amount of cash on hand, these banks naturally must meet these requirements whether they coincide with what the management believes to be a safe minimum or not. Two answers stated that inasmuch as banks v/ere prac- tically independently managed, the officers of each innit were permitted to determine the amount kept on hand. In most cases it was stated that cash in vault was never more than was absolutely necessary, so that danger of loss from robbery would be minimized. High Cost Factors, ** Over and against the possible economies of the group, the overhead of the home office, its personnel and office space, complicated reports, and red tape would be an offset0 When the groups have been in existence longer, a statistical analysis of conditions before and after formation will test the question of whether this type of banking concentration rests upon sound profit advantages. It is rather widely stated by the friends of the group movement that it does not have the same possibilities in this respect as a branch office system^ Elements of Strength and Weakness The foregoing discussion of the organ!zatiton, management, and operating policies of bank holding companies has indicated elements of both strength and weakness which may be briefly sxoajarized in the following paragraphs. - 139 Elements of Strength, - Such elements of strength as are possessed "by the holding company grow largely out of the fact that it is a method of concentrating hanking resources. It has been pointed out in the various studies on "branch banking—-especially the Canadian ajxid English reports— that the large banking institutions in those countries have been successful, partly in consequence of their size, in surviving periods of strain. Large financial institutions appear to gain their strength partly through achieving a higher degree of diversification. It has been shown that in many cases a bank holding company has brought together a large aggregate of banking resources, frequently several times that of the leading bank in the group. The larger aggregation of resources should be able to command a higher grade of management which should work in the direction of reducing costs and losses in all of the banks of the group, especially the smaller units. With respect to loans, the detached central management is less likely under local influence to grant unwise accommodation. With respect to making investments, the larger organization can command experts, not available to small banking units. The large organization built up through tlje holding company device can offer a wide range of services to its custopers, particularly those in outlying towns. Eor example, such customers may have access to an expert fiduciary service. The local borrower dealing with a group bank taps a larger reservoir of loanable funds, which is particularly advantageous to the large borrower. The association of many banks in a holding company contributes to the mobility of funds. Surplus lending power arising in one part of the area covered ^oy the group may be made use of in another locality - 1U0 - where a greater demand for credit exists. A membeij hank suffering a drain of deposits may "be supported by other members of the group where the situation is easier. The individual "bank shareholder, who exchanges his shares for stock in a holding company, may improve his position in that his risk is more scattered and his equity has a wider marketability than the one he has given up. Elements of Weakness and Unsolved Problemd. - From the point of view of public policy elements of weakness in groujj banking are the possibilities of manipulation inherent in complicated corporate interrelationships. Safety may be impaired by shifting of fund^ from one bank to another, by forcing worthless securities on a membejr bank, by pyramiding of reserves, and by using the funds of one bank to [buy the stock in another, All of these can endanger not only one bank, but the whole system. A later chapter, reviewing group and chain bank failures, shows that abuses of this sort have caused disasters in certain cases. The holding company has resulted in many c^ses in the close association of commercial banking activities and thje merchandising securities. /^p The dangers inherent in these relationships have had many exemplifications of late. The fact that the holding company movement in the banking field enjoyed its greatest development during the recent speculative era adds to the suggestion of its inherent manipulative possibilities. While most of the existing groups are in conservative - lUi ~ "banking hands today, the instrument of the holding company lends itself to manipulation. Supervision of a group system isj difficult, especially when it contains "both national and State chartered "banks. The transfer of the double liability of hank shareholders from natural persons to corporations through the holding company device is one of the unsolved problems of the movement* Moreover, the use of the holding compaiiy to separate control and ownership of hanks through the device of different classes of stock, some non-voting, may he contrary to public policy. The elaborate structure of a group system in itself has certain drawbacks. Inherently, the type of organization is cumbersome and difficult to supervise and audit* Complicated reporting systems are necessary to bring the separate banks under head office control* Since each unit of the group is a separate corporate entity, it is probable that the holding company can not operate its outlets as economically as a branch system in extending the same services. This, no doubt, accounts for the fact that most group managers would prefer to operate their groups as branch systems* Thus far the holding company has done litfcle towards solving the problems of the banking structure where they ape most acute. Only a minor fraction of the banking units in the major group systems are banks of less than $500,000 loans and investments* Other sections of - ite the Committees report have indicated that independent banks of t h i s s i z e , taken as a whole, have not had s a t i s f a c t o r y records of safety or profits* CHAPTER VIII SUSPENSIONS AMONG GROUP AND CHAIN BANKS: 1921-1931 The group movement, as represented by the leading bank holding companies, has covered such a brief period of time that few conclusions can be drawn as to the safety record of this type of banking* It is not possible for most of the period covered, 1921~1931» to separate those suspensions belonging to chains from those belonging to the group form of organization, but it is clear that the great majority were chain banks* Many of them belonged to systems that combined some of the features of both chains and groups. In some cases where failures occurred the holding company had been used as an instrument by a single individual to secure control over several banks* -1U3- ~ llfc- There is evidence that in some cases the chain and group vehicles have been used for promotional and manipulative purposes* In other cases of failure, sys- tems have been the victims of honest but incompetent management. The reasons for failures of groups and chains are probably about the same as for failures of independent banks. ment. The test has been the quality of the manage- Chains and groups, however, lend themselves more readily to manipulations and are more difficult to supervise# The small unit banks have been easy prey, in many cases, for unscrupulous individuals who have secured control through these instrumentalities, more for the purpose of exploitation than with the idea of strengthening the banking structure. Control of the larger institutions is somewhat more difficult to acquire owing to the greater outlay of capital needed* Daring the years 1921-1931 the majority of group and chain banks as of unit banks that have suspended were small institutions. ~ 1^5 ~ The abuses which have led to the failure of a number of chains have turned conservative bankersf writers, and banking supervisors against the chains. The attitude of students of the subject is revealed by the oft repeated statement that chain banking has all of the limitations of branch banking with none of its advantages. On the other hand, the group system in the hands of capable and honest management has elements of strength resulting from the common interest and cooperation of a number of banks. Group and Chain Suspensions. 1921-19*51 l/ During the elevei>-year period, 1921^1931t 551 group and chain banks belonging to 120 systems suspended, involving loans and investments of $519,696,000. £J This chapter was written in 1932 before the developments of more recent months had occurred in which several important groups of banks suspended operations. - 1U6 - It is sometimes difficult to identify? among suspended banks those belonging to chains and groups because of the limitation in the data regarding these organizations. In compiling these statistics only banks were included that were members of groups or chains at the time they suspended, and nothing was considered a group or chain unless there was definite information to show that it contained at least three banks, exclusive of private and mutual savings banks. As in the other reports of this Committee, mutual savings and private banks are not included in % o tr.bles. It is also difficult to determine how many of the 551 group and chain banks which suspended during the period can be classified as group banks and how many as chain banks• The Witham system contributed 117 suspensions and the CaldwellBanks system contributed 41+# - 1^7 - Both of these systems were on the "border line "between chains and groups• Of the 39O other hanks, kS appear to have been group banks and 3 ^ chain banks. Geographic Distribution. - Table 29 shows the geographic distribution of suspensions among group and chain banks during the period, 1921-1931* Tjie agri- cultural regions, comprised of the Southeastern, Southwestern, and Western Grain States, accounted for 79»5 per cent of the total number of group and chain banks suspending during 1921-1931 • ^h-e concentration in those areas was even more marked among group gind chain suspensions than among all suspensions during the elevenyear period. This was due partly to a few important cases of failure and partly to the concentration of group and chain banking in those areas» ~ iks ~ Table 29 - Suspensions of Group and Cliain Brinks during I92I-I93I by Geographic Division j Geographic division Suspended! banks loans Percent [Percent \ and inNumber of ! of vest!of svs~ ! Number ! total total x ments |tems^ ' (000 dmitted) i New England 1 10 1.8 i 61,93^ 11.9 Middle Atlantic 7 15 2.7 29,00^ 17.1 12 ks 8.7 83,626 16.1 2 5 .9 85,293 l6.4 Southeastern Ik 167 30.3 89.359 17.2 Southwestern 12 103 is.7 ^.553 8.6 Western Grain 59 ; 168 30.5 ^5,804 8.8 22 5.1; 17,53^ 3.H Z l»3 2.589 .5 North Central Southern Mountain Rocky Mountain ' s i Pacific Coast ! 5, UNITED STATES 120 551 i 100.0 $519,696| 100.0 J ; Systems in which one or more banks failed* Details by States appear in the Appendix, TJables XIV and XV# - 1^9 - The Eastern part of the United Stat|es, the first five geographic divisions named in Tablje 29, sup** plied three-quarters of the loans and investments involved in chain and group hank suspensions. Although the number of suspensions in the Western Graijn States and in the Southeastern States was about the same, the loans and investments involved were about ha3jf as great as in the former as in the latter. The loax^s and in- vestments of the 15 group and chain banks which failed in the Middle Atlantic States practically eqoialled those of the 167 suspended banks in the Southeastern States. While the agricultural regions suffered the greatest number of suspensions, the banks woare relatively much smaller than those which suspended in such industrial sections as the New England, Middle Atlantic, and North Central States. Because of the B&ncoKentucky failure, the average size of suspended banks was much larger in the Southern Mountain States than ^ywhere else. i - 150 ~ Among individual States, Georgia, Arkansas, North Dakota, and Florida, each had over So Suspensions. The collapse of the Caldwell find Witham systems accounted for most of the failures in the three Southern States. Suspensions in each of the States, Illinois, Pennsylvania, Florida, Massachusetts, and Kentucky, involved over $50,000,000 of loans and investments. On the other hand, the 71 suspensions among group and chain hanks in North Dakota involved less than $11,000,000 in loahs and investments. Details by States and by years are to be bound in the Appendix, Tables XIV and XV. Suspensions 19^0-1931« - Table 30 shows that of the 551 gro^-P &*id chain suspensions occurjriisg in eleven years, 237t or *+3 per cent, occurred in the last two years. This is slightly higher than the percentage among total bank suspensions. Virtually no suspensions among group and chain banks occurred in the industrial States of New England, Middle Atlantic, and Itforth Central in the first nine years. In the years 1930 1931 this area accounted for 3^*3 P e r ceirfc an & °£ a H group and chain suspensions and for 60.S per cent of the loans and investments involved. The average sizd of the sus- pending group and chain banks in these areas was much larger than the average size of banks else?irliere. - 151 ~ Table 30 - Suspensions of Group and Chain Banks dufring 1921-1929 and during 1930-1931, by Geographic Division 1 Geographic division Number New England - Middle Atlantic - - 1 1 North Central Southern Mountain 192:L-1929 Loans and in?er vestcent ments of (000 total omitted) Per cent Number of total 1930-1931 I Loans Per and incent vestof ments total (000 omitted) Per cent of total - - 10 4.2 $ 61,934 16.1 ~ - 15 6.3 89,oo4 23.1 ^7 19.8 5 2.1 85,293 22.2 707 ! •3 $ »5 - - - Southeastern ll+6 46.5 77,434 57.3 21 8.9 11,925 3.1 Southwestern 32 10.2 11,596 8.6 71 30.0 32,957 8.6 109 3^.7 28.426 21.0 59 24.9 17,378 4.5 2k 7.7 16,305 12.1 4 1 1,229 .3 5 2.1! 1.843! .5 Western Grain Rooky Mountain Pacific Coast UNITED STATES 2 31*+ - 82,919 ; 21.6 .6! 7461 100.01 $135,214 •51 100.0 237 *7 100.0 $384,4821 100.0 - 152 - Suspensions by Size Groups. - The increase in size of suspended hanks in the last two years is brought out in Table 31. During 1921-1929, 80#2 per cent of the suspensions were among banks with loans and investments under $500,000, while in the years I93O and 1931 the proportion in this size class was 6l#2 per cent. The distribution of loans and investments among the size classes during the two periods is even more striking. In the early period banks larger than $5,000,000 accounted for 13.8 per cent of the loans and investments of group and chain suspensions, compared with 63.I+ per cent in the years 193O-193I, This change in the size of suspended group- and chain banks is similar to that shown for all suspended banks. - 153 - Table 31 - Suspensions of Group and Chain Banks during 1921-1929 and during 1930-1931, by Size of Loans and Investments 192]L-1929 Loans i Per and inSize group vest'"SOX: Icent loans and investments of ments W total (000 (omitted) 1 Under $150,000 12S Per cent N"um~ of ber total 1 1 iq-?o-iqii Loans Per jand in- 1 Per cent cent 1 vestof of ; ments total total j (000 omitted) 1+0.8 $ 11,948 B.& n 29.5 $ 5.787 1.5 150,000 - 250,000 68 21.6 12,663 9> 4o 16.9 7.852 2.1 250,000 - 500,000 56 17.8 20,250 15.0 35 14.8 12,272 3.2 500,000 - 750,000 19 6.1 11,721 8.7 19 8.0 11,279 2.9 750,000 - 1,000,000 l4 *.5 11,913 8.8 16 6.7 13.7^0 3.6 1,000,000 - 2,000,000 19 6.1 26,152 19.3 23 9.7 32,735 8,5 2,000,000 - 5,000,000 S 2.5 21,840 l6.2 18 7.6' 56,8^9 i4.S 5,000,000 - 10,000,000 1 .3 5.005 3.7 8 3.V 10,000,000 - 50,000,000 1 .3 13.722 10.1 8 3.*: lS4,26l 47.9 50,000,000 and over - - •; - Total «* mj 59,707 15.5 i - ' - 3l4 100.0!$135,21^; IOO.O: 237 100.0 $384,4821 100.0 ~ 154 - Taking the eleven years as a whole, Table 32 brings out the fact that banks of less than $5001000 accounted for 72#1 per cent of the number of group and chain bank suspensions but for only 13*6 per cent of the loans and investments involved* On the other hand, banks of $5t0°0s0°0 or more account fojr only 3»2 per cent of the number of suspensions but fojr ^Q.S per cent of the loans and investments involved ih group and chain bank suspensions. - 155 - Table 32 - Suspensions of Group and Chain Banks diiring 1921-1931 by size of Loans and Investments Size group loans and investments Number Suspended blanks Loans and Per cent 1 i n v e s t ments of t o t a l (000 omitted) l Per cent of t o t a l i- Under $150,000 19S 36.O $ 17,735 3.* 150,000 - 250,000 108 19.6 20,515 3.9 250,000 - 500,000 91 16.5 32,522 6.3 500,000 - 750,000 38 6.9 23,000 k.k 750,000 - 1,000,000 30 5.5 25,653 Ks 1,000,000 - 2,000,000 kz 7.6 5S.S87 11.3 2,000,000 - 5,000,000 26 Kl 78,639 15.2 5,000,000 - 10,000,000 9 1.6 6l+, 712 12.5 10,000,000 - 50,000,000 9 1.6 197,983 38.1 50,000,000 Euid over Total '1' - ' 551 100.0 *m $519,696 - . 100.0 Details by States aijpear in the Appendix, Tsibj es XVI and XVII. ~ 156 - Disposition of Suspended Banks. - During the ten-year period, 1921-1930, U26 group and ch4in hanks suspended. Of these, llH, or more than one~fouitth* were either reopened or taken over, as shown in T^ble 33* Among all suspensions the coitfparable proportion was ohe-fifth. In the Southeastern States, where l6l banks Were involved, 59 were reopened or taken over. - 157 - Table 33 - Disposition of Group and Chain Bank Suspensions during 1921-1930 "by Georgraphic Division'1' Geographic division Reopened ProcComDisess of plete- posiTaken liquily tion over daliqui- untion dated known New England - - 1 Middle Atlantic - - 2 North Central 1 - Southern Mountain 1 Southeastern Total •• 1 - - 2 3 - - k - k - - 5 5^ 5 76 26 - 161 Southwestern 22 5 59 6 - 92 Western Grain 20 l 95 17 - 133 Rocky Mountain 1+ - 10 9 2 25 Pacific Coast 1 mm 2 UNITED STATES 103 11 252 ^ wa 2 52 U26 1 (!) Details by States appear in the Appendix, ifable XVIII. ~ 158 - Among group and chain honks reopened or taken over during the period threes-fourths occasioned no loss on general claims to depositors, as Table 3I+ shows• On the other hand, among those hanks completely liquidated, in more than two-thirds of the cases depositors realized less than 60 per cent on their general claims, and indeed in a third of the cases less than 20 per cent. This record in general, however, is better than in the case of all national and State bank suspensions. ~ 159 Table 3H - Distribution of Suspended Group and Chain Banks Eeopened, Taken Over, or Completely Liquidated during 1921-1930, Classified According to Per Cent of Greneral Claims Realized by Depositors Per cent of general claims realized by depositors Pei ' cent of Number of suspended ;otal banks ReContComHeopened pletely opened pletely and liqui- Total and liqui- fotal taken dated taken dated over over(l) (2) 0-19 1 19 20 •9 33-9 12.1 20 - 39 - 7 7 - 12.5 U.2 Uo - 59 6 12 IS 5.5 21.1* 10.9 60 - 79 12 S 20 11.0 lU.3 12.1 go - 99 6 1+ 10 5-5 7.2 6.1 8k 6 90 77.1 10.7 ^U.6 109 56 165 100.0 100.0 100.0 100 Total (1) Ho data for 5 banks. (2) No data for 2 banks* ~ i6o - Some Leading Cases of group and Chain Failures Prior to 1932 An example of early chain suspensions was that of the Heinze-Morse hanks, which occurred during the panic of 1907• Banking concentration in that period wasi often obtained, as it is today, through interlocking directorates, and this chain was held together by that means. The leading institution was the Mercantile National Bank of New York, the directors of which were also on the boards of several other banks, both in New York and elsewhere. The most important director, F. A. H0inze, moreover, had a substantial interest in the State Savings 3ank of Butte, Montana, and after having incurred heavy losses in copper deals, both the Mercantile National and the Mohtana.bank closed on October 17, 1907• Another director, C. P. Morse, - 161 - controlled the Bath Trust Company and the Lincoln National Bank, both of Bath, Maine. Immediately after tjhe Mercantile in Hew York had closed, the first of those Mainje banks suspended, and the second required a thirty-day notice for withdrawals of deposits. In view of the fact that many independent banks were involved in difficulties $t this time, the' Heinze-Morse suspensions were no doubt related to general conditions as well as to chain banking irregularities. The lessons learned from the evil potentialities of interlocking bank directorates influenced some of the provisions of the Clayton Act a few years later. In this instance, as well as in some more recent ones, the directors were able to exercise control over the banks in the chain with very little investment of their own funds. A larg^ block of stock in one bank was held by borrowing on it at another bank of the chain. - 162 ~ The WithannMaaley System With the collapse of the Florida booiji more than 117 banks of the approximately 200 belonging to the Witham chain suspended around the middle of 1926. Th0 suspension of these banks involved $k&f 560,000 in loans ajid investments and affected tremendously the business situation in Georgia and Florida. In Georgia the 82 Withan^ banks, which suspended, represented 1^*7 per oent of the number and U»5 per cent of the loans and investments of all Commercial banks in the State, as reported on June 30, 1$26# In Florida the 35 Witham banks which suspended represented 10#5 P e r cent of the number and 6*k per cent 0f the loans and investments of all commercial banks. Ihe Witham system had its inception three decades before its collapse. In I896 W. S. Witham of! Atlanta began to organize new banks and purchase control in| others. Mr. Witham1 s activities at first were confined to small agricultural communities in Georgia whore there were} no banking - 163 - facilities. As the chain developed, however, banks were established in towns where one or more banks were already in existence, and ultimately it was operating in the States of Georgia, Florida, New York, and New Jersey. The fundamental idea behind the organization of the Witham chain was that for a consideration Mr* Witham agreed to act as financial agent for the banks affiliated with him, assisting them in borrowing money during the lending season and in investing their surplus funds when loans were at their low point. In some of the affiliated banks Mr. Witham held no stock whatever, while in others he voluntarily purchased a majority interest. After a bank was once organized, Mr. Witham left the details of the management to the local stockholders and directors, but was actively interested in supervising and executing loan and investment policies in a broad way. On September 1$, 1905t Mr. Witham organized the Bankers Financing Company, a Georgia - 16U - corporation, which took over the Sanctions Mr. Witham himself had "been exercising as an individual. On July 1, 1911, the Bankers Trust Company, a Georgia corporation, was organized to succeed the Bankers Financing Company as the controlling agency for the affiliated banks. The Bankers Trust Company transferred funds between the banks and was responsible for them on call, having to repay them from other sources if the borrowing bank was not able to meet the demand. Call loans were made in New York and participating certificates in such loans were sold to member banks desiring to increase such commitments. The Bankers Trust Company also borrowed from the banks and promoted corporations, whose stocks it sold to the banks. It also acted as fiscal agent for the banks charging fees from $500 to $1,500 per bank per annum depending on the size of the bank. The member banks submitted semiweekly statements to the Bankers Tjrust Company and were examined semiannually by its auditors. ~ 165 - By 1911 the number of banks in the $hain had increased to approximately 108, and connections with several banks in Florida had been made. Because of the objection of some of the Florida affiliates to doing business with a foreign corporation, a Florida corporation was organized— the Bankers Financing Company—with offices iti Jacksonville. The affiliated banks in Florida were served by the Bankers Trust Company through this Florida company. Affiliation between banks in Georgia and Florida was particularly advantageous in the seasonal movement of funds. Deposits in Georgia banks reached their peak in the fall of the year at a time when customers of Florida banks needed financing for winter crops. When Florida loans were repaid in the spring, requirements for accommodation with respect to the summer crops of cotton, tobacco, and the like were high in Georgia. ~ 166 - Jbx associate of Mr. Witham, Mr. W. D. Manley, came to be more and more influential in the chain after 1910, and about 1916 Mr. Witham sold his interest in the company, Mr. Manley becoming the dominating force in the ma4agement of the Bankers Trust Company. In 1923 Mr. Manley organized the Georgia State Bank of Atlanta, which began to establish a state-wide branch bank system as an affiliate 0f the Bankers Trust. Several of the affiliated banks of the chain had ac- quired so much bad paper that their capital had been entirely wiped out, and rather than liquidate the banks entirely it was decided to convert them into branches of a newly organized bank owned and controlled by the Bankers Trust Company. The original stockholders of the banks in difficulty suffered a 100 per cent loss on their capital stock investment. Some branches in this corporation were established jie novo: others represented absorptions of active banks or the purchase of assets of failed banks. -167- The Witham chain collapsed concurrently with the Florida boom when Georgia banks could not meet the demands of Florida banks for the return of funds. The failures were directly associated with the decline in farm lstnd values after 1921. While land prices were rising, tho Georgia banks made real estate loans at excessive valuations, and when the decline set in these banks were left t'ith a large proportion of frozen assets. During I92U and 1925 deposits in Florida banks more than doubled as the speculative boom in real estate values reached its peak, and the Florida banks in the chain made available to the Bankers Trust Company a large part of their increased funds. Apart of these at least was absorbed by Georgia banks in further advances to their farmer customers. The Bankers Trust Company utilized a part of the increased supply of funds in promotional activities. The capital stock of the company was not fully paid in, and with money borrowed from its member banks it organized and operated subsidiary corporations in a wide variety of lines. Money was borrowed for the purpose also of making further investments in bank stocks and in thus acquiring new affiliates of the chain. ~ l6S ~ On petition of the Bank of Umatilla, Florida, receivers were appointed for the Bankers Trust Company on July lH, 1926• Immediately, runs began on affiliated banks, and more than 100 of them soon closed. A few of these were able to reopen through the assistance of outside co-respondents, but by far the majority of those that suspended remained in the hands of the supervisory authorities. It is stated that the managing officials of the Witham chain lent funds of the banks in the chlain to ventures in which the officials were interested. Their influence on the managements of the affiliated banks was not in the direction of conservative loan procedure. In theso circumstances the chain was not able to withstand the untoward economic factors, including the collapse of speculation in farm lands and in Plorida real estate, and the stagnation that followed upon these. Chart 12 shows the location of the >anks in the Witham chain just prior to failure. - 169 - CHART 12 r II I • • \ • / • \ \ •L •* • u • • • • ^ ^ • • r • • •• • \ *% \ ••• •t**TLA2T* \* II II \ 1 i • # * •• • k • • • • • \ • ^ > • I 1 II / II J \ • • * * ., \ < a y . • .- « *m • ~ • r ^ \ • • • 1 \ \ • •• \ FLA. \ BANKS INTHEWITHAM CHAIN THERE WERE ALSO FOUR BANKS IN NEWJERSEY AND" SIX IN NEWYORK AFFILIATED WITH THIS CHAIN EARLY, m 1926 \ • t • J r\ # Csvv \ •\ • if I •\ ^ II \ *\ •/ • ( 1 || || - 170 - Ba&coKentucky~Caldwell~A«B> Banks The l a r g e s t of the group and chain suspensions of more recent years concerned three systems, so interwoven that any account of t h e i r operations must de^l with them t o gether* S t a t i s t i c a l l y i t has been possible to separate them into two parts-—the Caldwell-Banks system with ^ suspensions involving $52,31^000 of loans and investments, and the BancoKentucky Corporation system with 3 , involving $59,180,000 of loans and investments* The controlling agencies were Cald- well and Company, BancoKentucky Corporation, A. B* Banks and Company, and t h e i r a f f i l i a t e s , personal and corporate, operating in Kentucky, Tennessee, and Arkansas* Although the number of banks involved in t h i s group of f a i l u r e s was l e s s than in the Witham system, the loans and investments nrere much larger* - 171 - Caldwell and Company controlled 13 bafcks, mostly in Tennessee, and was affiliated with others thro-ugh interlocking directorates and community of interest. It was also interested in 9 insurance companies and 32 othe|r corporations. Rogers Caldwell was said to have been sole own^r of the company bearing his name, until he exchanged Caldwell and Company stock in May, 1930i with the BancoKentue&# Corporation. This company then owned half of Caldwell and Cqmpany. A. B. Banks had been a stockholder iij many banks in Arkansas for some time, the number being about 50 in 1930. Most of their stock was actually held by the Home Fire Insurance Company, the Home Accident Insurance Company, the Home Life Insurance Company, A. B. Banks and'Company, Lumber Underwriters, and other corporations controlled by Mr. Banks and his associates* Caldwell and Company, meanwhile, acquired a con- trolling interest in the three Home insurance Companies, and - 172 - an independent interest in at least one of the more important Arkansas banks of the Banks chain. These were the links by which the three interests were associated. Caldwell and Company, the first of the three interests to fail, was placed "under the control of a committee of Nashville bankers on November 5, 1930, with a receiver appointed a few days later. Banks in Tennessee of the Caldwell chain were closed shortly thereafter, and other banks, not affiliated with this group, were suspended during the subsequent loss of public confidence. In Arkansas the .American Exchange Trust Company, leading unit of the A. B. Banks chain, closed November 17, followed by nearly all the other members of the chain, and the Home insurance companies were taken over by other organizations. A receiver was appointed November 2*+ for the BancoKentucky Corporation* The National Bank of Kentucky, the leading bank of this group, had suspended on the 17th as had the Louisville Trust Company. Since many matters connected with these failures are still in litigation, it is too early to describe in detail the circumstances that led to the failures. ' (1) Many of these circumstances are described in the following sources among others: Report of the Tennessee Legislative Investigating Committee, appointed January, 1931; Plaintiff's Bill, Paul C. Keyes, Receiver of the National Bank of Kentucky of Louisville, Plaintiff, v. John S. Akers et al., Defendants, Louisville Courier-Journal, March 31, 1931; Testimony before the Joint Investigating Committee on Banks and Insurance, Arkansas Legislature, Hearings beginning January 26, 1931. - 173 - Minor Chain Suspensions In addition to the major suspensions just described, the Committee attempted to collect information with respect to the circumstances surrounding some of the lesser chain failures. Some of the information collected was of a confidential nature and not a matter of public record* Certain important facts re- garding these lesser chains have been classified in Table 35* The tabulation brings out the extent to which, certain characteristics have been common to a number of the failures, including heavy borrowings, and excessive local loans, especially to interests which dominated the chain• - 17U - Table 35 - Characteristics of Ten Minor Chain Systems Which Failed Number of Year of "banks fail- suspendure ing Location of chain Deposits at time of suspension Southeastern 1 1927 11 Southwestern 2 1929 12 2,678,000 192S and 6 3,163,000 3 s — 192^ 5 6 1 $:9 $3,727,000 $ko *5 30 1 1 1931 Western Grain [InvestLoans to ments dominant inBorrowings per per $100 terests per of loans $100 of [ $100 of loans and capital funds and investments invest1 ments k 70, one bank only Heavy (no exact data) $16 Excessive (no exact data) h 1,117,000 90 1 19 Heavy (no exact data) 1926 7 3,827,000 90, varies fron1 0 up to $300 1 Heavy (no exact data) 1926 6 l,l&3,000 1U0 9 $25 7 ! 1926 3 539,000 115 , 6 $Uo 8 1 1927 1 7 921,0001 ^5 ! 20 j$3S 9 1930 7 i,7^5,ooo 120, 6 banks average $50, the 7th is •' $260 6 1925 k h, 639,000 Heavy (no exact data) Rocky Mountain 10 1 15 JU $17 - 175 The following paragraphs represent a siammation by responsible banking authorities of the causes of failure of several of these chains• Chain A - " completely dominated the policies and was given a free hand in the management of the parent institution as well as the other banks in the chain* In the opinion of the writer, the agricultural depression was only a contributing cause. The prime cause of the failure of the chain of banks was due to mis-management by Mr, ;_ and his associated. This is indicated by the large accommodations of credit extended to himself and his interests, "As far back as 1922, Directors and their concerns appeared to be over-extended financially. Paper was freely ex«£i.anged between the banks in the chain in large amounts, and practically all of such loans were of a capital and fixed nature. All the banks in the chain have been over-extended for a period of years, were frequently penalized for deficient reserve, and earnings were exceedingly small, Mr, and his associates were speculating not only in local land but in land in Southern states, "I am of the opinion that if the banks had been under conservative management, and independently operated and controlled, they would not have closed," Chain B - "The failure of this chain may be attributed to the over-extended financial position of , which resulted in his use of his seviral banks to an unwarranted extent, and to losses and a frozen condition in the several banks which resulted from a too free extension of credit during and immediately after the war, when high prices prevailed for fann lands and all farm and live stock products, and the subsequent collapse of these prices," -176- Chain C - "The failure of this chain was chargeable to a combination of circumstances* Mr. .* s optimistic belief in values of farm and coal properties led him to borrow heavily to add to and operate his holdings. This placed him in poor position to meet a situation presented by a depressed condition of the coal industry in southeastern , due to a falling-off in the demand for the quality of coal found in that section, increased freight rates, and labor troubles. This situation, together with lack of demand for farm and pasture lands, made it difficult or impossible for Mr. mmmmmmmmmm to raise money by the sale of any of his properties, and resulted in his borrowing, in one way or/another, from his various banks, to such an extent that the banks were placed in a weakened and frozen condition. The immediate cause of suspension of the banks of the chain was the discovery of irregularities in Mr. 1 s dealings with the banks, and his inability to raise money with which to restore the banks to solvency." Chain D - "A summing up of the history of this chain of banks indicates that during the last several years of its existence it was operated almost wholly for the benefit of and • It lacked proper supervision. Apparently the State Banking Department was not equipped to make simaltaneous examinations, or otherwise properly supervise the system. The credit policies of and were unsound. Their personal business ventures proved unprofitable and they continued to place inci*eased amounts of their paper in their different banks. Conditions continued to grow worse until suspension was inevitable." - 177 - Chain 1 - "In the inflation period during and following the war, a too-liberal loan policy was followed and the hanks "became over-extended* Practically unlimited demand for loans at high interest rates tempted the management, through the hanks and the t to take on a large volume of cattle paper. Much of this paper was re discounted with the of and the t , °f . and a considerable amount was sold without recourse to hanks within and without the chain• The western mmmm^mmmmm and eastern ^m^mmmmm^ hanks were in a section of the country where there is little accumulated wealth, and much of the business is done on borrowed money• In such communities times of falling prices are times of financial difficulties, and in the deflation period, commencing in 1921 and continuing for several years, the . valley region suffered severly* The cattle industry was particularly hard hit, and the banks in the chain were unable to withstand the shrinkage of deposits which came with falling prices, and the pressure exerted by the necessity of taking care of the large volume of placed paper*" Chain i1 - "The immediate cause of suspension of the banks in this chain was the death, generally believed to be suicide, of Mr # , immediately following unsuccessful attempts to borrow money to provide working capital for his banks* The frozen condition of the banks, and the resulting exhaustion of liquid funds on which to continue banking operations, waa due principally to long continued depression in the communities served by the banks because of cessation of oil production and oil operations, coupled with poor crops arid the adjustment in values of farm lands and live stock and agricultural products from the high prices which prevailed during and immediately following the war*" - 172 - f Chain G - "The period immediately following Mr* s entry into the banking business was a period of falling prices, particularly as affecting farm land, farm products, and live stock* The banks waged active campaigns to enlarge their businesses and in so doing extended credits on a very liberal basis# This urwise loaning policy, in the face of continued reductions in farm and live stock values, brought large losses to the country banks of the chain, and to the three larger . banks, both on loans made direct by them and on loans taken by them from country bank correspondents, and resulted in the absorption of working capital in an accumulation of an abnormally large volume of loans in the several banks which could not be properly clasif ied as liquid banking assets* "An important immediate cause of the failure of the , which was followed by the failure of the other banks, was live stock paper made through the » a company, and sold to banks and investors. As this paper matured, ranch of it could not be paid by the borrowers, and conditions had so changed that the cattle loan company could not keep the usual volume of paper sold out* The loan company and the bank were thus forced into an over-extended condition which they could not withstand*" Chain H - "The immediate cause of the suspension of this chain of banks was a demand by the State banking department that the several State banks in the chain withdraw their deposits from the of and place then with some other reserve agent* There were many contributing causes of the suspension, including the gradual withdrawal of deposits from the State banks, due to general lack of confidence in, and later, the collapse of the , and frozen and * 179 - worthless assets in all of the hanks, due to failure to recognize and remove losses as they occurred over the past several years and failure to avoid losses and frozen conditions in loans by making adjustments of loaning policies as conditions changed in the respective communities. The business of all of the banks was predominantly agricultural, and the depression in the agricultural industry since 1921 placed many difficulties in the way of successful operation of small country banks, but with these difficulties must be included the incompetency of the management. Since the failure, investigations have disclosed many irregularities on the part of and also on the part of his son, . confessed guilt on a number of criminal charges brought in the State court, and is now serving a long sentence in the penitentiary.n Chain I - M l . Liberal loaning policy of controlling interest. 2. Extending credit on valuations from $200 to $275 P° r acre. involved in land speculation. Exchanging of paper between the parent bank and members of the so-called chain in order to avoid showing excess loans. 5» Practically no free secondary reserve. 6. Inadequate credit data. 7» Lack of earning power caused by a large volume of other real estate and second mortgage loans on which no interest was received. S. Concentration of credit to individuals far in excess of their financial responsibility. 9« Exorbitant rate of interest paid on deposits. I: 10. 11. 12. Values knowingly i n f l a t e d . Large extensions of c r e d i t to tenants on land owned or controlled by the • Agricultural depression was only one of the contributing causes." CHAPTER IX FEDERAL REGULATION The status of Federal regulation of group and chain hanking may "be reviewed in three phases: (l) Federal laws which have a hear- ing on the movement, (2) attitude of the Comptroller of the Currency and the Federal Reserve Board towards groups and chains, and (3) proposals for new regulation of the group and chain hanking movement. Existing Federal Law National Banks As Holding Companies. - There is no Federal statute under which an organization may he incorporated to act as a holding company for hank stocks. The Federal statutes, on the other hand, contain nothing which has prevented a holding company incorporated under State law from gaining control of a national hank. A part of the Federal anti-trust legislation, the Clayton Act, however, has a hearing on community of interest between banking institutions building upon common directorships. Tfrien Congress made provision for national ibanks by the Act of IS63, the apparent intention was to limit their Activities to the business of discount and deposit, with the note issuing privilege. The central power accorded the new institutions was phrased as follows^ 1 ) (^ Act of June 3, 186U, c. 106 Sec. g; 13 Stat. L. 101, - ISO ~ - 181 ~ ,f To exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes according to the provisions of this title." In the early days of the national banking system, it was established by court decision that national banks did not possess the power to purchase and hold stocks of other corporations generally, including bank stocks. It is not necessary to trace in detail the history of adjudication on this subject, but some typical expressions of the courts may be quoted. In the case of the national Bank vs. Case, the Supreme Court held: !, Ho express - 182 power to acquire the stock of another corporation is conferred upon a national bank*11' ' "It is settled that the United States statutes relative to national banks constitute the measure of the authority of such corporations,, and that they can not rightfully exercise any powers except those expressly granted, or which are incidental to carrying on the business for which they are established. Logan County Bank v. Townsend, 139 U. S. 67, 73• No express power to acquire the stock of another corporation is conferred upon a national bank, but it has been held that, as incidental to the power to loan money on personal security, a bank may in the usual course of doing such business accept stock of another corporation as collateral, and by the enforcement of its rights as pledgee it may become the owner of the collateral and be subject to liability as other stockholders. National Bank v. Case, 99 U. S. 628. So, also, a national bank may be conceded to possess the incidental power to accept in good faith stock of another corporation as security for a previous indebtedness* It is clear, however, that a national bank does not possess the power to deal in stocks. The prohibition is implied from the failure to grant the power. First National Bank v. National Exchange Bank, 92 U. S. 122, 128."(2) It is true that the general powers of national banks have been broadened from time to time since 186^. Specific statutes allow national banks to purchase stock, usually in very limited amounts, in certain special corporations, e. g., Federal reserve banks, certain corporations engaged in the financing of foreign trade, and safe deposit companies. Neither the statutes nor the courts, however, have extended to national banks the right to purchase and hold corporate stocks generally. Thus a national bank cannot -under existing law act as a holding company for bank shares, either as its chief business, or as an auxiliary activity. Clffvton Act. - Although there is nothing in existing Federal law which prohibits holding company control of national banks, a portion of the anti-trust legislation strikes at extended community of interest between (1) 99 U. S. 628 (1878). (2) California Bank v. Kennedy, 167 U. S. 362, i. c. 366, quoted in Senate Document No. 92, 72nd Congress, 1st Session, May 9, 1932, p. 5. - 183 ~ one national bank and other banks based on interlocking directorates. The Pujo Commission had found during itsi investigations that interlocking directorates among city banks were common and believed such community of interest was not wholly desirable. The Clayton Act of I91U was directed at these relationships. This act was liberalized by amendments in 19l6, 1920, 1928, and 1929, so that its present prohibitions and exceptions are complex. In general, it does not limit the number of directorships or positions which a person may hold with any number of banks providing the size of none of the banks exceeds $5,000,000 in resources and none of them is located in a town of more than 200,000, The directorships and positions which a person may hold in banks of the larger size or located in the larger places are limited. With the permission of the Federal Reserve Board, a person may hold positions with as many as three of these large organizations. Even in the years immediately following 191*+ when the provisions of the act were most rigid, it was not effective in reducing community of interest between banking organizations. Those who had to relinquish positions could easjily be represented by their agents« - 1SU - Attitude of Federal Supervisory Authorities Both the Comptroller of the Currency said the Federal Eeserve Board have believed that their powers were ineffective with respect to regulating the group and chain movement* The Federal supervisory authorities are without visitorial powers with respect to bank holding companies themselves or with respect to nonmember banks associated in a group With national banks or member State banks, Federal Reserve Board. ~ Daring the spring of 1930 Roy A. Young, then Governor of the Federal Reserve Board, testified before the Committee on Banking and Currency of the House of Representatives. At that time, he offered for the record a previously prepared statement outlining the attitude of the Board toward group and chain banking, as follows:^ ' '•*•' United States Congress, 71st, 2nd Session, (Hearings before the Committee on Banking and Currency, House of Representatives, under H. R. lUl, March 18, 193O, ppj I&2-V+3. 0 iS5 r 11 1. Conditions of membership, - Prior to the enactment of the McFadden Act, the board prescribed conditions of membership under which State banks could be admitted to the Federal reserve system, in order to effect some degree of control over chain banking. One of the conditions with which State banks entering the Federal reserve system were required to comply, reads as follows: ,M (5) Such bank or trust company, except aftjer applying for and receiving the permission of the Federal Reserve Board, shall not consolidate with or absorb or purchase the assets of any other bank or branch bank for the purpose of opeitating such bank or branch banks as a branch of the applying bank; nor directly or indirectly, through affiliated corporations oit otherwise, acquire an interest in another bank in excess of 20 per cent of the capital stock of such other bank; nor direct Ijy or indirectly promote the establishment of any new bank for the purpose of acquiring such an interest in it; nor make any arrangement to acquire such an interest*' "This condition of membership was incorporated in the board!s regulations of 192*4 and was prescribed for every State bank admitted to membership betvzeen April 7* 192*+, and January 3> 1928# As a result of an amendment to section 9 contained in the McFadden Act (February 25» 1927) t there is some doubt whether the board now lias authority to prescribe this broad condition and, therefore, it has been unable to exercise the same degree of control over chain banking. It has, however, prescribed the following condition of membership for every State batik or trust company admitted to membership since January 3* 1928* fM (3) Except after applying for and receiving the permission of the Federal Reserve Board, such bank or trust company shall not acquire an interest in any other bank or trust company, through the purchase of stock in such other bank or trust company • ! H 2. Recommendations for legislation. - As eirly as January S, 1926, the board addressed a letter to Congressrpan McFadden recommending that there be incorporated in the petiding McFadden bill certain provisions designed to secure adequate information regarding national and State member banks which are closely related in management, operation or interests to other banking institutions and, in particular, to afford some chectk upon the abuses frequently occurring from chain banking, fhese suggestions were not adopted by Congress* !, 3t Correspondence with Hon. Louis T. McFadden re adminietrative control. - Under date of May 2, 1927, Congressman McFadden addressed a letter to the Comptroller of the Currency, suggesting that he adopt administrative measures calculated to - 186 control or prevent the growth of chain banking among national banks and sent a copy of his letter to the Fed0ral Reserve Board with the suggestion that the board should adopt similar administrative measures with reference to Stato member banks of the Federal reserve system. The board, uad^r date of May IS, 192S replied that it was powerless under t}ie law to take any such action. The board called attention tp the fact that it had suggested legislation along this line, but that Congress had not adopted its suggestions, and also called attention to the fact that Congress in the McFadden Act had amended the law so as apparently to take away the boards power to control this practice through conditions of membership. The board1 s letter concluded with the statement thfxt the remedy lies with Congress." In 1932 the Board in making recommendations in connection with the G-lass bill made some specific suggestions with [respect to the regulation of groups. These will be brought out in later paragraphs in which certain provisions of the Glass bill are dealt with in detail. Comptroller of the Currency. - The earliqr annual reports of the Comptroller of the Currency have taken little note of group banking, but in the 1930 report he points out what he regards as some disadvantages of group banking as compared with branch banking; but agrees that:* ' " . . . group banking in the main is in capably hands, and includes some of the best-managed banks in the Country. However, the field of group banking is now open to eve^y type of operator or promoter who may be able to purchase bcjmk stocks. This constitutes a source of potential danger. Injorder to facilitate the supervision of group banking, in tho^e cases where the Federal Government has any responsibility, it is my view that no national bank should be permitted to become a constituent of such a group, except upon the condition that ill other banks in the group are also national banks. The Comptroller of the Currency under these conditions could more effectively examine and supervise the entire group operation. It is therefore my view that group banking should be brought under the visitorial powers of the Federal Government in those cases wherp membership in the group is composed in whole or in part of national or State member banks of the Federal Reserve System. Legislation along these lines seems to be necessary in the public interest.t! (1) Annual Report of the Comptroller of the Ourrenby, 193°> P» 3* - 1S7 Action Proposed by Members of Congress After the large scale formation of bank holding companies culminating in 1929, members of Congress began to evince an active interest in the movement and its regulation. Although numerous bills were introduced, no Federal legislation had been enacted by the end of 1932» *n tlie early part of January, 1930, four bills were introduced into the House of Representatives dealing with group banking. Two of the House bills looked toward control of groups; both Congressmen McFadden^ ' and Beedy^ pro- posed that visitorial powers be granted the Comptroller of the Currency with respect to the holding corporations where members of the Federal reserve system were involved. Congressmen Strong^' and Goldsborough^' proposed to dissolve the movement by one legislative device or another. On February 10, 1930, the Committee on Banking and Currency of the House of Representatives was empowered "to make a study and investigate group, chain, and branch banking during the present session of Congress." ^5/ i n April, Congressman McFadden introduced a second bill which would have required holding companies to procure permission from Federal supervisory authorities before acquiring control of members of the Federal (G) reserve system/ ; For several months the committee held hearings, which aided in clarifying the major issues involved. In thcj subsequent Congress, Congressman Goldsborough reintroduced his bill. *' (1) United (2) Ibid,. (3) Ibid*. (*0 Ibid.. (5) Ibid,. (6) Ibid,. (7) United States Congress, 71st, 2nd Session, H. R. (9^* H. R. 8OO5. E. R. S367. H. R. 8363. H. Res. lUl. H. R. 12034. , States Congress, 72nd, 1st Session, H. R. fK)0. 1SS Beedy Bill, - The Beedy bill provided "That every corporation which may own or control the majority of the stock of more than one national and/or State member "banks of the Federal reserve system shall he subject to the visitorial powers of the Comptroller of the Currency." McFadden Bills, - The first bill provided that the Comptroller of the Currency should examine at least twice a year all of the affiliated corporations of a member bank, as well as the member banks themselves. Affiliated corporation is defined in the bill. In addition to transferring other visitorial authority to the Comptroller, the bill would give him the new responsibility of examining State member barics at least twice a year. The second McFadden bill would have made it:(l; ". . . unlawful for any corporation, copartnership, individual, or trustee to purchase or otherwise to acq-aire more than 10 per centum of the shares of the capital stock of more than one member bank of the Federal reserve system, whether state or national bank member, except after first obtaining the approval of the Comptroller of the Currency with respect to national banks and the Federal Reserve Board with respect to State member banks." Penalty for violation of the act would have been made a misdemeanor punishable by a fine up to $10,000. Goldsborou^h Bill. - This bill was intended to prohibit with penal provisions the voting of national bank stock or State member bank stock ovrnec hj a corporation. It would also have re quirod the payment of a tax of two cents per $1 on the face amount of each check drawn op. any bank when more than 25 per cent of its stock is owned by any corporation. This bill also proposed by a similar tax to prevent the further extejnsion of branch banking. ^'United States Congress, 7'lst, 2nd Session, E. E. +203^ - 189 Strong Bill, - The Strong bill was designed to "prohibit group or chain banking," although its provisions seem not to reach chains. It would have prohibited "any bank or trust company, whether or not a member of the Federal reserve system . • . • which is one 6f a group of banks as defined" in the bill, "from (l) using the mails; (23 shipping or delivering, or causing to be shipped or delivered in interstate or foreign commerce, any article or commodity of whatever nature; or (3) transmitting, or causing to be transmitted, any intelligence by wire or wireless in interstate or foreign commerce." Moreover, a national bank belonging to a group would forfeit its franchise; a State member belonging to a group, its membership in the Reserve System; and nonmember banks belonging to groups would be denied all rights and privileges under the| Federal Reserve Act. Glass Bill i In the Senate, proposals for Federal regulation of groups, though apparently not chains, have centered in the "Glass [Bill." Glass of Senator Carter Virginia introduced into the 71st Congress a preliminary bill: "To provide for the safer operation and more effective use of the assets of national banking associations to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes."(1/ Subsequently, under the chairmanship of Senator Glass, a subcommittee of the Committee on Banking and Currency be<fean, on January 19, 1931, hearings under a broad resolution permitting a general survey of the national and Federal reserve banking systems. Among the various other subjects, (!) United States Congress, 71st, 2nd Session, S. 4?23. - 190 - the resolution called for an examination into "the desirability of chain banking; the development of branch banking as a part of the national system, together with any related problems which the committee may think it important to investigate." Extensive hearings were held and as a result of this investigation, Senator Glass introduced a new bill on January 21, 1932# (?) The bill contained provisions dealing with problems of the banking structure, including the extension of branch banking and the regulation of group banking. Under the terms of the bill (S. UUl2, April IS, 1932) regulation of groups would be sought largely by bringing under the visitorial activities of Federal authorities all elements or affiliates of a group organization. Section 11 of fi. *&12 (April 18, 1232). - The most important provisions of the bill which were aimed at bringing the bank holding company under Federal regulation are contained in Section 17# It provided that: United States Congress, 71st, 1st Session, S. Res. 71. (2) Ibid.. 72nd, 1st Session, S. 3215. - lgi " . . . shares controlled by any holding company affiliated) of a national bank shall not be voted unless such holding company affiliate shall have first obtained a voting permit . ." In order for a holding company affiliate to get a voting perait to cast one vote for each share of national bank stock controlled by it, application would have to be made to the Federal Reserve Board. The Board, in passing on the application, would be required by the statute to cause the holding company to enter certain covenants. It would be required to agree to the examination of itself and all State banks controlled by it, to agree to accumulate assets other than bank stock to serve as a reserve against double liability provisions of bank stock owned by it, and to agree to have no interest in organizations in the business of merchandising securities. These provisions would also be made applicable to holding company affiliates of State member banks by Section 5(b) • Some of the statutory stipulations of Section 17 (S. HUl2, April IS, 1932) are: Examinations and Reports. - "Every such holding company affiliate shall, in making the application for such permit, agree (l) to receive, on dates identical with those fixed for the examination of banks with which it is affiliated, examiners duly authorized to examine such banks, who shall make such examinations of such holding company affiliate as shall be necessary to disclose fully the relations "between such banks and such holding company affiliate and the effect of such relations upon the affairs of such banks, such examinations to be at the expense of the holding company affiliate so examined; (2) that the reports of such examiners shall contain such in*- (!) Sec. 2(c) of S. UklZ (April IS, 1932) "The term 'holding company affiliate1 shall include any corporation, business trust, association, or other similar organization— "(l) Which owns or controls, directly or indirectly, either a majority of the shares of capital stock of a member bank or more than 50 per centum of the number of shares voted for the election of directors of such bank at the preceding election, or controls in any manner the election of a majority of the directors of such bank; or "(2) JOT the benefit of whose shareholders or members all or substantially all the capital stock of a member bank is held by trustees•" ~ 192 - formation as shall be necessary to disclose full;j the relations between such affiliate and such banks and he effect of such relations upon the affairs of such banks (3) that such examiners may examine each bank owned or controlled by the holding company affiliate, both individually and in conjunction with other banks owned or controlled by such holding company affiliate; and (k) that publication <|)f individual or consolidated statements of condition of such banks may be required;" Eeserves Against Double Liability, - "After January 1, 1935 > every such holding company affiliate (l) stall possess, and shall continue^o possess during the life of such permit, free and clear of tSITlien, pledge, or hypotheca ion of any nature, readily marketable assets other than banl[b stock in an amount not less than 12 per centum of the aggre mte par value of all bank stocks controlled by such holding coippany aff iliate, which amount shall be increased by not less than 2 per centum per annum of such aggregate par value unt 1 such assets shall amount to 25 per centum of the aggregate p, ,r value of such "bank stocks; and (2) shall reinvest in readi ly marketable assets other than bank stock all net earnings ovcjjr and above 6 per centum per annum on the book value of its <t>wn shares outstanding until such assets shall amount to 25 per centum of the aggregate par value of all bank stocks coitrolled by it; "Notwithstanding the foregoing provisions erf this section, after January 1, 1935> (1) any such holding company affiliate the shareholders or members of which shall be individually and severally liable in proportion to the number of Shares of such holding company affiliate held by them respective^ ly, in addition to amounts invested therein, for all statut ry liability imposed on such holding company affiliate by reason of its control of shares of stock of banks, shall be rrequired only to establish and maintain out of net earnings over ^nd above 6 per centum per annum on the boo^ value bf its own shares outstanding a reserve of readily marketable assets in an amount not less than 12 per centum of the aggregate par value of bank n stocks controlled by it, and (2) the assets re quired oj this section to be possessed by such holding company 4ffiliate may be used by it for replacement of capital in b a h M affiliated with it and for losses incurred in such banks, biit any deficiency in such assets resulting from such use ihall be made up within such period as the Federal Reserve Boaafd may by regulation prescribe;" • . . . IITT.Divorcement from Securities Business, Evefry such holding company affiliate shall, in its application for such voting permit, (l) show that it does not own, control, cir have any in- - 193 - terest in, and is not participating in the management or direction of, any corporation, business trust, association, or other similar organization formed for the purpose of, or engaged principally in, the issue, flotation, underwriting, public sale, or distribution, at wholesale or retail or through syndicate participation, of stocks, bonds, debentures, notes, or other securities of any sort (hereinafter referred to as securities company); (2) agree that during the period that the permit remains in force it will not acquire any ownership, control, or interest in any such securities company or participate in the management or direction thereof; (3) agree that if, at the time of filing the application for such permit, it owns, controls, or has an interest in, or is participating in the management or direction of, any such securities company, it will, within three years after the filing of such application, divest itself of its ownership, control, and interest in such securities company and will cease participating in the management or direction thereof, and will not thereafter, during the period that the permit remains in force, acquire any further ownership, control, or interest in any such securities company or participate in the management or direction thereof; and (h) agree that thenceforth it will declare dividends only out of actual net earnings.n National banks belonging to holding companies, which do not comply with these provisions, would have their franchise withdrawn under terms of the bill, and State member banks would have to give up their membership in the Federal reserve system. Section 3(b) of the bill would provide that in the election of directors of Federal reserve banks "Whenever any two or more member banks within the same Federal reserve district are affiliated with the same holding company affiliate, participation by such member banks in any such nomination or election shall be confined to one of such banks, which may be designated for the purpose by such holding company affiliate.11 These are the provisions of the Glass bill (S. kkl2.9 April IS, 1932) aimed directly at bank holding companies. There are several other sections of the bill which incidentally relate to certain types of groups. These are provisions which stipulate examinations and reports to Federal supervisory 19^ - ,(D' of member banks, both national authorities for all types of affiliates^ and State. Member banks are required within a perio^. of a few years to sever all connections with security affiliates. Loaxjs and other commitments by a member bank to all its affiliates mast come within a limited total. The practice of joining member banks with other corporations through the device of making one stock certificate represent ownership in two or more corporations would have to be discontinued within a Stipulated number of years. The joining of member bank with member bank is expected from this provision. Federal Reserve Board and Glass Bill. - On March 29,. 1932, the Jodotfal Hocerve: Boaydt through Governor Eugene Meyerj presented to the Committee on Banking and Currency of the Senate its Suggestions on the Glass bill. The general principles of the board's recommendations included bringing holding companies controlling member banks t(nder Federal visitorial (1) Sec* 2(b) "Except where otherwise specifically provided, the term 'affiliate1 shall include any corporation, business trust, association, or other similar organization— 11 (1) Of which a member bank, directly or indirectly, owns or controls either a majority of the voting shares or more than 50 P6** centum of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions; or M (2) Of which control is held, directly or indirectly, through stock ownership or in any other manner, by the shareholders of a member bank who own or control either a majority of the shares of such bank or more than 50 per centum of the number of shares voted for the election of directors of such bank at the preceding election, or by trustees for the benefit of the shareholders of any such bank; or "(3) Of which either a majority of the metjbers of its executive committee or a majority of its directors, trustees, or other persons exercising similar functions are directors of 4 member bank." - 195 - authority and providing for the building of reserves by holding companies because of double liability on bank stock owned. The implications of the G-lass bill appear to make it mandatory upon the supervising authorities to examine and require reports from bank holding companies while the Board would have made it permissive with respect not only to holding company affiliates but other bank affiliates as well* In this connection the memoran- dum of the Board presented by the Governor said: "Under the definition of 'affiliate1 contained in Section 2 and under the provisions of Sections 6, 27, and 2p of the Bill,(1) if amended in accordance with the recommendations contained in this report, all holding companies which control member banks and all banks owned or controlled by such holding companies will be affiliates of such member banks and will be required to make reports and submit to examinations whenever deemed necessary or advisable by the Comptroller of the Currency, the Federal Reserve Board or examiners appointed by them; and, therefore, it is suggested that the provisions regarding examinations and condition reports of holding companies be omitted from this section and from the corresponding sections regarding holding companies which own or control State member banks."(2) [ The Board*s recommendation to the effect that holding companies controlling one or more member banks and one or more nonmember banks should convert all nonmembers to members upon authorization of the Federal Reserve Board, if they were eligible for such membership, was not included in the April draft of the G-lass bill. The Board's recommendation as to the size of reserves against double liability assessments and the method of their accumulation differed in some details from the pendin)k bill. The Board also criticized provisions of earlier bills in connection with limiting the power of banks belonging to groups [and chains in voting for Federal reserve bank directors* The Board1s memorandum in this connection said: Refers to the earlier draft of the Glass bill. (2) The memorandum of the Board appears in full in tfye Federal Reserve Bulletin for April, 1932, pp. 206-222. - 196 ~ ,r It is recommended that this section be omitted. It prohibits banks that belong to a group or a chain from voting for Federal reserve bank directors. The wording of the section is such as not to confine the prohibition to group and chain banks, however, but to include all banks that are not controlled entirely by locally resident stockholders. Since the stock of many important banks is widely owned throughout the country, this might restrict the voting privilege to smaller and less important banks that are owned by local stockholders. It is to be feared that this section would bar from participation in the selection of Federal reserve directors many of the better managed banks." The subsequent draft of the bill made some concession to this criticism although it still proposed to prevent a bank holding company from having too strong a voice in the election of Federal reserve bank directors, under the provisions of Section 3(b) of S. W+12 (April 18, 1932) quoted in an earlier paragraph. Federal Reserve Members in Groups and Chains It is proposed at this point to refer again to the statistics of group and chain banking in order to bring out the extent to which the proposals of Federal authorities would reach the whole group movement. Only such bank holding companies as have one or more banks which are members of the Federal reserve system would apparently be reached. Table 1+5" shows that of the 67U banks belonging to leading groups as of December 31, 1931, 362 were national banks and Ul were State member banks. 3h Table U3 - Number and Loans and Investments of Banks in Groups and Chains by Class of Bank, December 31, 1931 Type of group or chain Leading groups Other groups Chains Total Loans and investments (in millions of dollars) NonState NonAll National State All National member banks banks member member banks member banks banks banks "batiks banks Number 362 107 805 Hi 3U 98 271 163 30U qos : 933 1,886 $H,Hl6 $1,070 '$ 815 $6,301 875 1.2S5 255 2.U15 528 927 $5,818 $2,398 $1,U26 $9,6U3 - 197 - .# Table W shows that every one of the leading groups included one or more banks which are members of the federal reserve system, either State or national. Therefore, every leading group as it was constituted as of December 31, 1931 would be brought under Sectibn 17 of the Glass bill (S. HUl2, April 18, 1932) unless the control by the holding company of member banks in certain cases was less than 50 per cent. One group, however, has only one bank that is a member of the federal reserve system and two groups have only 2. Out of the 3^ leading groups, 2U have five or more banks that are members of the Federal reserve system. All of these groups may be identified in the appendix, Tables I and III. - 19« ~ 37 Table ¥ T ~ Groups and Chains by Mfumber of Batiks in.jte^k Belonging to the Federal Reserve Sysijem, December 31, 1931 lumber of Number of syst ems national and State member Other Leading banks in each Cha.ins groups groups system 0 1 2 3 *•* 1 2 2 g 12 21+ g 31 P1 1|5 c2 11 k 5 S 5 3 7 5 5 3 3 8 2 - - 9 - 1 2 10 11 12 ik 15 19 20 so S3 Total 1 3 6 5 1 l l ~ ~ ~ _ 2 1 1 1 1 _1 —H 3^ 63 1 1 - r 17 0 Of the 30^ banks belonging to miscellaneous I groups on December 31, 1931$ 107 were national banks and 3^ were State banks| 1Blonging to the 3C Federal Reserve System, as shown in Table 1*% Of the|63 miscellaneous groups S included no national banks or State banks which weri members of the Federal Reserve System. These g groups would not be subject -po Federal regulation under the Glass b i l l / x / ^ , O f ^ ' f i M * ) - Table «+5* shows that of the 90S banks belonging to chains 336 were national banks and 23 were State banks which were members of the Federal - 1S9 - Reserve System. Of the 176 chains operating as of Depemher 31, 1931, 1^5 included at least one national or State member hank, |No satisfactory proposals have "been worked out to regulate such chains, kad yet the suspension chapter has shown that there have "been many disastrous hanking experiences associated directly with matters peculiarly characteristic of chain operartion* / Tahles U5; w f and J+f, respectively, classify groups and chains according to the number of national "banks, of mem her Jjltato hanks, and of nonmemher hanks in each. Table )&$ - Groups and Chains by Number of national Banks in Each, December 31, 193 1 Number of national banks in each system Leading groups Other groups 0 1 2 1+ 1 18 17 3 5 5 7 3 3 3 k 5 6 7 S Kumber of systems 14 2 3 16 79 SO Total 36 51 kk 21 11 5 3 1 l l l l 1 9 10 11 12 lk Chains 3 l 2 1 1 3^ 63 176 - 200 - 5? Table kGT~ Groups and Chains "by Number of State Banks in Each Belonging to the Federal Reserve Syst|em December 31, 193* lumber of member State banks in each system 0 1 2 Number of systems Leading groups Other groups Chains 17 9 Ho 159 1 2 5 3 k 5 17 1 1 1 3 1 7 Total lfr6 63 »#> Table Uf - Group and Chain Systems by Number of Banks in Each not Belonging to the federal Reserve System December 31, 1931 Number of nonmember State banks in each system 0 1 2 3 1+ 5 6 7 8 9 10 11 12 13 21 24 26 42 Number of systems Leading groups Other groups 1 1 S 16 14 9 7 k 6 3 1 4 4 2 l l Chains 1 2 3 1 2 1 l l l 1 kk Total 34 63 176 CHAPTER X S'fATS REGULATION Many States prohibit their banks and trust Companies from owning stock, and therefore these institutions can not act directly as holding companies in addition to their main banking business. In many cases, however, they may have affiliates which can operate as holding companies of bank stocks, and in these cases the prohibition against direct ownership of stocks is ineffective. In other States the banks and trust companies may hold stock directly and, therefore, they are in position to act as holding companies themselves. As a general rule, there appears to be little to prevent non-banking corporations from owning State bank stock. Only a few States have attempted to prohibit or to regulate the activity of holding companies in the field of bank stocks. In some States the general corporation law does not provide for the incorporation offfuroholding companies, but, as a rule, the powers of most corporations are broad enough to permitj t h e h o l d i n g of bank stocks in quantity. Even where holding companies may Inot be o r g a n i z e d u n d e r the la,ws of a particular State, foreign holding companies can usually operate there. The counsel of the Federal Reserve Board witlh the assistance of the counsels of the various Federal reserve banks has prepared two digests of State lav?s relating to these questions: one deals witp. the State statutes regarding the purchase of corporate stocks by banks and trust companies, and the other with State statutes regarding the purchase or ownership of - 201 - - 202 - bank stocks by holding corporations* This chapter is largely a summary of the important points brought out in these digest State laws as of August 1, 1932* of the status of the The digests themselves are incorporated in this report as appendices B and C. Table *+l pre 4ents in abbreviated form some of the principal features of the statutes in each State. Banks Jk$ Holding Companies Roughly two States out of five by statute iprohibit their cornmercial banks from owning bank stocks, and another one-fifth of the States place limitations on their commercial banks with respect to their bank stock holdings. Most of these limiting stipulations are to the effect that the bank can not invest more than 10 to 20 per cent of its own invested capital in the capital stock of any other one corporation. In the remaining States unlimited stock ownership ii a possibility. In a third of these there is a positive statutory stipulation allowing the purchase of stock. In more than half of the States trust companies are either prohibited or limited in their ownership of bank stock. In the remainder of the States where trust companies exist it may be possible for them to own bank stock without restriction. In the case of both commercial banks and trust companies, however, the iower to hold bank stock may have been limited in some States by court decisions or departmental rulings. - 203 ~ Table M-l - State Statutes Bearing on Groups (This table has been prepared as a rougt index to the digests of State statutes made by counsel as they appear in the arDondtx) !• ii iM'i "i » • ! 1 nun ii • New England Maine New Hampshire Vermont Massachusetts Rhode Island Connecticut 1 ~ ~ - ! - Limited • » •• • «i • i •• • i i i ill i »i i i ill i win in • man • 1 u0m • ill i«ii»nii n - Implied ~ - ! ! Implied | Limited Limited 1 Limited Permitted Limited «. "- ~ - - Banks have no D.L. «. ~ - Prohjbited^ ^ Limited Permitted Limited Permitted | Permitted ~ - Implied | Regulated and l t d . Required Impli ed prdfc ibition Conflict 1 Required — - Prohibited ~ — — - mm 1 Not bank stocks m» ••• - - Permitted | Inplieid prohibition Implied Permitted | - Plorida ' '»" ~ - Southern Mountain West Virginia For investment onferj Virginia Kentucky Implied prohibition Tennessee Implied 1 Alabama Mississippi •Bin 1 - Doubtful Middle Atlantic New York New Jersey Delaware Pennsylvania Maryland D i s t . of Col, Southeastern North Carolina South Carolina Georgia • MM, State s t a t u t e s governing: : \ Ban|ks as holding companies Holding companies for banka I Right of State Right of trust commercial iRight to own bank 1 Double l i a b i l i t y of own s h a r e company to cm bank : to own stock holders stock 1 ^tock T 1 State by geographic division North Central Michigan Wisconsin Illinois Indiana Ohio «i ' No prohibition *"* - - *" Perrkttaa i Proh i b i t e d *"* 1 Proh i b i t e d ~ ~ Limi ted Prohibited . | Liolted Conditionally permitted Conflict of laws I Doubtful Proh i b i t e d - 20^ - rrable State by geographic division Southwestern Louisiana Texas Arkansas Oklahoma Western Grain Minnesota North Dakota South Dakota Iowa Neb ra^ka Missouri Kansas 1*8*- State Statutes Bearing on Groups [Continued) State statutes governing: _ _ BanlJ s as holding companies Holding companies for banks Eight of State Eight of trust Double liability commercial Eight to o?/n bank company to own of own sharebank to own stock stock holders stock — — — - Doubtful Doubtful Implied Implied ~ — Implied prohibition Permitted Amount of bank stock limited I Permitted Not bank stocks No — _ - Prohibi ted Prohibited ! Prohibited Prohibited _ Implied'1) Prohibi ted •» Prohibi tedU) Surety may be exactedProhibi ted Eo cky Mountain Montana Idaho Wyoming Colorado New Mexico Arizona Utah Nevada No prohibition Implied No prohibition Implied Implied — Prohibi ted Permitted Banks have no D. L. Prohibited Prohibited ~ Prohibi ted | Permitted Limited | Permitted Must be approved Must be approved Prohibited Pacific Coast Washington Oregon California, Implied Permitted No prohibition - i[Limited T*C\ TITiTT- trfrnfl- Limited Limited Prohibited Prohibited j Prohibited | Blanks indicate no part of the statutes bear on point. (1)Court decisions • i i Holding of Bank Stocks by Other. Corporations 0nly a few States have positive provi sions i p. their st atutes re~ garding the ownership of bank stock by corporations, a kd it is difficult to determine w ith certainty the attitude of the other Sta pes regarding this question, p articularly their a ttitude towards h olding companies of bank fJ^JU**A. - 205 - stocks. In many cases the corporation law appears to provide for holding company operation in general, and nothing appears in the statutes to indicate directly that they might not own bank stocks freely. On the other hand, there is a legal doctrine extant in some jurisdictions to the effect that a holding company is really engaged in that business in which it ov/ns and controls operating corporations. Therefore, a bank holding company might be said to be in the banking business* Many of the State banking codes provide that all banking corporations operating" in that State, other than national banks, be organized under the banking laws. A bank holding company might be construed to be operating in violation of this principle. It has not been possible to review the court decisions in the forty-eight States bearing upon these points, and the following paragraphs with respect to existing lav/ are based wholly on statutes. Two States, West Virginia and New Jersey, have definite statutory provisions which appear to be intended to prevent control of banks by nonbanking holding companies. A statute in Vermont, though apparently not di- rected at bank holding companies, may nevertheless curtail their activities (see Appendix), There is a ruling of the Attorney General of Missouri opposing the bank holding company. Wisconsin and Indian^ have attempted to make shareholders in bank holding companies liable fori assessments against the company because of bank stock owned. Officials in both Ohio and Michigan have said that in those jurisdictions shareholders in holding companies might be construed to be liable in this connection. West Virginia, - This State probably has gone further than any other in a positive attempt to curtail bank holding company activity. A: law of 1929 provides: (O -j^Z^^ cJL*f*"H ^^f'9^9. - 20b - "It shall be unlawful for any firm, association or corporation to purchase and hold stock in any banking institution organized or authorized to transact business hereunder for the purpose of selling, negotiating or trading participation in the ownership thereof either for the purpose of perfecting control of one or more such "banking institutions or for the purpose of inducing other persons, firms or corporations or the general public to become participating owners therein* Nothing herein shall prevent the ownership of stocks in any such banking institution by any corporation for investment purposes,n It will be noted that no penal provision is included in this statute. It raises the question to what extent it would be effective against holding corporations organized in another State. New Jersey. - The situation in New Jersey presents a curious anomaly. A statute of 192S " . . . prohibits corporations that own more than ten per cent of the stock of any "bank or trust company in the State from purchasing after the date the statute became effective more than ten per cent of the stock of any other bank or trust company doing business in the State. This statute does not require corporations to dispose of any bank stock that they may have owned before the law became effective. . . n On the other hand, neither banks nor trust companies in New Jersey are limited as to stock ownership and they are specifically exempted from the prohibition above outlined. In four other States, California, New York, Washingtoil, and Wisconsin, bills have been proposed which sought to control the movement by machinery comparable to that in New Jersey. Missouri. - A ruling of the Attorney General of Missouri denies the right of a bank holding company to sell stock in that State on the ground that group banking is branch banking under a different guise. Branch banking is illegal in that State. This ruling, however, would not seem to reach a foreign holding company which buys the stock of Missouri banks, provided its own stock is not offered for sale in that State. There nave been legislative - 207 proposals for prevention of group and chain banking among banks in Arkansas and Nebraska* Wisconsin, - The laws of this State impose double liability on the stockholders of bank holding companies by provisions ^hich have been stimmarized as follows:v^/ Domestic corporations and foreign corporations authorized to do business in the State which own or control the stock of a State bank or trust company shall be held liable for any assessment made against the stockholders of such bank or trust company to the par value of the stock so owned or controlled; and sfuch holding corporations are required to deposit with the State Treasurer securities equal to fifty per cent of the par value of the stocks of State banks or trust companies owned or controlled by such holding companies, except that the aggregate amount of such securities shall not exceed the largest amount required to be deposited by Wisconsin trust companies. If the stockholders1 liability of any such holding company is not fully paid, the stockholders of such holding company are liable for an assessment sufficient to cover the deficit.' Indiana* - In this State, the double liability statute is an follows:.(2) "The shareholders in any corporation formed under the provisions of any law of this State for any purpose whatsoever, and the shareholders in any corporation formed under the laws of any other State or country and admitted to do business in this state, shali be held individually responsible for all contracts, debts and engagements of any bank, the shares of which are held by any such corporation, each to the amount which the said shareholder's interests in said corporation, as represented by his shares of capital stock in the same, bears to the total amount necessary to be collected from the holders of shares of stock in any such bank,***" Oregon. - In Oregon a holding company controlling a bank may not borrow from such bank nor may the holding company sell securities of other corporations controlled by the holding company througjh such bank without receiving permission from the corporation commissioner. Arkansas. - Arkansas has a provision somewhat similar to that in Oregon: (3) (!) Chapter 445, Wisconsin Laws of 1929—Published, August 30, 1929. (2) Sec tion 4—-Act approved March 2, 1931. (3) Section 3 of Act No* 252 of the 1931 Acts of Arkansas, approved March 31, 1931. - 208 - "• . • any person or persons, and/or any company, co-partnership, corporation or other legal entity in which such per$on or persons own or control a substantial interest, owning either singly or jointly an aggregate of fifty (50) per cent or more of the capital stock of three or more banks and/or trust companies, thus forming a chain or group of hanks and/or trust companies, shall he, and are hereby prohibited from borrowing from, or becoming indebted to, such banks and/or trust companies> thus owned and controlled, in any amount or in any manner. . . n Ineffectiveness of State EeCTilat^on This summary of the situation in the various States with respect to the regulation of groups and chains indicates that little of importance has been accomplished. In trying to deal with the bank holding company States are confronted with the problem of the dual banking system* A State probably can prevent a holding company from gaining control of its own banks and trust companies by revoking charters of such banks or trust companies * when control is proven. In order to bring to light all cases where such a condition exists elaborate machinery would doubtless be necessary. Revoking of charters, however, is a drastic remedy for either national or State authority to use in view of the competition which exists between the two systems. It is conceivable that a bank holding company might specialize in national banks and be represented in every State in the Union* It is not clear how effective any State could be in reaching such a situation. It might, of course, deny to a national bank belonging to such a holding company the right of being a State depository. A State might bring under its visitorial activities any holding company -which owned control in a bank or trust company incorporated in that ^ State. It would use much the same machinery as tne Gl^ss bill proposes with respect to members of the Federal Reserve System* In fact legislation exists - 209 - in Kansas giving the "bank commissioner authority to 0x,amine affiliates of banks including those which may own asranchas 25 pe^ cent of the stock of any bank in that State. (See digest in appendix.) CHAPTER XI SUMMARY Group Banking. The bank holding company, as it has developed since 19271 is an instrument of banking concentration which aims at objectives similar to those of branch banking. Many of the managers of holding companies themselves have indicated that they would prefer to operate their organizations as branch systems if the law permitted* The most significant part of the group movement consists of less than two score holding companies, controlling in 1931 about 700 banks and about $6,000,000,000 of loans and investments* These group organizations have had their greatest development in those States where branch offices are either wholly prohibited or are limited to local areas* Of the Sjk banks belonging to the leading groups at the end of 1931, 307 were in States then prohibiting the establishment of branches, and 93 were in States where administrative ruling did not allow new branches although the statute was silent on the subject* Thus, these UOO banks could not at the end of I93I have been operated as branches of the leading bank. Moreover, 2U9 of the banks in leading groups were located in States which allowed branch offices only in limited areas adjacent to the hea4 office* Because of such limitations most of this group could not iiow be converted into branches of the dominant bank* ~ 210 - 211 - A very small number, 25, of the banks in the leading groups were located in state-wide branch banking States* In addition to the 700 banks belonging to the major groups, about JQQ banks belonged to about 60 miscellaneous groups, many of which bear little resemblance to the major holding companies. Many of the miscellaneous groups came into existence by reason of the association of two or three small banks with some large city bank. Because of the relatively short experience with the bank holding company, statistical evidence is lacking with respect to what may be accomplished regarding the profits and costs of the individual banks belonging to groups. Moreover, the complicated interrelationships of many corporations makes it difficult to determine the position of the entire group through formal income statements. It is not yet clear whether the holding company will be able to operate a small separately incorporated bank more economically than it could be operated as a separate concern. The degree of centralization of management varies greatly from group to group. Some of them approximate a well organized branch system in this respect. Others appear to leave more local autonoiqy to the individual banks. In organizations of this type, however, there is usually a tendency towards increasing centralization of management. - 212 - The group movement, as represented by the leading holding companies, has covered such a brief period of time that few conclusions can be drawn as to the safety record of this type of banking compared with the record of independent unit banks. Groups, however, have done little to strengthen the banking structure in the small towns and rural communities. Relatively speaking, holding companies have not acquired many banks of less than $500,000 of loans and investments. The Problem of Groups. - The chief weakness of the holding company device as an instrument for strengthening the banking structure lies in its manipulative possibilities, and the difficultxes of adequate supervision. In the period of adjustment through which the country has been passing, there have been frequent examples of the abuse of the holding company in fields other than banking. The complicated interrelationship of many corporate entities is a convenient vehicle for the activities of the unscrupulous. The major part of the bank holding company movement has been in the hands of conservative bankers, but there are examples of th|e consequences when conditions are otherwise. The fact that the bank holding company movement largely matured in an era of speculation makes dif- ficult its dissociation from some of the manipulative operations of the times. Shifting of assets between different elements of a group and the splitting of credit lines are among the moire potent abuses to which this form of banking organization is open. - 213 - The problem of groups is bound up inextricably with the broader problem of the banking structure in general* Bank holding companies have developed partly because of the legal necessity of separately incorporating banking offices, and the dual system of banking control, State and national, has made adequate supervision and control over groups difficult* Chain Banking The control of a number of banks by one or more individuals known as chain banking began to appear in this country before the beginning of this century* The number of such arrangements multiplied with the passage of time, and indeed they were the predecessors of the more modern groups* The statistics as of the end of 1931 account for about 175 chains, iiicluding about 900 banks with an aggregate banking strength of about $1,000,000,000 of loans and investments. The community of interest in a chain of banks is elusive, and it is quite possible that the official statistics have not recorded all of the cases* There are instances in which the investment in bank stock brings about a community of interest in several banks, without a deliberate intent to control* Chain interests in many instances do not openly avow their responsibilities as do the modern bank holding companies* The very elusiveness of the movement presents one of its serious problems* The ease with which new banks have been char- tered, partly as a result of the competition between State and - 21^ - national systems, and the small capital outlay needed to secure control over a string of banks are associated with the growth of chains and the high rate of incompetent management among them* Many failures of chains have resulted because they were operated by men inexperienced in banking* In many cases the chain of banks has been utilized as an avenue through which to finance the often speculative outside "undertakings of the dominant interests* In some cases control has been exercised over a string of banks with a very small investment, stock owned in one institution being used as security for a loan the proceeds of which are used in the purchase of stock in another* APPENDIX A Statistical Tables Tatle Group number (2) 13 i4 15 16 by Loans and Investments " b; Class of Bank and Number of States and Cities in Which Operating>,U) December 31, 1931 [^ Name of group and l o c a t i o n of head o f f i c e Total Middle A t l a n t i c Banca Comnaerciale I t a l i a n a Trust C o . , New York, N. Y. C e n t r a l Hanover Bank & T r u s t Co., New York, N. Y. F i r s t N a t i o n a l Bank & T r u s t Co., E l m i r a , N. Y. F i r s t T r u s t & D e p o s i t - C o . , Syracuse, N. Y. Interbanc^l Investors°J5«7, B u f f a l o , N. Y. Marine Midland Group I n c . , B u f f a l o , N. Y. The Manhattan C o . , New York, R. Y. N o r t h e r n N. Y. T r . Co. and trie Northern N. Y. Sec u r i t i e s Corp. Ogdenshurg T r u s t C o . , Ogdenshurg, N. Y. Orange County A s s o c i a t e s I n c . , Goshen, N. Y. Camden Safe Deposit & T r . Co., Camden, New J e r s e y C i t y N a t i o n a l Bank, Hackensack, New J e r s e y ' 3 ) Hudson Co. N a t i o n a l Bank, J e r s e y C i t y , New J e r s e y ( 3 ) i Mechanics T r u s t Co., Bayonne, New J e r s e y M o n t c l a i r T r u s t Co., M o n t c l a i r , New J e r s e y Bank of N u t l e y , N u t l e y , New J e r s e y P e o p l e s T r u s t & Guaranty Co., Hackensack, New J e r s e y ^ 3 ) -^rrig 19 20 21 22 23 24 25 26 27 - Groups: Hew England E a s t e r n T r u s t & Banking C o . , Bangor, Maine F i n a n c i a l I n s t i t u t i o n s I n c . , Augusta, Maine F i r s t N a t i o n a l Bank of Boston, Boston, Massachusetts N a t i o n a l Shawmut Bank, Boston, Massachusetts Western Mass-. Banking A s s o c i a t e s , G r e e n f i e l d , Mass. Worcester Co. Bank & T r u s t C o . , W o r c e s t e r , Mass. I n d u s t r i a l T r u s t C o . , P r o v i d e n c e , Ehode I s l a n d B r i d g e p o r t C i t y T r u s t Co., B r i d g e p o r t , Connecticut F i r s t N a t i o n a l Bank, B r i d g e p o r t , Connecticut H a r t f o r d Connecticut T r u s t Co., H a r t f o r d , Conn. 1 2 3 4 5 6 7 S 9 10 11 12 I $ Loans and i n v e s t m e n t s i n thousands of d o l l a r s NationState al member hanks 1 hanks 10.25S 1 7 9 . 8 7 1 i$ 4so,434 I i42,4i7 ! 5,436 | 69,326 139,201 34,963 20,466 ! 33.3*7 20,991 4o4,650 $ 138,261 5,436 29,901 6,294 17,611 s.953 $ 52.9S3 - 36,4so 129,378 - Number Number of of States c i t i e s Nonmember hanks 10,255 58,880 22,301 4,136 2,945 3,529 34,963 2,855 29,394 1 1 1 1 1 1 1 1 1 1 3 7 18 6 3 6 2 3 1 7 ' 1 13,71^ 5^5,533 i6,57S ! 97,145 11,973 441,553 314,511 14,514 9,325 13,174 33,249 4,920 ^3,339 13,626 is,535 4,4oo 24,285 1,124 538.sUo 15,548 7,681 6,714 43,84o 81,295 312,176 311,285 _ 1,582 2,248 13,174 564 3,923 32,305 1,372 1,483 1,645 1,577 11,551 6,652 32,233 297 12,307 2,755 22,70s 13,714 5.569 1,030 8,169 5,259 85,537 3,226 3 2 l 1 1 1 1 1,381 425 1,052 700 11,034 12,254 4,745 - 1 1 1 1 l 1 1 1 i 1 1 ! 3 3 5 15 3 19 3 6 7 6 3 5 3 2 2 l 8 Table Group 2»amber (2) 28 29 30 31 32 3, r 3o 37 3S 9 ?4o 4i 42 44 45 46 47 US 49 50 51 52 I - Groups: Loans and Investments by Class of Bank and Number of States and Cities in Which Operating, (l) December 31, 1931 (Continued) Name of group and location of head office Total Middle Atlantic (Continued) Plainfield Trust Co., Plainfield, Kew Jersey9 Union County Trust Co., Elizabeth, New JerseyUnited States Trust Co., Paterson. New Jersey West Jersey Trust Co., Camden, Sew Jersey West Side Trust Co., Newark, New Jersey Colonial Trust Co., Pittsburgh, Pennsylvania Commonwealth Trust Co., Pittsburgh, Pennsylvania Monongahela Trust Co.* , Homestead, Pennsylvania Peoples Pittsburgh Trust Co., Pittsburgh, Pennsylvania United States National Bank, Johnstown, Pennsylvania Union Trust Co.. & Melbank Corp., Pittsburgh, Penna. .North Central Detroit Bankers Inc., Detroit, Michigan(4) Guardian Detroit Union Group Inc., Detroit, Michigan Wisconsin Bankshares Corp., Milwaukee,-Wisconsin Central Republic Bank & Trust Co., (3) Chicago, Illinois First National Bank. (3) Chicago • Illinois National Republic Sancorporation, Chicago, Illinois State Savings Loan & Trust Co., Quincy, Illinois First and Tri State Corp., Port Wayne, Indiana Old First National Bank & Trust Co., Fort Wayne, Ind. BancOhio Corp., Columbus, Ohio Southern i^ur^tain " First"National'Bank Trustees, Louisville, Kentucky American National Bank, Nashville, Tennessee Commerce Union Bank, iNashville, Tennessee Hamilton National Associates Inc., Chattanooga, Tenn. Loans and investments in thousands of dollars State Nationmember al banks banks 18,180 15,842 20,515 10,019 12,391 22,490 16,477 10,223 166,975 15,961 522,763 431 902 2,748 2,050 3,076 78,55s 11,716 314,751 513,572 333.769 231,394 183,602 596,290 25,273 4,324| 3,759 35,371 61,306 454,66s 45,672 62,602 12,2631 34,932l 24,524 48,623 4,956 32,139 237,030 133,951 10,286 402,437 i^45 2,198 24,242 55,147 17,749 2,777 24,895 13,271 85,604 218,555 46,559 16,880 153,370 13,284 —90& 3,310 16.3S5 Non-* member banks Number Number of of States c i t i e s 1 1 1 1 1 1 1 1 1 1 1 3 1 2 1 2 4 2 2 2 16 5S.904 50,180 30,563 19,946 180,569 17,122 1,014 l,56l 11,129 6,159 1 1 1 1 1 8 23 26 3 l 1 1 1 1 2 5 2 9 4,763 13,979 7,307 2,793 1 1 1 2 5 15 2 17 12,163 20,515 10,019 ,64 3 ,545 ,206 ,147 ,813 ,245 49,457 Table Group number I - Groups: Loans and Investments by Class of Bank and Number of States and Cities in Which Operatingt(l) December 31, 1931 (Continued) Name of group and location of head office (2) 53 5^ 55 56 57 5S 59 60 61 62 63 64 65 66 67 69 70 71 72 73 74 75 76 Total Southeastern Socarnat Corp., Charleston, South Carolina Citizens & Southern national Bank, Savannah, Georgia First National Bank of Atlanta, J*t?.anta, Georgia Almours Securities Inc., Jacksonville, Florida Atlantic National Bank, Jacksonville, Florida Barnett National Bank, Jacksonville, Florida First National Bank, Miami, Florida American Securities Corp.,Mobile, Alabama I First National Bank, Birmingham, Alabama Britton & Koontz Inc., Natchez, Mississippi Southwestern Commercial National Bank, Shreveport, Louisiana Interstate Trust & Banking Co., New Orleans, Louisiana Continental Bank & Trust Co., Fort Worth, Texas J. M. Crews & A s s o c , Childress, Texas Mercantile Bank & Trust Co., Dallas, Texas 'BepufcXic~ffr~B;ff'Trusf"Co., Dallas, Texas Sxcharjge National Bank, Tulsa, Oklahoma Western Grain Bank Shares Corp., Minneapolis, Minnesota First Bank Stock Corp*1 Minneapolis, Minnesota Northwest Bancorporation, Minneapolis, Minnesota St. Olaf College & P. 0. Holland, Northfield, Minn. C. J. Weiser Inc., Decorah, Iowa Commerce Trust Co., Kansas City, Missouri Lafayette South Side Bank & Trust Co., St. Louis, Mo. $ Loans and investments in thousands of dollars NationState al member "banks banks 33>247 $ 57,136 9^,723 21,197 30,838 16,571 l6,71b 3*112 50,108 2,217 26,354 23,042 6,133 1,537 15,3S0 52,202 48,026 5,329 312,182 316,213 2,060 4,075 71,594 32,795 27,088 52,676 81,239 $ 18,151 29,933 16,571 16,100 1,614 48,6*45 2,057 — 13,484 — — _ - M76 19,780 «. 857 75 49,37^ 14,027 — 41,138 267,o4o 501 2,613 8,981 $ 12,802 15,262 65,844 23,814 Number jtfumber of of States cities 2 2 1 1 1 1 1 1 1 2 4 6 6 2,224 3,262 2 5 9 825 605 1 1 1 1 6,159 4,46o - 3,o46 905 - 616 1,^8 l,463 160 19,254 5,308 1,680 268,142 Nonmember "banks 1,353 2,8236,888 3,649 31,238 33,911 1,559 ^,075 3,137 - 3 8 6 5 4 5 3 3 11 9 8 3 3 17 1 1 91 115 8 8 1 2 5 8 2 2 1 1 Table Group number | (2) 77 78 79 80 81 82 S3 8k 85 86 87 88 89 90 91 92 Groups: Loans and Investments by Class of Bank and Number of States and Cities in Which Operating,(!) December 31, 1931 (Continued) I Name of group and location of head office Total Rocky Mountain First National Investment Co., Boise, Idaho Vollmer Clearwater Co., Lewiston, Idaho First Security Corp., Ogden, Utah $ ! Pacific Coast American Securities Co., Spokane, Washington Coffman Dobson Bank & Trust Co*, Chelialis, Washington First National Bank, Seattle, Washington Hall Investment Co., Carnation, Washington Marine Bancorporation, Seattle, Washington Old National Corp., Spokane, Washington Peoples Corporation, Seattle, Washington Yaklroa Holding Co., Yakima, Washington Linn Securities Co., Albany, Oregon Oregon Investor Corp., Hillsboro, Oregon Pacific Bancorporation, Portland, Oregon U. S. National Corp., Portland, Oregon Anglo National Corp., San Francisco, California 613 32,352 29,247 12,232 6,607 2,553 1,309 9,732 71,909 160,154 A q o A p i Q"hpr} f?n.*l 5 "hr» 1 0 96 97 Citizens National Trust & Savings Bk., Riverside, Calif. Sebastopol National Securities Co., Sebastopol, Calif. Security First National Bank, Los Angeles, California Transamerica Corp., San Franciscof California $r 95 Tj*hr\ - _ Sfln TPTV^YIPI QC*r» )| ?Rg rV^li'F UNITED STATES • (1) ^2J v3v v*0 - - - 11,035 $ 4,232 33.052 5,637 2,118 69,128 Q^ TTnlrlTriP'q Loans and investments in thousands5 of dollar s NationState Konal member meaiber banks "banks banks 7,906 2,05^ 445,549 877,652 7,371 3>176 11,217 $ - $ 9,200 - 5,637 - 459 30,831 26,875 986 6,349 868 917 9,732 70,632 151,256 1,544 — — - 613 8,910 25s 760 WiJ50 821,350 812 873 - Ipl U,6il 1,521 2,372 2,336 - _ - 392 - 1,277 8,898 q-71 ^7* 3,295 1,294 799 56,302 $8,715,779 $5,290,132 $2,355,093 $1,070,554 . . . _« - . , . . , „ . , , States and cities in which head offices of individual banks are located. On subsequent tables, this number is used in lieu of the group name. -Control both personal and corporate. Does not include several small banks in which the control is less than 20 per cent of the stock. 3,664 1,056 12,635 1,659 67,584 7 - Immber Nuaibe r of of States cities 2 2 3 1 1 1 1 1 2 1 1 1 1 1 2 2 10 9 26 3 4 1 4 , 8 H- 19 t 2 ' 2 1 3 4 7 16 Q 1+ 1 1 1 2 2 2 3 7 Tahle II - Chains: Loans and Investments by Clas s of Bank and Number of States and Cities in Which Operating,*1' December 31, 1931 Loans and i n v e s t m e n t s i n thousands , of d o l l a r s NationState lionTotal al member member "banks hanks "banks Chain Name of c h a i n and l o c a t i o n of head o f f i c e number (2) i ^ e w England 1 I J . C. Makepeace & Family, Wareham, Mass. 2 3 k 5 6 r g 9 10 11 12 13 iH 15 i6_ Middle A t l a n t i c J . W. C r a n d a l l & Family, Westfielcl, H. Y. G. W. Hamlin & Family, Holcomb, N. Y. C. E. E u l b e r t & A s s o c i a t e s , Downsville, N. Y. W. J . & E. J . Humphrey, Warsaw, Mf. Y» L e s l i e E. Palmer ( E s t a t e o f ) , I r v i n g t o n , N# Y« Dobler B r o t h e r s , P a t e r son, IT. J . J . D. E v e r e t t & H. L. Holmes, Orange, H. J . TSn. C. Heppenheimer, J e r s e y C i t y , N. J . Kean Family, E l i z a b e t h , l\f. J . N a t i o n a l I r o n Bank, Morris town, H. J . w ) J . J . S t a m l e r , Newark, N. J . Berwind-White Coal Mining Co., P h i l a d e l p h i a , P e n n a . ( 4 ) C a r l i s l e T r u s t Company, C a r l i s l e , P e n n a . ( 4 ) F i r s t N a t i o n a l Bank, Johnstown, Penna. ( 4 ) Union T r u s t Company, New C a s t l e , P e n n a . ( 4 ) North C e n t r a l C o r n e l i u s Gerber, Fremont, Mich. John C. H i c k s , S t . J o h n s , Mich. F r a n k Hubbard, D e t r o i t , Mich. 20 C. W. McPhail, C e n t r a l Lake, Mich. 21 F r a n k 1?. M e r r i c k , Saginaw, Mich. 22 A. E. S l e e p e r , Bad Axe, Mich. William Alden Smith, Grand Rapids, Mich. 23 F r a n k Wolf, D e t r o i t , Mich. 2U| Harry D. Baker, S t . Croix F a l l s , Yfisconsin 25 2b! C. C* Brown, Kenosha, Wisconsin 17 is 19 $ S,229 $ 5,576 9,o46 4,593 13,744 27,263 2,333 S,2S0 75,021 37A56 7,34l 33,213 6,473 4,290 is,529 11,563 2,173 1,27s 1,644 2,12S 1,497 4,250 15,672 21,555 S74 9,24s 2,460 4,117 $ 5,866 4,593 S,255 24,060 _ 7,013 - $ l,03l+ ~ _ - 21,71+1 6,269 6,36s 20,1+66 351 — 6,122 1,131 3,159 15,327 7,569 - — - 939 615 1+57 - 7,935 - 8,872 — - 530 297 ll+,S80 — Number itanber of of States c i t i e s 5,769 1 1+ 1+25 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1+ 1+ 1+ 7 1+ 1 1 1 1 1 1 1 1 1 1 5 3 3 9 k 13 3,180 - 5,1+89 3,203 2,338 1,267 75,021 9,lU6 973 13,3^7 - 3,262 3,99^ 1,231+ 1,263 i,6Ui+ 2,128 967 3,^96 798 13,620 S71+ 376 2 2 3 k 3 l+ 5 3 l 1 2 7 5 l , < , Table II - Chains: Loans and Investments by Cleiss of Bank and Number of States and Cities in Hlhich Operating,(l) December 31, 1931 (Continued) Loans and investments in thousands of dollars NatioiiH State ! Non- Chaitt Name of chain and location of head office number Total (2) 27 2S 29 30 31 32 33 3* 35 36 37 32 39 HO l+l 42 *3 u445 46 ^7 ks h9 50 North Central (Continued) C. C» & A. E. Coe, Almena, Wisconsin J. W. Dunegan, Stevens Point, Wisconsin First National Bank, Eacine, Wisconsin Judson Rosebush, Milwaukee, Wisconsin Ralph N. Ballou & E. I. Wagoner, Chicago, 111. A. W. Baltz, East St. Louis, 111. Alben E. Bates, Elmhurst, 111. John A. Carroll, Chicago, 111. John Clay, Chicago, 111. First National Bank & Trust Company, Bloomington, Ill.(^) Morris Family, Chicago, 111. W. Pitts Barnes & Associates, Cleveland, Ohio W. &. Mather, Cleveland, Ohio Southeastern !• 0. Benton, Monticello, G-a. First National Bank, Columbus, Ga. Exchange National Bank, Tampa, Fla. First National Bank, Tampa, Fla. Cary it. Hardee, Live Ga&, Fla. First National Bank, Clanton, Ala. First National Bank, Do than, Ala. Capital National Bank, Jackson, Miss. (3) First National Bank, Hattiesburg, Miss. Grenada Bank, Grenada, Miss. Morris Lewis, Lexington, Miss. Southwestern Calcasieu national Bank, Lake Charles, La.v^v First National Bank, Shreveport, La. L. P. Atmar, Groveton, Texas 53 51 52 $ al banks — 79^ 3,292 $ 2,390 12,21+9 10,833 8,112 7,356 9,370 2,667 10,482 9,759 — 3,181 6,226 5,302 4,492 6,U96 3,268 3,187 15,862 15,862 244 158 6,371 5,999 397 3,360 14,146 15,429 525 1,^73 7,622 6,533 3,984 5,653 298 1,561 10,271 12,785 "•* 950 6,830 2,625 3,U50 - member banks — — — — - $ — 1,168 — — - 1,233 11,289 19,639 953 11,0^7 13,990 6sk $ Wt — — — — — member banks Number Number of of States eities 794 902 1,416 756 6,703 723 2,737 924 1 4 4 2 81 1 1 1 1 1 1 1 4 1 86 372 1 1 99 1 3 l 1 1 1 l 8 836 — 3 2 6 4 1 9 3 3 3 3 1,799 3.S75 2,644 525 523 i 792 3,908 534| 4 1 -?--- 1 6 1 3 9 2 1 ! 1 5 7 5,653< 1 1 1 1,233 : 1 3 3 242 5,649 2691 1 2 1 4 6 2 2 Table II - Chains: loans and Investments by Class of Bank and Number of States and Cities in Fnich Operating,(l) December 31, 1931 (Continued) Chain Uame of cbain and location of head office number (2) j Southwestern (Continued) R. C. & D. E. Couch, Haskell, Texas 54 F. L. Dennison, Temple, Texas 55 L. M. Feagin & John K. Kirby, Houston, Texas 56 W. H. Fuqua, Amarillo, Texas 57 58 Henry James, Abilene, Texas M. C, Parrish & Associates, Austin, Texas 59 60 H. B. & K. L. Seay & Associates, Mercedes, Texas 61 1 Carter Steward & Associates, Houston, Texas 62 ! H. H. Thompson, Houston, Texas C. L. Wilklns & Associates, Brenham, Texas 63 I. -H. Nakdimen, Forth Smith, Ark. 64 ITeil Sims. Fort Smith, Ark. 65 66 1 Edward Stevens, Rushing, Ark, B. M., E. G., & G. W. Athey, Enid, Okla. 67 H. T. & N. Douglas, Shawnee, Okla* 6S Willard Johnston & Family, Shawnee Mounds, Okla, 69 E. C. Mullendore & Family, Cleveland, Okla. 70 W. D. Myers, Alva, Okla. 71 C. F. Stuart, Pawhuska, Okla. 72 IX J^ W*, J^ i . , aacUlSV^B^ Stuart, Layerne, Okla. 7*+ Thurmond Brothers, Oklahoma City, OkLa. L. G. Voorhees, Oklahoma City, Okla. 75 E. A. Vose & Associates, Oklahoma City, Okla. 76 H. K. Wooten, Chickasha, OkLa, 77 78 M. L. Harris & W. Mathies, Wister, Okla. Western Grain Adams Investment Company, Fergus Falls, Minn. (3) J. W. Black Company, Minneapolis, Minn.(3/ SO Si Otto Bremer et al, St. Paul, Minn. 82 j Edwin Brickson, Adrian, Minn. 79 Loans and investment ;s in thousands of dollars NationState NonTotal al * member member "banks hanks banks $ 1,261 $ 1,252 546 638 $ 1,208 - 5,682 4,973 2j6l 2,64s 1,155 2,072 756 1,059 595 184 832 1 584 4,254 ! 3,685 7,29S i 7,183 252 1,666 312 3,024 2,378 2,584 1,974 84-9 900 1,007 973 kk2 64-2 3,4p9 2,61*5 1,502 2,64l 352 64s 2,382 2,062 1,236 2,6Ul 206 $ — — — *— — — — — _ ~ ~ — — _ — — — 553 2,715 2,059 1+6,316 1,161 2,17^ 1.723. 25,200 118 — - 1,087 - 417 44 546 709 113 Number Sumter of of States cities 553 1 1 1 2 1 1 1 1 1 1 2 2 1 1 1 1 1 2 1 2 2 2 1 1 1 54l 336 1 2 20,029 1,043 4 1,155 1,316 464 184 248 569 115 252 1,354 646 610 51 34 90 1,021 583 266 — 1 8 4 ' 4 5 4 9 4 3 3 4 8 3 3 3 6 7 3 4 3 3 17 3 8 6 4 3 6 47 6 Table II - Chains: Loans and Investments by Class of Bank and Number of States and Cities in Which Operating^ 1 ) December 31, I93I (Continued) Loans and investment s in thousands of dollars Chain Name of chain and location of head office Nation- Total number (2) S3 SH 85 86 87 88 89 90 91 92 93 Sk 95 96 97 98 99 100 102 103 104 105 106 107 108 109 110 111 112 al "banks , Western Grain (Continued) John C. Carlson, Hash City, Minn. L. G. Castle, Duluth, Minn. Alfred Christopherson, ATbert Lea, Minn. W. W. Dean, Adams, Minn. D. W. DuToit et al, Chaska, Minn. D. M. Sunn, F. E. King, A. King, Grand Rapids, Minn. Isaac Hazlett et al, Minneapolis, Minn. L. H. Ickler, St. Paul, Minn. A. J. Johnson, Granite Falls, Minn. C. H. Klein, Chaska, Minn. J. Lampert Company, St. Paul, Minn.O) Harry Lee, Long Prairie, Minn. Samuel Lewison, Carl C. Swenson & J. F. Fries, Canby, Minn. C. H. March, Litchfield, Minn. T. F. McClure, Litchfield, Minn. Midway national Company & K. H. Bigelow, St. Paul, Minn v (3) K. ±tana, Misutme i i n, lAiiiiiu, '?n*-«^t^«_^t^£i_Jty) W. R. Sawyer, Goodhue, Minn. / ' J, G« Schmidt, Nnrthfield, Minn. Geo. E. Towle et al, Minneapolis, Minn. A. L. Ward (Estate of), Fairmont, Minn. H. A. Warner, White Bear Lake, Minn. F. L. Goodman et al, Grand Forks, N.D. Peterson, Akin Estate et al, Harvey, U. D. J. H. Wishek, Ashley, N. D. M. Plui Beebe, Ipswich, S. D. G. F. Schneider et al, Rapid City, S. D. J. A. Bradley, Centerville, Iowa Brenton Brothers, Des Moines, Iowa E. T. Dufer, Diagonal, Iowa KUIUS spytw^^J $ 1 State member banks 1*71 2,882 $ 8,3^7 s,3^7 268 U02 128 762 97^ 1,752 2,108 1,855 H,536 1,533 3,993 799 — 2,662 1,012 3,661 2,131 1,871 673 879 856 563 2,01+7 1,786 U,US2 939 1,372 — 3,215 9U3 989 587 J+97 I4-63 1,828 1,828 67U HSU — 1,7^6 1,198 271 111 911 1,37s 3,508 2,352 2,282 763 - ~ ~ — ~ — — _ — — — ~ — — — — - 763 1 Nonmember banks $ 2,411 — ksk 572 1,62!+ 253 5U3 860 799 999 1,119 992 293 675 1,786 1,267 983 mm — — — — — « ~ mm 1,014 1,510 Number Number ~ - 526 103 — 67U 5Us 160 911 1,378 3,50s l,33S 772 - of I-I-P Ui States cities 1 1 2 2 1 1 1 2 2 1 2 1 2 1 1 1 1 1 1 2 1 2 2 1 2 1 1 1 1 1 6 2 5 k k 7 16 5 3 8 8 6 3 U 3 l 5 2 k 3 h k 7 3 6 6 6 5 k 3 II - Chains: Loans and Investments by Class of Bank and Number of States and Cities in Which Operating,(l) December 31, 1931 (Continued) Chain Name of chain and location of head office number Si 113 114 115 116 117 118 113 120 121 122 123 124 125 126 127 12S 12° 130 131 132 133 13^ 135 136 137 13S 139 l40 l4l 7/estern Grain (Continued) Fred J. Figgf, Calmar, Iowa 3. H. Kaugen, Northwood, Iowa Johnson, Brush & Annis, Osage, Iowa E. H. Rich, Ft. Dodge, Iowa F. L. Sawyers, Centerville, Iowa James F. Toy, Sioux City, Iowa R. E. Barber & P. H. Kannow, Kearney, Nebr. T. F. Birmingham & Associates, O'Neill, Nebr. C. M. Brown, Cambridge, Nebr. C. F. Coffee, Chadron, Nebr. E. F. Polda & Family, Schuyler, Nebr. C. A. McCloud & Associates, York,Nebr. P. 0. Southwick & Family, Friend, Nebr. G-. H. Titus, Holdrege, Nebr. H. A. & E. A. Wiggenham, Ashland, Nebr. F. L. Ford & Associates, St. Joseph, Mo. (3) J. M. Kemper et al, Kansas City, Mo. Alex Rieger et al, Kansas City, Mo. A. A. Speer, Jefferson City, Mo. J. J. Benjamin, Cambridge, Kansas &. D. & H. 0. Benton, Oberlin, Kansas W. H. Burks, Wellington, Kansas J. R. Burrow & Family, Topeka, Kansas C. Q. Chandler & Associates, Wichita, Kansas R. B. Christy, Scott City, Kansas J. H. Collingwood & Family, Topeka, Kansas P. Eresch & Family, Beloit, Kansas J. P. & F. R. Fair, Mankato, Kansas F. F. Ffickele & F. M. Harris, Ottawa, Kansas Loans and investment s 1 Number' Number in thousands of dollars NationState Nonof of Total al member member 1 banks banks "banks States cities $ l,06l 1,006 $ 3,253 4,252 1,445 12,^96 559 1,353 - 791 1,167 $ — 701 2,926 - 1,230 907 459 2,507 1,556 2,656 i,4n 1,630 1,612 6,601 14,454 4,226 3,92S 2,507 177 S34 - 1,884 S10 1,580 1,013 3,654 3,929 342 3,3S9 - 643 881 1,597 I S,^70 ; 6,686 15,336 i 15,336 736 i 539 2,608 7S3 500 i 1,53S ! 664 291 1,367 — — $ 215 772 _ — _ — — — ~ — ~ ~ — _ -. — — - • - 1,011 ~ - l,06l 1,31^ M52 7UU 3,570 559 73 UUs — 1,556 772 601 50 599 2,947 10,525 ; 3,884 1 539 177 191 716 1,784 — 197 1,597 119 209 171 1 1 2 2 1 3 1 1 1 1 1 1 1 1 2 1 3 1 1 1 1 2 1 3 2 1 1 1 1 3 3 3 7 3 18 4 3 3 * ! 3 ' 7 4 4 7 1 10 ! 2 4 3 4 3 4 ! 5 3 7 3 1 3 ! 6 Table II - Chains: Loans and Investments by Class of Bank and Number of States and Cities in Which Operating,(l) December 31, 1931 (Continued) Chain Name of chain and location of head office number (2) 1^2 IU3 ll& 1U5 lU6 Ikf lUS 1H9 150 151 152 153 15U 155 156 157 15s 159 160 161 162 163 16$ 165 166 167 16s 169 Western Grain (Continued) Linn Frazier, Fowler, Kansas J. B«, P. 0. & S. I. Gardiner, Wichita, Kansas & M* Gray & ¥• J. Br/Bofienthal, Kansas City, Kansas A. D. Jellison, Junction City, Kansas Leavenworth National Bank, Leavenworth, Kansas G. W. Lemon, Pratt, Kansas J, B. Lower, Washington, Kansas W. A, Miller & ?• 0. Herald, Anthony, Kansas A. H. Moffett, Lamed, Kansas E. R, Moses & Son, Great Bend, Kansas W. H. & J1. E. Myers, Wakefield & Clay Center, Kansas F. W. Sponable, Paola, Kansas J. T. Stewart, Wellington, Kansas W. D. ¥omer & Family, Manhattan, Kansas Rocky Mountain Fred A. Wochner, Great Palls, Montana H. E. Hemmingway, Burley Idaho J. W. Hay, Cheyenne, Wyo. C. J, Williams, G. A, Hinman, W. E. Pearson, Powell, Wyo. M. B. Holland, Denver, Colo. R. B. & D. E. Holt, Walsh, Colo.-Wheeler, Texas M. D., J. H. & R. C. Thatcher, Pueblo, Colo. P. C. Brophy & Associates, Phoenix, Arizona Chipraan Family, American Fork, Utah J, E. Cosgriff, Salt Lake City, Utah Desoret national Bank, Salt Lake City, Utah. N. B. Jones, Roy, New Mexico 0. G. Bates, Ely, Nevada : George Wingfield, Reno, Nevada Loans and investment s Number Number in thousands of dollars NationHonState of of Total membe r member al banks "banks States cities banks $ U59 $ 1,809 4,227 1,745 3,268 1,79^ 17S ~ - S93 2,657 1.U12 1,191 2,331 613 919 65s 367 671 1,660 728 289 2,060 1,926 957 1,313 807 670 1,202 4,532 5,352 804 613 599 $ 502 $ h,szk kSk 498 208 21,417 15,631 M75 ~ 12,552 4,687 969 1,187 7,525 281 1,809 M27 852 611 382 3kk 33k 1U9 303 520 671 U39 13^ _ — l4,i45 1,723 13,079 12,684 1,126 1.389! 19,379 ~ ~ «. ~ ~ — — — — — — 3,013 122 _ _ _ — — — — _ — —-.,.••. _. 1 1 1 1 1 1 1 2 1 1 1 1 2 1 5.7S6 9,970 1,723 1 2 1 1 2 2 1 1 1 527 3 7,997 1 1 1 1 1,202 1,017 368 218 115 391 157 202 12,35^ 3 k l 3 2 6 k 6 h 3 3 k 3 k 6 5 h 3 3 U 6 5 k 9 k k 3 10 Table II - Chains: Loans and Investments by Class of Bank and Number of States and Cities in Which O p e r a t i n g ^ 1 ) December 3 1 , 1931 (Continued) Chain Name of chain and location of head office number (2) 170 171 172 173 Pacific Coast • C. E. Bingham, Sedro-Wotfley, Wash. Ufa. C. Butler & Associates, Everett, Wash. 0. A. Eletcher, Yakima, Wash. F. M. & ]p. W. Roberts, Seattle, Wash. Mr. & Mrs. W. D. Howard, Pasadena, Calif. T. A. Work, Monterey, Calif, E. D. & Helson McCook, San Bernardino & Long Beach, Calif. Loans and investments in thousands of dollars State NationNonTotal al member member banks banks banks 1,078 $ 1,078 10,93S $ S.539 2,399 2,858 757 $ 2,101 1,008 265 7^+3 2,025 1,395 3,teo SU6 175 k,182 5,028 176 6,963 6,963 UNITED STATES $U3,15U ($355,^ $926,733 $527,735 (1) States and c i t i e s in which head offices of individual banks are located, (2) On subsequent t a b l e s , t h i s number is used in l i e u of the chain name. (3) Hot in possession of definite information with respect to method of c o n t r o l . Control both personal and corporate. $ Number Number of of States cities 1 1 1 1 1 1 2 3 3 3 U 5 5 3 1 i - Xll - Table III - Groups: Number of Banks "by Classes, Number of Banks Operating Branches, and Number of Branches December 31, 1931 Number of branches Number Outside head In of "banks Nation- State Nonhead office city operating Total office In own In other al member member "branches city county counties Number of banks Group number (i) , total 1 i 3 2 12 20 3 4 631 7 ! 5 6 7 23 T~ 5 10 . - 4 — 4 3 5 l 3 7 6 3 4 7 5 31 36 2 l 12 — — 3 17 2 11 36 - — — — 4 4 1 — ! ! I I 2 1 5 14 \ 4 2 _ — _. _ - _ _ - — — - .. « - 7 15 7 15 ~ mm 10 Q , l 5 n 3 — — 3 2 12 •^ 1 1 1 13 - - S 1 55 79 ~ - _ — - 9 i 14 15 16 17 11 ^4 IS 7 7 7 3 5 19 20 21 22 5 4 23 24 li 25 26 27 2S 29 30 31 32 33 3^ 35 36 37 3S - ^ 6 15 5 ; i 1 i 3 9 3 3 4 3 2 3 ! 3 3 26 39 9 40 27 1 - i U l 1 4 7 - l 2 1 7 2 - •7 J 8 2 I l 4 7 - 2 2 1 4 - - 1 1 1 1 3 1 5 - — 3 7 2 l l 1 5 7 l 3 2 2 2 2 2 1 1 - - — - 1 1 7 2 1 2 1 1 1 - 2 1 1 ! 55 79 _ ~ - 3 1 2 2 — - — — — — -* — 1 3 4 1 1 3 3 7 l «. 5 1 13 - 16 1 1 6 l 2 — - ! 1 1 l 2 io 1 12 1 1 — — - S 7 S 12 3 5 5 - _ — «. _ - 2 1 8 1 s - - - 5 ! 11 1 188 18S 75 75 5 ~ — — ~ — _ — 5 — — — -. — — — — 1 1 — 1 — - ' — — — — — — _ - — — — — — — — — •» - mm -— -. - - XI11 - Table III - Groups: Number of Banks by Classes, Number of Banks Operating Branches, and Number of Branches December 31, 1331 (Continued) Number of franks Group number Total Nation- State Honal member member (1) 1+1 46 16 4 26 42 10 10 3 l 2 l l 6 7 6 S ^5 1 1 s — 46 47 4 5 4 48 11 7 49 6 is 3 3 5 50 51 52 53 54 55 56 57 5S 59 60 61 62 §65 66 67 6s 69 70 71 72 875 7S 2 12 17 5 7 7 s 9 5 5 5 6 3 I 4 4 6 5 6 5 3 1 1 ^2 7 i 4 0 — - 1 — — — - 1 2 — 10 | 3 10 5 3 21 12 1 1 — - 1 5 2 2 4 2 13 l 5 1 3 1 2 li 3 3 - 2 4 2 1 2 7 9 6 9 6 1 1 2 - - 7 7 3 2 4 3 8 10 2 5 5 2 2 1 _ _ _ _ - 22 11 8 3 3 — ~ — _ _ - — — _ _ ~ 3 3 3 1 _s. _ 6 5 2 2 44 6 8 — — 8 15 11 1 1 1 - 7 M u —» - 6 - 11 4 3 6 — — — » «. J 24 79 9 1 1 _ SO 2 10 — — _ — 9 2 1 3 3 _ ~ — - 104 127 8 tf 76 77 1 2 Number of branches _ Number In Outside i;ead of banks head office city operating j Total In ownl In other office branche s I city 1 county counties M .. — _ mm - - 3 3 3 3 _ ~ _ — - ! i mm - <•• - _ mm 4 1 - - 9 19 8 — — ~~ — ~ — - M _ - — — .. — - mm S — «. _ — ~ — «* — - 1 — — — — — mm ~ 2 2 j "• — «. 1 — - i — -. — **• - ~ 1 M — ! — ~ ~* 1 ~ 1 — mm 1 •— - ~ _ 1- 1 xiv ~ Tahl e I I I - Groups: Number of Banks "by C l a s s e s , Mriber <3f Banks Operati ng Branches, and Number of Branches December 3 1 , 1931 (Continued) ITumbp] r of "branches plumber f Group TIn 1 Outside head of "banks number T o t a l Nation- S t a t e head 1 o f f i c e c i t y operating Total al of p e e I n ownl In o t h e r member member t r a n c h e s (i) dity 1county c o u n t i e s lumber of banks 79 27 1 so 5 SI 82 83 90 91 92 a U95 96 97 7 10 22 k 3 ; 3 3 1 k 11 ^ 1 U 1 3 _ I 1 * 1 2 1 1 2 5 1 1 UNITED STATES 97S 1 k 69 Wl^ Tabl<3 I 1 — - - 5 •<> _. _ — _ _ — i _ - i 2 _ — — — — — — — ... ~ — -> «• — — _ — ? i 1 1 - — — ~" ~ - 10 2 1 1 - lUs — 3 — - u — tf ' [• 21 7 7 «, 12 1 2 1 1 11 k 1 : mm — 7 -' 6 U «3 8k S5 86 81 88 2 1 ~ — i "" "~ - ; 2 — 3 j 1 2 2 1 i 2 2 6 75 u3u M ~ 2 1 2 £1 — — — — ~" ~ ~ ! ~~ — —» _ — _ ~ — — «. ... — — _ — — _» — M ^, — — — — ? i — _ — — 125 k 30 27 363 |L.219 7Q5 6S UH£ Uo7 1 V fC)r names5 r e p r e sjented by g roup rmmders« - XV — Table IV - Chains: Number of Banks by Classes, Number of Banks Operating Branches, and Number of Branches December 31» 1931 • •» — ' •" • i ' • • " • Number < . )f banks • ifcaaber Number of branches Outside head of 'banks Chain ^T N a t i o n - S t a t e Non- ! o p e r a t i n g office c i t y hqad Total Total: number o f f i c e In own I n o t h e r tranches member member al (i) c i t y county; c o u n t i e s i k 2 2 k k k 7 k 3 3 2 2 U U 3 3 l+ 5 6 7 s 9 10 n 12 13 lk 15 16 17 18 19 20 21 22 23 2k 25 26 27 28 29 30 31 32 2 1 ~ 1 2 mm ~ ~ - — — — ~ mm \ ! ! «,» — — - mm 1 mm l 1 - k - 4 3 - mm 2 2 3 2 11 2 — — mm k x — 9 U 2 2 7 7 - ^ - 5 3 4 5 3 1 * 3 5 5 3 9 4 2 2 2 1 2 1 1 ^ 7 ko 3 3 1 3 l 1 2 ~ 2 1 1 mm mm — — — — . — mm mm mm mm mm — — — — — — mm •« mm — — — ~ mm ~ ~ 3 2 2 2 mm 2 - - - - «-» - ^ 1 2 ~ «. V 3 3 9 3 . ~ — — — - *. — — ~ — — — — ~ — — ^ M #— — « ~ «. — — *" — - 1 38 39 2 «* - 5 3 U 4 4 3 U 6 5 U 9 3 3 3 4 33 l>k 35 36 37 - — 1 - 2 — 1 1 2 1 k mm < U l 1 1 l — « — ~ — ll ! ! ~ - 1 ~ i 2 1 «. - 2 - l 3 2 4 2 3 3 i ~ I i - k 3 3 | — 16 22 i x l - ! ~ — — «. — — ~ ~ ~ 5 1 2 3 2 3 1 3 3 6 mm — mm — — ~' "" — — — I ~ "* 1 mm I - - — mm mm 16 22 -!• mm «+ •4» 4 •+ ! mm i -> •4 -4 - 4 — mm mm mm "• *" M 1 — I 1— — " • -* - mm - - 4 1 mm — — — — 1 - i "" . — - — — ~ - - • • - xvi Table Chain number IV - Chains: Number of Banks by Classes, Number of Banks Operating Branches, and Number of Branches December 31> 1931 (Continued) total Hi 12 is ^5 7 3 9 i ^ 50 51 52 1 I55 56 57 i 2 l l — i 5 2 1 k 3 4 5 k 9 58 59 60 6l 3 3 2 2 1+ 3 62 63 6k 65 66 67 63 69 2 «• 2 — ~ ~ — - 1 5 s 1 — 1 mm 76 77 6 73 ^ - ~ — — — ~ ~ ~ — — - 79 3 6 1 „ 3 1 — - 3 3 3 6 7 k 2 2 70 71 72 2 3 j 2 £75 3 i 3 9 SO SI 32 S3 ^ 3 S 2 ! 51 6 6 3 ! 7 6 8 1 1 — — — - — - — — _ — 1 - ~ — «. «. 12 - — — 1 1 ~ ~ — — — — — _ - S 5 3 7 — _ «•* - 2 5 6 3 3 9 4 2 10 — 2 7 1 S U 3 | 3 Us 1 3 1*2 H6 ^7 Number of branches Umber of "banksi Number In Outside head |1 of banks |Nat i o n - S t a t e Nonhead office c i t y Total o f f i c e In own I n o t h e r al member Imomber o p e r a t i n g branches c i t y county c o u n t i e s 2 7 3 3 3 1 l 2 3 l ! 4 2 1 9 2 1 3 3 3 2 3 2 2 5 1 l l - s1 1 — k 2 3 k2 5 ; 5 ' ~ «» ~ — — ~ — — -. — — ~ 3 ~ «• — — — — •» •» - «» - _ ~ «, mm M „ «. — - _• — « ^, 12 - ... 2 — — __ •• — «• — 3 5 >IT - 1 «. «. _ w> «M> ~* mm „- rm «• .. ^. ~ «• _ - w— ** M . «~ „„ ^ •• _ _ ^. ,, , mm ,„ _ mm ^a nTT n, _ «•» ~ _ — — — — • M mrm — _ M «» M l mm ^ mm „T _ _ - - _ _ <~ M> mm - ~ L| «. - - j — «~ — - —» •W OT> - 1T _ m> - mm — s S8Ki3^!^l8S3S££3&S^ 1-3 OOI-4 4 ^ 0 * ^ .pr^ v>i .prU) 4^1 . p - 4 ^ * ^ ^ O A ^ C h c n u ^ jp 4=^ 4=-^^ -V^ ^ m w M ^ ^ i l - J ' ' * ' ! ' w o^ruv^ HUJUIW l 1 1 1 ' ' ' ' ' ' ' ' ' « « ' ' I ^ 1 1 1 1 » 1 1 I M H ^ M U - ^ M W W I ' » ' » » *-> l I I ' ' ' ' ' ' ' ' ' » ' > » •"• « { ' ' * ' ' ' ' ' ' « ' ' 1 l ' ' ' ' ' ' ' ' ' ' • ' ' ' ' ' « ' » ' » ' « ' » ' ' ' ' «-* » l 1 » 1 1 1 1 I fU 1 H H U U J T l 1 1 1 1 1 I J | iu.r<*<r>OMvjoi4ri M OJ ro VJJ ru v*i ^rov ^ VJI 4 ' 1 ' l *-> l ^ • 1 l 1 1 I « 1 1 « » I 1 1 I l • l l 1 l 1 l « » l 1 1 1 1 1' M 1 1 t 1 1 l 1 1 I l 1 I 1 I I l I 1 l 1 l I I 1 l 1 l 1 t I l 1 1 i 1 1 j t | | 1 | 1 1 j ( l » 1 1 1 1 , 1 , 1 1 1 i I 1 I , , | I t , , , 1 1 1 1 , 1 1 1 1 1 1 1 1 1 1 , 1 1 1 1 I , , ^ ^ v^ ro 04 v*. 4=- 1 1 1 t 1 I l | rUW^MMMV^ | , j , , 1 , 1 , , , t , , , CD gj 0 S& PP »i ct- H » H- £ O &\ 1 CD fe3 B 0 a1 £ CD I 1 >d 0 ITumber of "branches in Outside head of hanks office city operating Total head office In other branches city counties 1 " PWHHl State ' 1 OilOM 1 1 1 M4TI Nation- ' M memher ' -PM^ . P H I M 4='4rvJ1^ al H^HMUHWI Total ^ & CD (fa • • O 8 bd B H g oi »•* O O * t3T CD U O 4 l-J CO «• «• O H> H» p VjsI p i P M £ ~S*r 0 81 1 0 CF a p 0 ^ C+ HJ H« O g O M fi H>(B CD C O p i bd w ^ 4 (D gi° O ** ^ CD g a* CD hJ 0 Hi bd ! K H H ! - XVI11 - Table iv - Chains: Number of Banks "by Classes, Number of Banks Operating Branches, and Number of Branches December 31, 1931 (Continued) Sumber of b r a n c h e s Number In 1 Outside h e a d of banks N a t i o n - S t a t e Nonhead j o f f i c e crvby number T o t a l o p e r a t i n g T o t a l | o f f i c e In own 1I n o t h e r al member member branches (1) c i t y county count i e s Numbefr < af banks \ Chain 131 132 133 13U 1 — I - _ — ~ 137 13s 5 l s 1 9 l 3 i4i 1U2 1^3 6 1 5 1U5 1U6 ikS 150 151 152 153 154 155 3 7 — 0 2 3 13 5 \ll 176 UNITED STATES 1 90s (1) See Table 2 7 2 2 «. — — I ~ 2 1 3 2 -. ... — — ~ ~ — ~ 5 —• _ mm 1 5^9 1 mm — <M •M w * "* 1 ., ! fc,. - i mm, \ 1 mm 1 — ' •M 1 2 ~ 101 ! mm «•• «» - ~ - - 1 mm — ! mm mm — — «. •«• — — — - - mm mm mm - 4 mm T - 1 ~ i 2 mm mm ~ 1 mm ! - — 2 mm w - 1 2 1 - mm> mm — — — — ~ 1 *m, ! mm mm •» - mm - — l ~ 23 j — U~^ 1 — — — — mm* I •— « 1 — _9 L l L _ 11 for names represented by chain numbers. 236 mm 1 ~ — ,„ — — ' ! — •"• ~ mm. mm 1 M ~ — *-. • — — ~ -* — - — "" - — — « ^ - •* — — ~ *• M — — 1 M — — ~ _ _ ~ — «. ~ — «• — — — — — _ — — — ~ ~ — ~ — ~ «* mm E I1 ~ ~ ! «• — — 7 3 2 1 1 3 2 1 11 - — ~ — •* 3 — ~ ~ | mm 2 2 M ~ — ~ ~ - - — -. — -«~ — — «• 3 1 ~ V , 2 1+ _ — M 4 2 U 5 32 3 1 k 3 1 3 — M 1 2 1 2 1 6 1 2 2 2 2 6 5 3 2 2 ~ « ~ — — — _ ~ ~ — - ~ j 3 3 M 1 3 2 2 4 170 171 172 173 174 ~ — — ~ 3 sr 167 168 1S9 l l 2 1 I I I 3 J m 1 1 2 3 2 2 1 1 1 1 1 1+ 156 157 15s 159 160 161 162 163 - —. _ 4 k 6 k 6 iJ+7 lUs 2 1 2 3 5 5 3 }13b % 7—r k mm 19 U.M., , . . , , , . - - xix - Table 7 - Number and Loans and Investments of Banks in Groups and Chains By Geographic Division, June 30, 1929-December 3 1 , 1931' 1 ) Number L o c a t i o n of bank Nonby geographic A l l nation- S t a t e division al member member hanks banks banks b a n k s ! New England June 30, 1929 Dec. 3 I , 1929 June 3 0 , 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 44 75 82 S7 SS ?3 ^ 42 ^ 75 ^3 36 104 109 115 113 98 Middle June Dec. June Dec. June Dec, Atlantic 30, 1929 3 1 , 1929 30, 1930 3 1 , 1930 3 0 , 1931 3 1 , 1931 204 235 245 254 257 222 North June Dec. June Dec. June Dec. Central 30, 1929 3 1 , 1929 30, 1930 3 1 , 1930 3 0 , 1931 3 1 , 1931 238 299 332 346 276 252 56 78 87 92 S3 33 49 56 Southern Mountain 5 June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 ^ 42 39 95 8 8 6 15 $762,837 25 1,086,597 33 1,266,969 36 1,235,153 37 1,208,114 33 1,030,973 66 $301,843 749,767 883,958 802,551 761,469 63^,577 $362,457 207,4s4 209,548 243,170 245,623 218,84l $ 98,537 129,346 173,^63 189,432 201,022 177,555 1.066,621 1,085,799 1,253,060 1,192,522 2,788,596 413,125 450,280 501,925 449,101 674,7^5 1,756,576 2,247,424 l 2,327,043 1,891,784 2,073,^75 l,7io,o4o S93,069 1,261,402 1,379.216 1,353,935 1,280,901 1,465,173 448,581 846,224 842,282 807,973 729,968 251,401 402,966 574,191 617,839 648,111 53^,515 421,695 45 46 46 93 4o 98 84 3,236,322 3.783,503 4,082,033 3.533^07 5,331,810 2,773.689 77 19 28 30 27 21 19 163 193 215 227 172 156 1,744,616 2,681,817 2,839,337 2,810,019 2,5^5,384 2,138,269 14 21 25 20 21 20 l 3 3 2 2 2 18 25 28 21 19 17 153,547 269,520 302,903 184,003 185,363 152,845 108,311 174,661 190,772 127,125 132,457 ! 108,673 ! 1.345 41,207 39,927 18,136 18,300 17,879 ^3,891 53,652 72,204 38,742 34,606 26,293 5 5 4 3 95 288,585 333.219 355,161 361,925 364,161 335,293 ! ! 7^ 382,430 406,634 432,966 428,635 421,463 399,156 28,929 15,509 10,680 10,197 6,120 14,902 64,916 57,906 67,119 56,513 51,182 4s,96l 162 170 172 124 133 114 293,633 335,662 315,116 275,563 345,651 253,008 206,434 247,128 222,042 199,944 203,616 180,764 38.109 37,171 41,127 ; 33,638 97,51s 37,546 ! 49,090 51,363 51,947 41,981 ^,517 3^,698 Southeastern June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 l4i 139 15s 151 139 133 4i 48 58 Southwestern June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 272 294 293 235 248 221 104 119 116 107 108 101 6 7 7 All banks Loans and investment 0 i n thousands of d o l l sU'S S t a t e 1 NonNational member member banks banks "banks 59 59 57 !*? 46 2 2 6 5 I I 6 85 91 86 ; 96 89 78 ! 1 469,739 388,904 - XX - Table V - Number and Loans and Investments of Banks in Groups and Chains By Geographic Division, June 30, 1929-December 31, 193l( 1 ' (Continued) lIu3Ti"bp.r L o c a t i o n of bank Hon- 1 by g e o g r a p h i c A l l ] Nation-i S t a t e division a l \ member member 1 banks banks "batiks banks :Joans and investment s i n thousands of d o l l a r s NonState j A l l "1 N a t i o n a l member member banks banks banks banks Western Grain June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 665 724| 701! 685 675 629 253 296 29 s 2S9 292 282 9 9 10 10 10 9 403 419 393 38b 373 33S $849,575 1,012,515 936,206! 985,174: 982,701! 9oo,477| Rocky Mountain June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 167 130 1S7 188 185 167 54 64 63 65 63 56 11 12 12 12 13 9 102 104 112 111 109 102 223,176 265,818 260,142 243,658 235,799 215,123 ! 157 ! 170 i 175 ! 165 161 148 75 81 88 82 81 7S b 9 10 9 7 5 P a c i f i c Coast '' June 3 0 , 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 United June ; Dec. June Dec. June Dec. States 30, 1929 3 1 , 1929 30, 1930 3 1 , 1930 30, 1931 3 1 , 1931 ' : 76 80 77 7U 73 65 j 2,122,107 2,250,775 2,279,975 2,155,142 2,0991 lo'S 1,773,972 $546,126 $109,144 104,136 691,917 674,364 104,723: 106,008 667,897 679,272! 101,190 640,988 93,696 113,686 144,985 137,463 132,528 127,632 116,040 1,437,389 1,646,997 1,669,165 1,310,015 1,761,311 1,661,614 | $194,305 216,412 207,119 211,269 202,239 165,793 34,725 40,650 39,817 37,072 34,832 31,305 74,765 80,183 32,862 79,058 73,335 67,778 223,124 246,407 260,639 242,394 235,854 1 22,637 406,594 357,371 350,121 102,733 102,023 94,72| 106 1,100 ! 9 , 7 6 8 , 2 4 3 5,012,064 13,007,990 11,748,189 715 854 124 1,187 12,092,841 6,335,875 3,736,262 ! 1,970,70!+ 886 126 1,217 12,765,641 6,765,201 13,875,841 |2,124,599 872 121 l , l 6 l 11,355,754 6,648,442 13.390,372 1,816,940 063 lib 1,092 13,355,473 s , 0 9 9 , 4 1 5 13,542,330 1,713.17s 1,006 1 305 9S 983 9,642,512 5,317,367 2,398,247 1,426,39s , ( 1 ) These figures exclude mutual savings and private "banks. Inclusion of such "banks, affects 10 States for which figures are given in Table VII with mutual savings and private banks included. ll,921 p . 165 2,229 £,154 J2.07/1 - Table VI XXI - - Number and Loans and Investments of Banks in Groups and Chains by S t a t e s , June 30f 1929-Dec ember 31, 193IU) Number Location of "bank All Nation- State Nonmember member al banks banks "banks "banks Loaiis and investments in ;;hotf,sands, of dollars State NonAll National member member "banks "banks banks banks i New England Maine June 30, Dec. 3 1 , June 30, Dec. 3 1 , June 30, Dec. 3 1 , 1929 1929 193O I93O I931 1931 5 13 17 17 is 15 2 5 — 6 6 7 8 3 $ 7 53»268 $ 11 10 10 10 8k,O33 88,701 9^,250 90,129 10,033 1^,665 16,065 21,160 23,183 20,991 1,173 70,7te ±i ~ — - $ 1+3,235 56,077 67,968 67,51+1 71,067 69,138 New Hampshire Vermont Dec. 3 1 , 1929 1 1 - - 1,173 Massachusetts June 30, 1929 Dec. 31, 1929 June 30, I93O Dec. 3 1 , 193O June 30, 1931 Dec. 31, 1931 32 i+s 1+9 50 50 l+i 19 30 30 29 28 2k 5 6 6 7 7 5 12 13 ik 15 12 s 523,289 82k,SOU 959,509 898,565 862,839 707,862 Rhode Island June 30, 1929 Dec. 3 1 , 1929 June 30, 193O Dec. 3 1 , 1930 June 30, 1931 Dec. 31, I93I 3 3 3 3 3 3 1 1 1 1 1 1 l 1 1 1 1 1 1 1 1 1 1 1 153,331 151,603 151,100 1^9,889 153,091 139,201 Connecticut June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, I93I Dec. 3 1 , 1931 l+ 10 13 17 17 16 1 - 3 5 8 11 11 10 32,91+9 32,275 72,327 97,99s 97,93*+ 93,7S1 5 5 6 6 6 - - 280,557 719,599 252,877 7^8,125 705,1+22 580,728 $220,3SS 69,202 10l+,2S0 102,81+0 29,1+63 22,3l+l+ 37,61+9; 37,1+30 1+6,16Q 51+.577 37,67l : 7,3^ 6,825 6,91+9 6,832 6,601+ 6,291+ 11+2,069 139,928 ll+0,3l+6 138,890 11+2,783 129,37s 3,922 1+.850 3.S05 1+.167 3,70l+ 3,529 3,913 7,505 8,067 26,1+31+ 26,260 26,561+ — — — 67,556 29,036 30,770 61+, 260 71,561+ 71,671+ 1 67,217 - x:cn Ta"ble VI - Number and Loans and Investments of Banks in Groups and Chains "by States, June 30, 1929-Decemt>er 31, I931O) (Continued) TiTinr JM Via u c i L o c a t i o n of ' "bank Middle A t l a n t i c New York June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 3 0 , 1931 Dec. 3 1 , 1931 New JerseyJune 30, Dec. 3 1 , June 30, Dec. 3 1 , June 30, Dec. 3 1 , t Nation- S t a t e Nonmember member al [banks franks "banks "banks All 82 104 103 103 104 ^5 95 45 1929 64 1929 ! 72 1930 ! 80 1930 87 1931 93 70 1931 Delaware June 3 0 , 1929 Dec. 3 1 , 1929 June 30, I93O Pennsylvania June 3 0 , 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 3 0 , 1931 Dec. 3 1 , 1931 3 3 3 55 56 59 64 60 57 I 52 ! 52 1 51 52 31 : 33 , 1 36 36 36 27 _ — 1 17 19 19 20 33 1 334 ,2 18 16 15 ! 14 15 15 17 19 15 - 19 19 21 28 25 26 12 12 11 11 11 10 10 25 11 • 19 17 15 1 10 36 35 Loans $X.6L i n v e s t m e n t s i n 1ihouaands of d o l l a r s State ! NonAll 1 National member 1 member "banks ! "b^nks banks banks [ $ 2 , 0 4 l , 2 6 l $ 576,399 | $1,330,543 1 $13^,319 2,529,214 397,277 1,762,637 ! 169,300 fe,74-5 | 1,863,138 f 154,204 2,674,085 I 547,004 1,380,383 150,637 2,078,024 3,671,90s 2 , i l 4 , 9 7 9 1,324,775 172,154 137,678 1,262,833 127,104 1,527,615 , 38 28 384,482 424,309 511,313 520,295 682,4l4 383,850 3 3 3 l,l4l 1,152 1,115 24 809,43s 828,828 895,520 935,088 977,488 862,224 19 24 29 34 25 i 27 25 1 24 ! 21 ! 131,932 133,586 197,485 179,010 182,412 102,538 69,865 108,869 113,008 140,728 295.657 97,095 - _ — - 358,284 356,168 375,918 350,902 370,673 393,043 350,112 94,986 97,974 145,786 97,907 93,24o 77,583 339,5^9 598,499! 586,147i 574,7321 541,805' 63,2051 54,340 183,576 188,327 179,577 171,099 134,606 354,936 39M32 4^6,508 491,205 4F,529 182,679 181,854 200,820 200,557 204,345 184,217 i,i4l 1,152 1,115 Maryland D i s t r i c t of Col. North C e n t r a l Michigan June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 79 118 119 119 102 95 J 25 I 25 ! 23 1 23 j 9 53 74 77 79 69 63 415,546 1,098,555 1,099,076 1,071,153 1,036,607 913,720 t £1,657 3116,480 324,602 316,844 323,703 115 , 9 0 9 - Table XX111 VI - Number and Loans and Investments of Banks in Groups and Chains by S t a t e s , June 30, 1929-December 3 1 , 1931' 1 f (Continued) Loans and investments i n thousands of d o l l a r s SfonState All Wa|ti onal member member "banks "banks banks banks Itfumoer L o c a t i o n of bank Hat ion- S t a t e UonAll al member member "banks "banks "banks banks . . 11 • • ' Wisconsin June 30, Dec. 3 1 , June 3 0 , Dec. 3 1 , June 3 0 , Dec. 3 1 , 1929 1929 1930 1930 1931 1931 54 56 67 25 85 82 20 21 27 31 31 29 2 k k k ks Illinois June 3 0 , Dec. 3 1 , June 30, Dec. 3 1 , June 3 0 , Dec. 3 1 , 1929 1929 1930 1930 1931 1931 88 93 103 108 66 55 20 21 22 24 19 15 7 5 7 6 6 6 61 67 74 7S ki 34 1,065,552 1,205,097 1,297,0U2 1,292,669 1,090,260 8*18,251 671,822 685,902 760,161 725,655 61+8,772 1+47,116 86,741 173,241 167,334 166,682 140,688 171,316 306,929 345,954 369,547 400,332 300,800 229,219 Indiana June 3 0 , Dec. 3 1 , June 30, Dec. 3 1 , June 30, Dec. 3 1 , 1929 1929 I93O I93O 1931 1931 17 26 30 24 13 9 r 0 9 9 7 k 3 l 1 l l ~* 10 16 20 16 9 6 52,44l 83,605 85,699 78,1+00 45,273 39,130 14,701 45,224 42,153 39,172 29,436 26,44o 22,291 20,667 21,113 20,021 - 15,449 17,71^ 22,433 19,207 16,437 12,699 Ohio . Dec. June Dec. June Dec. 1929 193O 1930 1931 1931 6 13 10 10 11 2 k 5 6 7 3 3 1 1 - 1 6 k 3 k 23,976 94,513 70,1+12 71,078 61,306 28,441 35,207 33.77S 35,3^ 55,1^7 53,817 51,628 28,535 29,794 1,71s 7,678 8,099 5,940 6,159 Southern Mountain West V i r g i n i a June 30, 1929 Dec. 3 1 , 1929 June 3 0 , 1930 Dec. 3 1 , 193O June 30, 1931 Dec. 3 1 , 1931 1 1 1 1 1 1 _ - 1 l l 1 l 1 31, 30, 31, 30, 31, Virginia 1 & 35 32 50 50 > $ 1 ! - 211,077 $ 210,58^ 263,007 297,325 301,566 275,862 1,345 1,260 1,428 1,471 \ 1,1+88 1,1+94 I 184,889 125,355 217,093 $ 238,1+86 21+3,646 220,561 — ~ — — — - $ 26,188 25,229 16,060 29,254 18,003 40,896 17,681 40,239 16,880 38,421 i 1,345 ; 1,260 1,428 1,471 i,4ss 1,494 — — — _ — - - xziv - Table VI - Bomber and Loans and Investments of Banks in Groups and Chains by States, June 30, 1929-December 31, 193l( 1 ) (Continued) •vr_«, iNfumoer Location of' "bank [All Nation-i StateI Nonmeinbor member foanks al "banks "banks banks KentuckyJune 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 1930 1931 1931 Tennessee June 30, Dec. 31, June 30, Dec. 31, June 30> Dec. 31, * k - 6 6 6 10 6 3 3 3 2 2 1 1 1 1929 | 2S 32 1929 42 1930 1930 1931 35 32 1931 10 11 19 17 18 17 — 1 16 13 1 36 All "ho-nlro U CLXlXi-O - ;$ 1+ 1 5 1 2 2 2 18 21 1 ] Loans and investments ii1 •thousands of dollars I Non1 National I State member member 1 T*»^"n"U"cj I U Ctllxi-O "banks j "banks 8,120 $ 119,421 121,320 43,229 51,334 45,672 23 144,082 148,839 180,155 19 17 15 139,243 132,541 105,679 8,120 1 73,013 $ 39,947 $ 6,46l 64,166 1 3S,499 18,655 6,062 20,562 | 16,665 29,044 16,812 5,478 24,524 4,763 16,385 100,191 101,648 126,606 106,563 103,413 84,149 — — -. -. ~ 43,891 47,191 53,549 32,680 29,128 21,530 Southeastern North Carolina June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 l 1 1 1 1 1 1 1 — — 2,943 3,253 i ! 2,973 2,908 2,943 3,253 2,973 ; 2,90s ._ - South Carolina June 30» 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 2 6 11 11 11 6 1 3 7 7 7 k — 1 3 3,455 29,735 31,321 32,654 29,79s 26,259 — ~ — «. - 12,09!= 2 7,733 39,659 43,415 43,766 4o,24i 35,755 9 k 10 10 10 11 10 10 161,543 170,889 173,334 167,039 163,313 154,312 144,121 150,960 157,172 150,857 13*827 3,595 15,509 4,420 5,482 5,985 5,733 5,570 39 i46,9io 131,245 144,073 123,695 131,509 128,419 1 k k k Georgia June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 1930 1931 1931 23 25 2S 28 24 2k 13 1 Florida June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 1930 1931 1931 ' 55 kl 53 54 5k 55 1 15 19 22 23 1 j - 1 - 2k 1 1 25 1 l 1 29 1 10 ' ?\ 14 \ k 1 lk 3i *3 ! l i 28 31 31 29 i ! | ! 152,131 s 10,680 10,197 5,444 135,264 13,484 97,874 110,579 121,462 103,790 112,489 109,029 15,102 j "• — 676 ! i,4is ~ - 4,27s 9,924 11,11$ 10,443 9,49l 33,93^ 20,666 22,611 19,905 18,344 17,972 Table VI - Number and Loans and Investments of Banks in Groups and Chains By States, June 30, 1929-December 31, 193l(1) (Continued) j L o a n s and i n v e s t m e n t s i n NumDer I thousands of d o l l a r a NonL o c a t i o n of bank 1 State [Nation- j S t a t e \ NonAll All National member member member al jmember hanks hanks hanks 1 banks banks banks banks . hanks Alabama June 30, Dec. 3 1 , June 3 0 , Lee. 3 1 , June 30, Dec. 3 1 , 1929 1929 1930 1930 1931 1931 22 22 26 26 26 24 Mississippi June 3 0 , 1929 39 Dec. 3 1 , 1929 39 June 3 0 , 193O 39 Dec. 3 1 , 1930 31 June 30, 1931 I 2 3 Dec. 3 1 , 1931 23 Southwestern Louisiana June 3 0 , Dec. 3 1 , June 3 0 , Dec. 3 1 , June 3 0 , Dec. 3 1 , - 13 13 i 11 11 11 11 - 29,81+2 30,51+3 30,502 30,167 1+2,59^ 1+0,51+7 $ 12,852 11,857 12,81+1+ 19,699 82,1+21 23,238 2,768 8,994 8,867 14,256 14,956 10,426- 10 10 9 12 8 51,462 51,394 52,213 64,122 139,971 74,211 4 ; 3 3 3 59 60 63 64 66 61 93,306 118,608 115,074 112,028 110,1+10 92,526 68,235 93,996 89,082 85,787 82,572 72,813 H+,117 13,623 13,951 13,939 15,097 ll+,308 10,954, 10,929^ 12,04l 12,30$ 12,741 11,405 4l,604 1+9,955 38,300 1+,100 ii+,56i+ 11,120 15,1+13 20,631+ 6,1+23 3,S2l+ 11,889 10,868 11,11+0 11,691 ll+,332 — - 15,051 17,630 17,545 276 2,675 252 107,261 115,705 109,529 95,313 80,706 | 69,151 | 92,91+1+ 101,955 1 96,035 j 80,166 66,561 _ — — — — - 14,317 13,750 13,494 15,147 14,145 12,615 36 3S 39 37 3 ? 34 41 4 j Arkansas June 3 0 , Dec. 3 1 , June 30, Dec. 3 1 , June 30, Dec. 3 1 , 1929 1929 I93O 1930 1931 1931 10 i4 11 l l 1 5 1 61 6 13 28 20 1 20 i 99 — - 1 1 1 1 3 2 i 101 105 104 10s 99 Oklahoma June 30, Dec. 3 1 , June 3 0 , Dec. 3 1 , June 30, Dec. 3 1 , 12,268 11,702 11,821 10,277 9,i4l 7,888 896 81+1+ 36 36 36 1929 1929 I93O I93O 1931 1931 S 18 9 34,481 33,754 33,926 25,790 21.S93 20,327 $ _ — 30, 31, 30, 31, 30, 31, 7 — •- 3 3 3 3 3 3 6 6 7 8 9 9 lk1 30,867 30,21+3 30,1+1+2 6l,09l+ 57,629 53,945 15 15 15 17 17 17 21 21 19 60 31,763 $ 31,087 35,269 65,092 61,53*+ 57,429 ! - 1 — 1929 1929 1§30 193O 1931 1931 Texas June Dec. June Dec. June Dec. 9 |$ 9 9 kS j 59 59 | 3 1 12 — 3 4,827 3,992 3,905 3,^21+ | 22,213 22,052 22,105 15,513 12,752 12,1+39 1 1929 96 1929 102 1930 100 I93O 102 1931 101 1931 J 94 I 52 61 - 59 1 57 55 - 52 - 44 j 4i 4i 45 46 i 42 56,536 1 ~ xxvi Table VI - Number and Loans and Investments of Banks in Groups and Chains by S t a t e s , June 30, 1929-December 31, 193l( 1 ) (Continued) Loans and i n v e s t m e n t s i n thousands of ' d o l l a r s NonState All N a t i o n a l member member "banks "banks banks "banks IjUBiuex" Location of t a n k All banks Western Grain Minnesota June 30, 1929 j 2U2 Dec. 3 1 , 1929 276 June 30, 193O 232 Dec. 3 1 , 1930 276 June 30, 1931 270 Dec'. 3 1 , 1931 256 nation- S t a t e Nonmember member al "banks "banks banks 101+ 123 125 120 117 119 2 2 2 2 2 1 136 151 155 154 151 136 27 3s 42 39 — 59 53 54 53 51 kk 4o,68i 52,515 57,590 55,512 54,6so ^8,317 2S,125 1+0,6S1 1+6,111 44,295 l+l+,204 39,769 ~ — - 12,556 11,834 11,1+79 11,223 10,1+76 8,51+8 $ W+,807 $ 544,228 527,30U 537,781 539,753 1+96,198 349,992 430,531 410,272 1+14,319 420,582 404,528 $ 1,848 $ 92,967 1,894 111,803 1,687 115,345 1,650 121,S12 1,613 117,558 1,087 90,583 North Dakota June 30, 1929 Dec. 3 1 , 1929 June 30, I93O Dec. 3 1 , 193O June 30, 1931 Dec. 3 1 , 1931 86 91 96 96 95 S3 South Dakota June 30, 1929 Dec. 3 1 , 1929 June 30, I93O Dec. 3 1 , I93O June 3 0 , 1931 Dec. 3 1 , 1931 54 60 62 60 57 53 2k 30 33 32 35 33 3 3 3 3 3 3 27 27 26 25 19 17 38,618 44,572 46,773 43,872 44,893 40,202 28,185 33,457 34,946 32,939 35,639 32,290 1,754 1,828 l,66l i,54o 1,504 1,16s 8,679 9,287 10,166 9,393 7,750 6,744 Iowa June Dec. June Dec. June Dec. 910 S98 922 sso 873 772 19,914 21,392 19,507 19,551 18,1+56 17,067 IS 30, 31j 30, 31, 30, 31, 1929 1929 193O 193O 1931 1931 79 25 70 64 63 61 31 32 26 22 22 22 1 l 1 1 l 1 47 52 43 l+l 1+0 3S 65,439 84,756 79,260 72,342 73,357 67,359 Ui+,665 62,1+66 58,831 51,911 54,02S 49,520 Nebraska June 30, Dec. 3 1 , June 30, Dec. 3 1 , June 30, Dec. 3 1 , 1929 1929 1§30 193O 1931 1931 72 77 61 62 62 53 25 29 2S 29 29 27 •*• ~ - 47 ks 33 33 33 26 35,137 66,785 58,973 63,300 63,242 54,867 20,519 50,031 50,1+Sl 54,796 55,309 4S,S17 — — — - ii+,6is 16,754 8,1+92 8,50i+ 7,933 6,050 - Table XXV11 - VI - lfamber and Loans and investments of Banks in Groups and Chains by S t a t e s , June 30, 1929-December 31, 1931(1) (Continued) "M11* JJiUlUUtii. Hatim- S t a t e I'Jonmember member al "banks "banks banks L o c a t i o n of t a n k All [banks Missouri June 30, Dec. 3 1 , June 3 0 , Dec. 3 1 , June 30> Dec. 31> 1929 1929 1930 1930 1931 1931 31 32 31 28 2S 27 Kansas June Dec. June Dec. June Dec. 1929 1929 1930 1930 1931 1931 Rocky Mountain Montana June 30, 1929 Dec. 3 1 , 1929 June 30» 1930 Dec. 3 1 , 1930 June 3 0 , 1931 Dec. 3 1 , 1931 Idaho June Dec. June Dec. June Dec. 30, 31, 3Q, 31, 30, 31, Loans and i n v e s t m e n t s i n thousands of d o l l a r r State NonAnn All National member member banks banks banks i banks 10 10 ; 9 s ! 9 9 2 2 3 3 3 3 19 :$ 20 19 17 16 15 101 103 99 99 100 96 32 3^ 35 35 36 33 1 l 1 l l l 6S 68 63 63 63 62 64,644 67,677 66,289 6i,4S5 60,545 57,390 42,479 45,310 46,776 42,666 42,4il 40,369 1,455 1,405 1,407 1,298 1,350 1,011 20,710 20,962 18,106 17,521 16,784 16,010 28 4l 1+6 46 45 42 9 17 19 19 is 17 3 5 4 4 4 3 16 19 23 23 23 22 44,1+78 79,750 77,552 74,334 69,623 63,548 15,423 42,302 40,762 40,360 38,929 36,249 23,125 28,925 24,817 22,813 21,362 is,970 5,930 S,523 11,973 11,161 9,332 S,329 11 11 9 10 10 10 3 3 3 3 3 3 27 27 32 32 32 j 32 • 36,79S 38,874 39,368 38,417 36,501 34,124 16,731 18,194 15,700 15,905 14,355 l4,285 8,607 9,233 8,822 9,099 8,687 S,27S n,46o 11,1+47 14,846 13,413 12,959 11,561 l l 1 2 3 l 16 16 16 15 l4 19,721 20,171 I9,4s4 18,455 18,691 13,642 ! 14,456 14,326 13,502 12,356 12,727 10,268 143 115 142 759 977 122 5,182 5,730 5,84o 5,3^0 4,9S7 3,252 30, 31, 30, 31, 30, 31, 1929 1929 1930: 1930 1 1931 1931 4i i+i 44 45 45 1+5 Wyoming June 30, Dec. 3 1 , June 30, Dec. 3 1 , June 30, Dec. 3 1 , 1929 1929 1930 1 1930J 19311 1931 25 25 25 25 25 1 16 | j ; j : j j 8 S S 8 8 6 : 9 I 160,199 $ 151,982 150,017 150,876 146,231 136,i44 32,lbl 29,44l 26,947 26,971 27,099 25,695 $103,177 $ 24,861 98,161 24,380 24,024 99,046 100,640 23,265 95,850 23,282 89,65s 20,791 - xxviii - Table VI - Number and Loans and Investments of Banks in G-roups and Chains by States, June 30, 1929-December 31, 1 9 3 1 U ) (Continued) Loans and investments :i n thoiisands o:r dollars ATiTm"H^ y* JiJU-ii Location of tank Colorado June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 1930 1931 1931 Uew Mexico June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 1930 1931 1931 Nation- 1 Statei Nonal member member "banks franks banks banks All 10 11 11 11 11 15 lb 1 7 *7 ^ 16 10 I 9 9 ! 6 6 5 5 5 5 4 5 4 4 -J - banks $ 1+ — 27,329 $ 27,670 27,790 25,252 j 24,211 22,564 3,031 3,173 2,099 1,516 4 2 l l 1 State f National banks i,3«9 1,240 Non^ member "banks member "banks 20,687 20,557i 20,771 1S,674| 17,917 16,465 - 2,197 2,255 1,465 1,295 1,217 1,023 - $ 7,l42 7,H3 7,019 6,572 6,294 6,099 1 834 918 634 221 172 157 . Arizona June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 19^9 193O I93O 1931 1931 6 6 6 6 6 ; 6 l l l l l l — Utah June Dec. June Dec. June Dec. 30, 31, 30, 31, 30, 31, 1929 ! 27 1929 26 I93O ! 26 193O 26 I931 25 1931 21 6 6 6 6 6 4 3 4 3 3 Nevada June Dec. June Dec. June Dec. 30, 31, 30, 31, 30, 31, 1929 1929 I93O I93O 1931 1931 16 4 _ 16 5 — 5 5 6 6 6 6 All v 17 ^ 16 5 5 i 1 5 4 5 5 5 5 5 5 1+ 17,646 17,660 17,525 15,255 14,729 17 17 16 17 16 15 2 i I I 12 12 9,994 9,970 - 4,175 - 50,514 29,248 3i,44i 29,916 2S t 96o 27,285 24,803 44,592 ! 11,213 11,870 12,059 10,772 4,735 i 50,4o4 4s,223 j - l4,i45 52,290 51,232 12 11 12 12 5,233 5,790 5,526 5,023 23,099 26,230 24,426 24,425 22,432 21,26s 1 2,850 2,377 1 9,m 10,120 9,221 9,295 9,367 2,712 ! 6,036 4,4oi 3,206 3,935 — — — - I8,4i6 18,472 15,886 17,043 16,532 15,254 13,928 16,110 14,605 14,530 13,065 1 12,556 - Table XXIX VI ~ Number and Loans and Investments of Banks i n Groups and Chains by S t a t e s , June 30, 1929-December 3 1 , 1931V 1 ) (Continued) Loans and investments i n ;housands of d o l l a r s NonState All National member member banks banks banks banks MffilUCi.- L o c a t i o n of bank All banks P a c i f i c Coast Washington June 30, 1929 Dec. 3 1 , 1929 June 3 0 , I93O Dec. 3 1 , I93O June 30, 1931 Dec. 3 1 , 1931 Oregon June Dec. June Dec. June Dec. • Nation- S t a t e Hon- , member member al "banks banks banks 62 7^ 79 SO 81 73 2k 28 33 33 33 32 - 3 5 5 5 1+ s $ ki 1+2 43 37 91,325 1S6,SSS 203,068 201,907 207,97^ 182,76c 76,1+52 80,291 13^,393 126,253 12UJ63 122,620 $ lh,6ks - 151,035 155,115 155,050 160,835 ii*3,ii*8 $ ll*,087 25,1*10 25,172 25,816 21,761* $ 16,677 21,716 22,51*3 21,685 21,325 17,850 68,203 70,331+ 124,735 117,386 117,395 116,558 2,182 3,231 2,621 2,312 907 873 6,067 6,726 7,037 6,555 6,1*61 5,189 30, 31, 30, 31, 30, 31, 1929 1929 193O 1930 1931 1931 33 36 36 33 29 26 16 18 19 18 18 16 k 5 l* 3 1 l 13 13 13 12 10 9 California June 3 0 , Dec. 3 1 , June 30, Dec. 3 1 , June 30, Dec. 3 1 , 1923 1929 193O 1930 1931 1931 ! 62 60 | 60 i 52 ! 51 35 35 36 31 30 30 2 l j 1 1 ! 1 *"" ! 225,942 25 1,95^,330 j 1 , 3 ^ , 5 3 8 2k 1,983,596 1,425,578 229,089 i 2 1,9^2,51U i 1,389,315 i 232,658 3 20 1 1,826,982 1 1,537,579 2ll*,910 i 20 | 1.766.U1I9 1,1*83,081 1 209,131 | 1 1,^73,590 ! 1,1*01,908 i 19 k3 I ( 1 ) See f o o t n o t e ( l ) , Table V 383,850 328,929 320,51*1 7M93 7^,237 71,682 Table VII - Number and Loans and I n v e s t m e n t s of Banks i n Groups and Chains I n c l u d i n g Matual Savings and P r i v a t e Banks i n C e r t a i n S t a t e s ^ v J u n e 30, 1929-December 3 1 , 1931 — | Location of bank 'All U C U .IX1.0 Maine June Dec. June Dec. June Dec. lumber Mutual P r i r nation- 1 State [Nonmember member s a v i n g s v a t e al banks banks banks banks banks 1929 1929 1930 1930 1931 1931 6 i4 18 IS 19 16 2 6 6 7 8 5 _ - New Hampshire June 3 0 , 1929 Dec. 3 1 , 1929 June 3 0 , 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 S 8 8 8 8 2 2 2 2 2 2 Massachusetts June 3 0 , 1929 Dec. 3 1 , 1929 June 3 0 , 1930 Dec. 3 1 , 1930 June 3 0 , 1931 Dec. 3 1 , 1931 3^ 50 51 55 55 46 19 30 30 30 29 25 Connecticut June 3 0 , Dec. 3 1 , June 3 0 , Dec. 3 1 , June 3 0 , Dec. 3 1 , 4 11 l4 18 18 17 1 5 5 6 6 6 30, 31, 30, 31, 30, 31, 1929 1929 1930 1930 1931 1931 . , ,, - . . — . . . . • * . . — 10,033 14,665 16,065 21,160 23,183 20,991 - 66,201 56,412 66,984 67,559 69,626 68,471 6,839 7,206 7,275 7,680 8,5H 7,550 — — - _ - 533,008 834,701 969,924 917,424 881,786 727,495 280,557 719,599 852,877 748,387 705,690 580,994 — - 32,949 43,768 77,594 103,247 103,092 93,991! 3,913 7,505 S,o67 26,434 26,260 26,564 3 7 11 10 10 10 I 1 1 1 1 1 «. - - 2 2 2 2 2 2 4 4 4 4 4 4 - 6 6 7 7 5 8 12 13 15 16 13 2 2 2 3 3 3 — _ - j 3 5 8 11 11 10 , 1 1 1 1 1 : • .. . .. - — - .. — » . . ., Loans and i n v e s t m e n t s i n thousands of d o l l a r s State UonMutual P r i AH National member s a v i n g s v a t e member L/di.jLCk.0 UCJ/J..UXO banks banks banks banks $ 54,830 $ 72,287 85,591 90,306 95,930 91.S55 $220,388 67,556 69,202 104,280 102,84o 89,463 — - $ 4 3 , 2 3 5 $ 1,562 56,077 1,545 67,968 1,558 1,605 67,5^1 1,680 71,067 1,726 69,13S 249 255 251 251 230 24l 59,113 48,951 59,458 59,628 60,885 60,680 22,344 37,649 37,430 52,116 60,596 44,009 9,719 9.S97 10,415 12,641 I2T660 13,029 29,036 30,770 64,260 71,564 71,674 67,217 -.. 5,^93 5,267 5,2^9 5,15S 5,2io ~ - - - Table VII - Number and Loans and Investments of Banks in G-roups and Chains Including Mutual Savings and Private Banks in Certain States/1)June 30, 19*29-December 31> 193^ (Continued) L o c a t i o 11 of bank New York June 3 0 , Dec. 31> June 3Q.# Dec. 3 1 , June 30> Dec. 3 1 , ITumber NationS t ate Eon- Mutual " P r i All al member member s a v i n g s v a t e "banks banks banks "banks "banks banks 1929 1929 1930 1930 1931 1931 S3 105 io4 io4 105 96 45 52 52 51 52 45 17 19 19 IS 16 15 20 33 32 3'+ 36 35 — - Pennsylvania June 3 0 , •1929 Dec. 3 1 , 1929 June 3 0 , 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3-» 1931 59 60 63 6S 64 5S 20 20 22 29 26 26 12 12 11 11 11 10 25 26 2S 26 25 21 — • — - 58 74 77 79 69 63 10 16 20 16 9 6 Michigan June 3 0 , Dec. 3 1 , June 30 > Dee^ 3 1 , June 3 0 , Dec.. 3 1 , 1929 1929 1930 19301911 1931 91 130 129 12-9 112 105 10 25 25 25 23 23 11 19 17 15 10 Indiana June 3 0 , Dec. 3 1 , June 3 0 , Dec* 3 1 i June 3 0 , Dec, 3 1 , 1929 1929 1930 1930 1931 1931 IS 27 31 29 IS i4 6 9 9 9 6 1 1 1 1 - ' t— Q 1 1 1 1 1 :.i Loans and i n v e s t m e n t s i n thousands of d o l l a r 3 Mutual P r i lionState AH National member member savings, v a t e banks basics banks banks banks banks $2,0*41,261 $ 576,399 $1,330,543 $134,319 2,529,214 597,277 1,762,637 169,300 2,67^,035 656,743 1,863,133 154,204 547,004 1,380,383 150,637 2,07s,467 3 , 6 7 2 , 3 4 1 2,114,979 1,384,775 172,154 137,67s 1,262,833 127,104 i,52S,019 2 2 2 2 2 1 S13.146 832,701 S99.319 938,849 981,096 863,465 — - 12 12 10 10 10 10 416,597 1,099,642 1,100,136 1,072,116 1,037,550 9i4,6l6 — - 1 1 1 3 3 3 1 1 ! ; 1 52,503 83,696 85,773 79,817 47,322 ! 4o,6os - U.S. l\i • S . N.S. $ 443 433 4o4 359,187 355,955 399,828 467,46o 492,o4o 434,529 356,16s 375,918 350,902 370,673 393,043 350,112 96,536 99,573 147,334 99,442 94,763 77,583 - 1,255 1,255 .1,255 1,274 1,250 l,24l 21..657 316,4so 324,602 314,-844 ; 323,703 715,909 339,549 598,499 586,147 574,732 541,305 63,205 54,34o 183,576 188,327 179*577 171,099 134,606 - 1,051 1,087 1,060 963 943 896 14,701 45,224 42,153 40,433 30,701 27,703 22,291 20,667 21,113 20,021 - 15,449 17,714 22,433 19,207 16,437 12,690 - 62 91 74 156 184 215 Table Til - Jfumber and Loans and Investments of Banks in Groups and Chains Including Mutual Savings and Private Banks in Certain States/?-'June 30, 1929-December 31, 1931 (Continued) Number State Non- Mutual P r i A l l National member member savings v a t e "banks banks banks banks banks banks Location of 'bank Texas June Dec. June Dec. June Dec. 30, 31, 30, 31, 30, 31, 1929 1929 1930 1930 1931 1931 107 109 113 112 lib 10b Iowa June Dec. June Dec. June Dec. 30, 31, 30, 31, 30, 31, 1929 1929 1930 1930 1931 1931 SS 9^ 80 70 69 67 39 u ki 1+2 37 3 3 3 U U 31 32 27 22 22 22 l l l l l l ho Hi H* S-.—not shown. (1) See footnote (l), Table V. 60 61 6U o5 67 62 H7 52 kk hi i+o 3S Loans and i n v e s t m e n t s i n thousands o:f d o l l a r s Mutual P r i State NonAll National member member savings v a t e banks banks banks banks banks banks _ - k k k k k 3 $102,2+20 12S,35S 126,190 121,1+82 120,Hl6 107,337 % 75.605 _ - 9 9 68,339 S7.672 82,215 1+1+.665 62,H66 59,020 51,911 5^,028 1+9,520 sr 0 6 6 7^,535 75,^96 69,429 101,595 9S.125 93.50U 90,917 so,307 $ iU.117 $ 1 2 , 3 S ^ 13,623 12,826 13J^0 13,951 13,725 13,939 14,088 15,097 lH,308 12,697 910 898 922 880 873 772 19,91^ 21,392 19,65719,551 18,456 17,067 — $ 3l*+ 31U 311+ 31I+ 311+ 75 2,900 2,916 2,616 2,193 2,139 2,070 - xzxiii - Table VIII - Number of Group and Chain Systems, "by Geographic Division ( i ) June 30, 1929-December 31, 1931 Geographic division. Number of systems Haw England June 30, 19H9 Dec. 31, 1929 June 30, 193O Dec. 31, 1930 June 30, 1931 Dec. 31. 1931 7 10 11 12 12 11 Middle June Dec. June Dec. June Dec. 4g 5^ 56 55 53 ^3 Atlantic 30, 1929 31, 1929 30, 1930 31, 1930 30, 1931 31, 1931 North Central June Dec. June Dec. June Dec. 30, 31, 30, 31, 30, 31. 1929 1929 1930 1930 1931 1931 Southern Mountain June 30, 1929 Dec. 3 1 , 1929 Ho 42 44 42 35 33 5 7 Geographic division June Dec. June Dec. 30, 31, 30, 31, 6 5 1930 1930 1931 1931 Southeastern June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Doc. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 21 21 Southwestern June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 41 39 3S 37 3S 35 Western Grain June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 109 107 100 96 (DAc cording to location of head office* Number of systems 2 J 2^ Geographic division June 30, 1931 Dec. 3 1 , 1931 ^ocfcy Mountain June 30, 1929 Dec. 3 1 , 1929 June 30, 1§30 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 P a c i f i c Coast June 30, 1929 Dec. 3 1 , 1929 June 30, 1930 Dec. 3 1 , 1930 June 30, 1931 Dec. 3 1 , 1931 United June Dec. June Dec. June Dec. States 30, 1929 3 1 , 1929 30, 1930 3 1 , 1930 30, 1931 3 1 , 1931 - xxxiv *..••- Table State by geographic division New England Maine June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, IX - Nuiriber of Group and Chain Systems, "by Stated •*•' June 30, 1929-Decernber 3 1 , 1931 .Number of systems 1929 i 1929 1930 i 1930 1 1931 1931 I 21 2 2 2 2 New Hampshire Vermont Massachusetts June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 k 6 6 6 6 5 Rhode Island June 30, 1929 Dec. 31, 1929i June 30, 1930 i Dec. 31, 1930; June 30, 1931! Dec. 31, 1931) l 1 l 1 1 1 Connecticut June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 1 1 2 3 3 3 Middle Atlantic New York June 30, 1929 Dec. 31, 1929j State bygeographic division Number of systems Number of systems New York (Cont.) June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 193I 20 20 IS 15 New Jersey June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 193O 1930 1931 1931 16 IS 20 22 2k IS Illinois June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 1930 1931 1931 S 15 Delaware June 30, 1929 Dec. 31, 1929 June 30, 1930 1 1 1 Indiana June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 1930 1931 1931 k Ohio June Dec. June Dec. June Dec. 1929 1929 1930 1930 1931 1931 Pennsylvania June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 Wisconsin (Cont.) Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 lU ih 15 13 11 10 Maryland Dist. of Col. 17 21 State by geographic division North Central Michigan June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 11 10 Wisconsin June 30, 1929 7 30, 31, 30, 31, 30, 31, 7 7 7 7 7 15 12 11 5 6 k 2 2 2 3 3 3 3 3 Southern Mountain West Virginia lU 13 13 13 Virginia 1 KentuckyJune 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 1930 1 3 2 l - Table State by geographic division IX - Number of Group and Chain Systems, by Stated) June 30, 1929-December 31, 1931 (Continued) j Number 1 State by geographic division of systems Kentucky (Cant.) June 30, 1931 Dec, 31, 1931 Tennessee June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 I93O 1931 1931 4 4 4 4 4 3 South Carolina Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 Southwestern Louisiana June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, Florida June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, Alabama June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, l l 1 1 1 | 7 6 5 5 4 4 1929 1929 1930 1930 1931 1931 1929 1929 1930 1930 1931 1931 1929 1929 1930 1930 1931 1931 ! i i 1 6 7 7 7 7 7 1 4 4 4 4 4 4 Number j of systems Mississippi | June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 1 1 Southeastern North Carolina Georgia June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, XXXV | ! i 1 | I 1 Texas June Dec. June Dec. June Dec. 0 1 6 i 7 | 5 5 4 4 4 1929 1929 1930 1930 1931 1931 4 4 30, 1929 31, 1929 30, 1930 31, 1930 30, 1931 31, 1931 Arkansas June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 Oklahoma June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 6 Western Grain J Minnesota I June 30, 1929 | Dec. 31, 1929 j Number IS IS IS of systems Minne so ta (Cont. )j June 30, 1930 Dec. 31, 1930 June 30., 1931 Dec. 31, I93II North Dakota June 30, 1929 1 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 South Dakota June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 193I Dec. 31, 193I 35 33 33 30 r b 5 5 5 5 3 6 5 5 5 4 2 17 16 15 Iowa June Dec. June Dec. June Dec. b 5 4 30, 31, 30, 31, 30, 31, 1929 13 1929 14 1930 ! 1 2 1930 11 1931 f 1 1 1931 10 2 I 4 |. 3 i | 1 1929 1929 1930 1930 1931 1931 State by geographic division 1 i 3 12 12 14 14 1 13 37 ! 36 | Nebraska June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 Missouri June 30, Dec. 31, June 30, Dec. 31, 1 June 30, ! Dec. 31, 1929 1929 1930 1930 1931 1931 14 1 14 I 12 12 12 9 s S 7 6 6 6 - xxxvi - IX - Number of G-roup and Chain Systems, by State'1) June 30, 1929-December 31, 1931 (Continaed) Table Stats "by geographic division Kansas June Dec. June Dec. June Dec. 30, 31, 30, 31, 30, 31, 1929 1929 1930 1930 1931 1931 Rocky Mountain Montana June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 Idaho June Dec. June Dec. June Dec. 30, 31, 30, 31, 30, 31, Wyoming June 30, Dec. 31, June 30, Dec. 31, June 30, Dec. 31, 1929 1929 1930 1930 1931 1931 1929 1929 1930 1930 1931 1931 Number of systems 25 25 2k 2k 25 2k 3 2 2 1 1 1 3 3 3 3 3 3 3 3 3 3 3 2 State by geographic division Colorado June 30, Dec. 31, June 30, Dec. 31, June 30, Doc. 31, of systems 1929 1929 1930 1930 1931 193I New Mexico June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 Dec. 31, 1931 3 3 3 3 3 7 2 2 l l l 1 Arizona June 30, 1929 Dec. 31, 1929 | June 30, 1930 Doc* 31, 1930 June 30, 1931 j Dec. 31, 1931 \ l l Utah June Dec. June Dec. June Dec. 5 5 5 5 5 30, 31, 30, 31, 30, 31, 1929 1929 1930 1930 1931 1931 < *• •' According to 1acation < of head office. Number ! l l l l ^ State hy 1 i/umber geographic of division systems Nevada June Dec. June Dec. June Dec. 30, 1929 31, 1929 30, 1930 31, 1930 30, 1931 31, 1931 2 2 2 2 2 2 Pacific Coast Washington June 30, 1929 Dec. 31, 1929! June 30, 1930! Dec. 31, 193O June 30, 1931 Dec. 31, 1931 12 12 13 13 13 12 Oregon June 30, 1929 Dec. 31, 1929 June 30, 1930 Dec. 31, 1930 June 30, 1931 | Dec. 31, 1931 k k k California June 30, 1929 ! Dec. 31, 1929 June 30, 1930 ! ])ec. 31, 193O t une 30, 1931 Itec. 31, 1931 8 9 9 9 9 9 <0 7 5 Table State X - Banks in Leading G-roups: Number of Banks, I\fumber of Branches, and Loans and Investments by Class of Bank and by State, December 31> 1931 Loans and investments in thousands of dollars NationNonState Hation-j State! NonTotal al Total member member al | membe r j membe r banks banks banks classified Number of banks according to lavv regarding branch banking Number of branches Total Nation- State Nonmember member al banks banks banks St ate-wide Branch Banking Permitted Arizona California Delaware Dist. of Col. Maryland North Carolina Ehode Island South Carolina Vermont Virginia _ 2 i 3 i 17 - — — D $1,000,632 $ 93S,140 $ 62,492 2,079 3,337 408 345 409 346 118 IS - 1 - Total 2 1 - 1 25 IS — 7 5,to6 $1,006,04S|$ 940,219| - j$65tS29j 3raxich.es R e s t r i c t e d As to Location Georgia Indiana Iowa Kentucky Louisiana Maine Massachusetts Michigan Mississippi Montana New Jersey New York Ohio Pennsylvania Tennessee Total IS 11 1 6 1 5 4 _ 1 1 2 i 6 5 3 12 5 19 15 2 30 14 5 5 3 34 11 S i H 26 29 15 2U9 122 3 27 1 21 7 9 20 13 i\ 1 ico 1 $ 150,561 $ 133,^05 3,672 35,730 45,672 22,933 .79,871 692,177 855,971 35,n^ 24,524 15,S33 20,991 572,832 616 4,763 2,224 58,830 29,882 109,084j 58,SSI 700,32s 5,247 53A698 61,306 522,763 93,^16 34~664 51,521 55,147 31^,751 79,193 $3,217,979 $2,038,303 93,706 . 6,159 1 49,457 14,223 $377,913 - s 8 — 40 1 11 3 31 53 263 237 68 11 2 11 20 JM .. ^75 330 85 16 57 1 j Table State X ~ Banks in Leading Groups: number of Banks, Number of Branches, and Loans and Investments by Class of Bank and by State, December 31> 1931 (Continued) classified Loans and i n v e s t m e n t s i n thousands of d o l l a r s NationState Total al member banks banks Number of banks l a c c o r d i n g t o law regarding branch banking S t a t e NonTotal! Natiar>" j al member member Number of branches Nonmember banks Nation- S t a t e j Nonmember member Total al banks banks J banks Establishment of Branches Prohibited by Law Total 1 I i ! 95 22 28 1 I - 6 - 3 5 l 104 63 7 5 i4 3 8 6 36 2 i 3 2 22 -52 22 307 150 1 _• — 1 — — $ k 3 16 19 ki k 2 \ r 0 — 1 1 — ! $ 48,645 1,463 - 38,347 30,838 17,027 805,165 522 407,837 71,594 34,307 8,953 29,923 2,60S 1*19,366 b22 353,261 2,613 33,^56 29T394 r 905 6,081 $ 8,278 167,562 217,637 54~576 65,844 3,137 1,351 107,853 3,985 ~ 18,113 137,880 103,863 4,l64 11,217 124,447 922 9,094 5^974 4,339 239Toil 190,762 16,880 31.363 268,580 $360,205 4,lS4 6 1 13 _2i A 50,108 $ - - 1 1 1 k 1^3 1 $1,963,366 $1,334,581 $ 1 6 - 1 i - | 1 Alabama Arkansas Colorado Connecticut Florida Idaho Illinois Kansas Minnesota Missouri Nebraska Nevada New Mexico Oregon Texas Utah Washington T7est Virginia 6 — j ~* ""* p 2 — Q r Jt _i | _1_ 14 12 1 j 1 898 688 6 Ho Provision in State Law Regarding Branch Banking New Hampshire North Dakota Oklahoma South Dakota Wyoming Total UNITED STATES 32 2 31 10 31 7 9 3 2 93 72 21 67k 362 4l 271 32,219 $ 46,661 32,^85 i,°7S $ 113,543 $ 31,183 39,773; 31,462 102,418 1* 1,036 6,888 1,523 l,o78 $ 11,125 $6,300,936 $4,415,521 $1,070,343 $815,072 86 124 Table XI - Banks in Other Groups: Number of Banks, Number of Branches, and Loans and Investments by Class of Bank and by State, December Jl, 1931 Loans and investments in thousands of dollars NationNonState Total al member member banks banks banks iedl state class!fi Number of banks according to Inregarding Nation- State MO nTotal branch banking al memberl member! i ' Number of branches Total Nation- State Nonal member member banks banks ! banks State-wide Branch Banking Permitted Arizona California Delaware Dist. of Col. Maryland North Carolina Bhode Island South Carolina Vermont Virginia — 8 j$ 1 l 1 1 1 — 13 1 458,44o $452,121 2,90s I 3 —~~ z. —— 10 1 21 Total 5 — — — 139,201 30,339 2,908 6,294 $ 24,180 $ 129,378 6,319 1,529 >,159 127 ! 125 14 22 - -j 14 17 5 z. X 10 jj $ 630,888'$485,503!$ 1 129,378 $ l6,007| i6 3 130 14 19 Branches Restricted As to Location Georgia Indiana Iowa Kentucky Louisiana Maine Mas sachuse 11 s Michigan Mississippi Montana New Jersey New York Ohio Pennsylvania Tennessee Total _ _ 9 3 - - I - 6 6 1 3~ 1 1 4 s - 3! 4 3 - 5 1 - 4 I 49 is 14 19 6 1 j 6 | 3S e i 5 3 ! -J. 2 ^ i4o 52 24 \ 17 39,130 1 j 17 13 9 i 1 I 64 i $ 26,44o - 3 Ms 244 $ 20,917 10,258 7,456 18,362 5,436 $ 12,690 3,458 3 3 - : 2,3H 10,258 2,020 8 — 5j - - 5 3 5 1,813 - 1,111 219,901 928,695 46,950 39,266 90,826 868,328 82,125 21,101 20 101 7 1 94 24o,o4o 95,4oo ^.956 123,770 20,870 7,307 10 11 1 1 7 2 _10 $1,485,042 $220,505 $1,101,286 $163,251 158 13 112 33 2,924 12,26^ 61 7 6 Table XI - Banks in Other Groups: Number of Banks, Number of Branches, and Loans and Investments by Class of Bank, and by S t a t e , December 3 1 , I93I (Continued) State classified Loans and investments in thousands of dollars State NationNonTotal member al member banks banks banks Number of banks according to 1 ;>r nation- State Nonregarding rotal al member member branch banking 1 i 1 Number of branches Nation- State Nonmember member Total al banks banks banks Establishment of Branches Prohibited by Law - k j$ 1 r O 1 ^ i - 7 21 15 4 10 1 14 3 j 5 1 3 36 8 8 55>34 62,595 13,628 4,324 12 3 i,6i4 17,611 51,946 9,374 1,418 i ! 3,310 ! 6,860 32,795 1,680 8,9 SI 23,Si4 a\ 14,767 75,252 12,690 55,544 , S73 17 | 29,000 9 2 - 37^323 9,231 4,254 1.014 5,ISO - - i - - ~ - 2 2 8,662 - 1,204 5,606 14,102 ! 10,569 z_ m 43 ! 9 *"* Z. I 86 !$ 297,767 $168,102 $ 9,769 - 1 1 23 138 i$ 1,498 1 — 12 1 3.112 $ 1 Total 5 1 Alabama Arkansas Colorado Connecticut Florida Idaho Illinois Kansas Minnesota Missouri Nebraska Nevada New Mexico Oregon Texas Utah Washington West Virginia Wisconsin - - ~ - - 143 126 — 54,086 $ 75,579 No Provision in State Law Regarding Branch Banking New Hampshire North Dakota Oklahoma South Dakota Wyoming Total UNITED STATES 5 2 3 $ 1,146 $ 501 5 2 3 $ i,i46 $ 501 304 107 34 163 - $ "645 $ 645 $2,414,81+3 $874,611 $1,284,750 $255,482 321 5 Table XII- Banks in Chains: Number of Banks, Number of Branches, and Loans and Investments by Class of Bank and by State, December 31> 1931 State classified Bomber of banks according to law regarding Nation- S t a t e i\ionb r a n c h "banking (Total al member member! Loans and i n v e s t m e n t s i n thousands of d o l l a r s NationState NonTotal al member member banks banks banks Number of branches Total Nation- State al member banks banks State-wide Branch Banking Permitted Arizona California Delaware Dist. of Col* Maryland North Carolina Rhode Island South Carolina Vermont Virginia Total 6 13 $ M75 19 10 .* - 11,6^7 9,970 2,871 $ 28,663 $ 15,S22 $ 12,841 1 g 1 2 Branches R e s t r i c t e d As t o Location Georgia Indiana Iowa Kentucky Louisiana Maine Massachusetts Michigan Mississippi Montana New J e r s e y New York Ohio Pennsylvania Tennessee Total 6 50 k 55 IS 12 21 23 - IS ! 6 \ 2 S 2 3 9 15 I k 1 — l ! 1 1 k lU 211 1 70 ! 11 k $ 3.757 $ 1,859 31 22,171 i4,4o6 2 30,361 2k,kl0 $ 1,898 - - - 2 - - 5.891 11 8 - 2 16 - 12,993 ! __ 8,229 57,7^9 ^3 17,^03 16 9 ! 4,667 11 163,9^9 7 60,222 2,1+60 15,521 6,075 1.585 55,583 46,891 5,769 25,522 11,328 3,082 102,092 12,297 12 _ - 2k k 9 h 1 - 39, ^ l 24,378 7,256 2 1 - 130 $413,929 $193,293 $32,508 $188,128 95 22 17 2 5 38 Table XII - Banks in Chains: Number of Banks, Number of Branches, and Loans and Investments by Class of Bank and by State* December 31» 1931 (Continued) State classified Number of banks according to law Nation-* State Nonregarding Total al member member branch banking Loans and investments in thousands of dollars NonState Nat ional Total member member banks _Jrankg_ banks Number of branches Nation- State Nonmember member al Total bankg_ banks banks Establishment of Branches Prohibited by Law Alabama Arkansas Colorado Connecticut Florida Idaho Illinois Kansas Minnesota hissouri Nebraska Nevada New Mexico Oregon Texas Utah Washington West Virginia Wisconsin 1 13 1 6 i -i J lb 25 2 23 142 16 46 16 ! 5 60 12 14 1 _§a 0 r — 4 10 32 •-* 1 1 1 _ 10 5 55 5 _ - 23 2 2 6 1 1 1 ! - 1 _2 ~~ 4,20Q § 1 _ 1 22 4 4 530 : 201 Total _ 1 3,686 10,SbS $ 161465 20 4 12 62 S6 11 24 12 1 i j 7 21 22 321 34,?Sb 32,762 56 768 81,501 31,755 20,060 21,268 1,240 1^110 26,479 15,222 27,150 2,243 444 27,150 $ 1,011 39,7% 1,027 %,5S7 523 r 252 6,099 — — 1 _ — 2 — — — — — 1 — — — 3! 1 157 36,851 —• 1,226 11,168 16,010 30,827 1,083 206 3,013 2,101 1,494 ~ ~* - „. 17,65^ 4,69? 12,556 13,105 13,525 10,039 — — - 7,236 15,361 2,712 14,101 — — 5,799 9,280 3,71+2 .7,052 $427,51S $282,6761$ 9,356 $135,486 — — — 1 - 1 — -. ~ _ — — — I No Provision in State Law Regarding Branch Banking New Hampshire North Dakota Oklahoma South Dakota Wyoming Total UNITED STATES 1 — 40 75 14 6 — 42 2 34 3 11 i $ 14,952 $ 8,025 16,763 22,490 7,217 S2S $ 1,168 122 11.964J 10,262 6,867 5,727 5,221 1,574 JL __1 148 6 56 4 28 $ 56,623 $ 3 5 , 9 ^ $ 19,329 ' 908 336 23 549 $926,733 $527,735 $355,244 101 25 17 59 - xliii Table XIII - Number and Loans and Investments of Banks in Two-bank Affiliations by States, December 31, 1931 Loans and investments i n thousands of d o l l a r 3 State [ NonAll 1 National member membe r banks banks banks banks ^iTl VtTlT"* *"* "*» S t a t e by geographic division New England Maine New Hampshire Vermont Massachusetts Rhode I s l a n d Connecticut •iMuiD A l l Uation-1 S t a t e 1 I o n al member member banks 'banks banks "banks ! 42 4 12 1 11 6 - 23 9 4 Middle A t l a n t i c New York New J e r s e y Delaware Pennsylvania Maryland D i s t . of Col. 152 36 3S -. 78 - North Central Michigan Wisconsin Illinois Indiana Ohio 129 15 Southern Mountain West V i r g i n i a Virginia Kentucky Tennessee Southeastern North C a r o l i n a South C a r o l i n a Georgia Florida Alabama Mississippi Southwestern Louisiana Texas Arkansas Oklahoma 3 6 6 ii 7 ^ ! - 22 1 1 is 20 32 16 s 4 2 2 109 1 10 1 k64 1 1 31 3 I - l4 30 US 54 4 12 19 2 S - 3 26 x ! 1 19 $ 1 - 6 51 2j -1 5 65,565 60 r 13,769 24,65s 2i,4o5 6,343 6S 7 12 16 26 7 665,723 62,525 15,052 109,760 70,535 407,851 269,611 25,595 1.283 72,820 49,130 120,783 174,814 27,182 52,842 5L792 105,726 14,881 20,279 41,955 28,611 28 1 1 1 1 - IS 1 9 i 5 1 2 ~ 4 1 7| 10 ! 10 1 i - 1 l k i 12,282 280,725 s 2 1 1 - 1 23 81,626 15,451 - 24 2 k S 10 1 314,4s6 21,479 35 k \ i 319,498 115,747 39,093 164,658 - 9 1 - ko 1 i \ I 5 2k 3 81 36,99S 45,737 25,678 12,736 2,639 — 3.^52 1,232 281,995 78,421 139,014 1 3.107 ; 61,453 ! $ 53,229 l,6l6 12,439 5,532 13,554 20,688 - 1,410,263 $321,107 1,130,143 11,183 77,116 77,487 — 203,004 232,437 - - s 17 - ' 3 65 5 36 l 75,801 3.285 11,680 9,494 6,465 ~ 44,877 2,050,SbK 1,257,073 193,696 — 600,099 - 53 5 2 13 22 11 3 7 2 2 1 1 129,630 $ 4,901 24,119 15,026 20,019 — 26,216 19,06s 2,996 2,134 1,444 574 39,235 ! 29,253 11,182 1 1,119 9,910 28,653 ~ 9,837 8,387 ~ 707 I 707 M - 224,676 45,438 118,128 1,629 59,481 - 2,5^5 ~ 2,545 ~ i "** 18,814 6,610 9,033 505 — 2,008 65S 54,774 32,983 18,341 1.478 1,972 «* x l i v Table XIII - Number and Loans and Investments of Banks i n Two-bank A f f i l i a t i o n s by S t a t e s , December 3 1 * 1931 (Continued) S t a t e by geographic division u,, m, •NumuKj- ; ITonA l l Natio ri- S t a t e al me nib e r meniber banks "banks "banks "banka ffestern Grain Minnesota North Dakota South Dakota Iowa Nebraska Missouri Kansas 164 ! 12 I 6 2 50 Rocky Mountain Montana Idaho Wyoming Colorado New Mexico Arizona Utah Nevada 2k 2 - P a c i f i c Coast Washington Oregon California UNITED STATES kk 20 30 r 0 , 6 6 | 31 7 3 1 21 25 8 16 l4 l - 3 5 3 2 2 - l l - 1 90 ^3 l ; 2 1 12 1 5 2 - . 1 2 5 3 l 27 19 11 12 9 51U.914 $ 10,479 3,023 2,325 72,312 77,181 1 324,103 25,^91 1 1 «. 1 «. - - 3 44 3411,303 l 4 39 3,967 | 76 36 2 1 796 389 ^3 6 78 $ Loans and investments i n thousands <jf d o l l a r s State NonAll National member member banks "banks banks "banks l - 3 3 l l - 95,923 559 5,329 50,840 13,755 | 2,568 22,372 - 5,105 335,231 324,939 $134,149 $ 55.S26 ,1,392 9,087 2,292 731 — 471 1,85^ 22,688 21,817 27,307 6,187 70,99*+ 21,138 197,757 105,208 1,134 4,090 20,267 66,577 450 5,031 38.783 10,679 2,438 9,196 - 12,057 12,057 _ - 19^,557 3,281 2,569 18SJ07 io,S73 17,289 109 — 798 3,076 130 13,176 - 13S.S73 686 1,005 ; 1.531 9,868 136,656 361+ $^,303,907 $2,696,366 ;$S35,759 $769,722 - xlv Table XIV - Number of Suspended Banks in Groups and Chains, by States and by Years State by 1926 1927 1^28 1929 1930 1931 Total geographic division 1921 1922 1923|1924 1925 New England Massachusetts Vermont Middle Atlantic New Jersey New York Pennsylvania North Central Michigan Wisconsin Illinois Indiana Southern Mountain Kentucky Tennessee Southeastern Georgia Florida Alabama Mississippi Southwestern Arkansas Oklahoma Texas Western Grain Minnesota North Dakota South Dakota Iowa Missouri Nebraska Kansas Rocky Mountain Montana Idaho Wyoming Colorado Arizona Utah Pacific Coast Washington Oregon UNITED STATES l 9 9 10 l 2 - 1 13 k 3 6 15 k U 7 ks 13 l l — - - - - - - - 1 1 - 3 - 1+1+ 12 2 29 3 5 3 *. 2 - - | - j - ! - ~ ~ - ! - 1 2 2 ~ - - - Ill 80 7 2 30 5 - - - — — - -. - 1 1 17 - ~ -' - ~ .. 27 - - - 9 3 2 12 3 - 12 1 - 3 0 — 1 - 5 k 28 1 17 11 31 15 - _ - 2 ~ 1 ~ _ 17 16 k 6 3 - ~ - - - 1 17 3 - 3 7 3 •» _ — - k — — — — «* M 1 - 1 - 1 6 1 2 l «. — - k - - 2 2 7 1 8 1 l 1 - -. — — - — - -* ~ - k 3 — — — — - «• ~ ~ — — - mm ~ — _ mm 1 .— - - - - - - 1 - 7 - ! 21 2k 19 im 33 ~ - 3 1 1 1 6 1 1 1 3 13 - 15 l l k 9 60 56 2^ 7 3 3 4 U 6 — l 3 6 - _ — — — — 1 l 1 - 9 2 29 U 5 3 2 6 167 2 86 63 1 5 3 13 11 103 8 72 20 11 35 168 12 IS 11 71 2 10 3 31 2 13 5 15 10 1 2 3 2 — 28 8 2 — _ _ .» - - 1 tl< 1 1 k k 7 6 - - 1 _ mm 7 4 6 l 53 112 125 551 Table XV - Loans and Investments of Suspended Banks in Groups and Chains, 'by State and by Year0 1 State by geographic division ! 1921 \ 1922 r - 6 ~ 1930 j - [. - - - - - - - $ ! - - - 707 707 89,004 12,224 10,727 66,053 79,5^0 7,682 552 71,077 229 83,626 8,389 552 71,077 3,608 - 85,293 59,120 26,113 - - - 3,379 •• """ - «-* —m - - - ~ $40,502 16,517 23,621 . 8,422 175 2,2^7 „_ - mm $28,510 S3 28,1+27 364 $ -951 951! 1 : 1 100 - ! - 100 3,950! $4,095 1,189; 1,814 2,761! 2,281: 2,500 2,500 Total 40,59s i 12,224 10,253 \ ^7,932 18,121 48,4o6 3,379 - 1931 :• $1,139 $ 60,795 1$ 61,93^ j 60,795 60,795 |. 1,139 1,139 1 Southern Mountain Kentucky Tennessee 1929 • - - Southwestern Arkansas Oklahoma Texas "* - 1928 - - - - i North Central Michigan Wisconsin Illinois Indiana Stftitheastern Georgia Florida Alabama Mississippi 1923 : New England Massachusetts Vermont Middle A t l a n t i c New Jersey New York Pennsylvania ( i n thousar .ds of d o l l a r s ) 19 2U 1926 1927 1925 25,293 59,180 26,113 9,253 173 1,3^2 2,231+ 6,104 2,072 160 89 1,823 89,359 17,10s 61,637 2,323 8,291 30,372 29,823 139 4i6 2,579 2,035 13s 406 i 44,553 35,812 5,538 3,203 Table XV - Loans and Investments of Suspended Banks in Groups and Chains, "by States and "by Years (Continued) (in thousands of dollars) State "by geographic division 1921 Western Grain Minnesota Worth Dakota South Dakota Iowa Missouri Ifehraska Kansas Rocky Mountain Montana Idaho Wyoming Colorado Arizona. Utah Pacific Coast Washington Oregon UNITED STATES $ 1922 '. 1923 ,, 131 - 131 — 2f96S _ - 2,968 — 1 1925 - 527 - - - 1,000 8,310 2,926 1,037 3,366 - - - — 83s ~ — 2,765 2,286 _ — - 1*1 i — ~ — 2,224 2,697 7,95^ 2b0 119 281 1,964 _ ~ — 2,57S - — ^,569 3,104 — — — — _ — $4,485 - 1927 162 933 - — 1926 192s $2,765 $2J27 $ 2,564 $13,809 $ 4,657 $ - — *» ^35 U35 192^ — : i — 7^ 7^ — — — 494 320 917 — _ — — ~ M 311 - - 311 1929 3S9 $ 1,384 $ 206 119 64 - — - 3S8 388 — — ~ — — — ~ 672 379 333 — 1930 1931 Total 5,882 $ 11,496 $ 45,804 5,352 3,9^7 S37 10,811 527 2,357 1,496 276 777 1,676 15,462 1,550 256 5,639 539 2,984 1,652 5,289 1,755 I83 183 1,046 204 — — - — — - 846 846 997 997 — - 842 17,53^ 1,121 1,964 3,420 4,569 6,072 388 2,589 2,278 311 $4,989 $5,424: $10,518 $54,485 $18,047 $4,872 $32,394 $185,359 $199,123 $519,696 <? Table XVI-Number of Suspended Banks in Groups and Chains, hy State State by geographic division ^nder $150 Size g r o u p — l o a n s and investments in thousands of dollars $150- \ $250- • $500$750- $1,000- | $2,000- $5,000- '' $10,000- J$50,000 and over 2,000 10,000 750 , 1,000 5,000 250 500 50,000 k Sfew England Massachusetts Vermont _ - - Middle Atlantic Hew Jersey New York Pennsylvania _ - _ - - Iflorth Central Michigan Wisconsin Illinois Indiana 3 k 7 2 2 1 l l Southern Mountain Kentucky Tennessee Southeastern Georgia Florida Alabama Mississippi Southwestern Arkansas Oklahoma Texas - _ """ - 3 l 1 — - 1 - 6 3 - 1 I r \ 0 J 1 3 2 2 1 1 - - - 3 3 "2 J Total 10 - 9 1 —. 3 1 1 l -. — — - 15 U k 1 - 1 2 l 10 7 7 3 1 2 - - - ~ — 1 - 1 l ks 5 3 - - 5 5 6 3 1 1 k 5 1 - - 1 - 1 - - _ — - _ - _ - _ ~ - «. - »» - _ - 1 1 4 «,, - _ - 2 2 - 63 36 11 11 12 j 1 1 1*9 8 2k 8 27 12 12 - - - - - 11 1 3 3 — - 3 - 2 ~ — - 167 86 63 5 k 10 1 1 1 — 10 1 1 2 _ _ _ - 50 19 13 17 13 l 8 8 2 1 1 — - 1 1 _ - 103 72 20 11 2 }ik « and "by Size of Loans and Investments k ' 3' 3 3 1 2 u —. - - _ - 6 4 1 1 - — - 13 2 29 k 2 13 Table XVI - Number of Suspended Banks in Groups and Chains, by State- and by Size of Loans and Investments (Continued) State by geographic division Size . gr ov.y—loans and investments in theusands of dollars $250- $500$750- i $i,ooo- $2,000- $5,000- $10,00010,000 1,000 1 2,000 5,000 50,000 250 500 750 $150Under $150 Western Grain Minnesota North Dakota South Dakota Louisiana Missouri Nebraska Kansas 72 5 ^ hi k k 20 2 3 2 7 5 k 5 6 Eocky Mountain Montana Idaho Wyoming Colorado Arizona Utah 3 k 3 3 l 9 1 2 10 — _ — — 2 2 1 1 2 k ~ — - — ~ 1 1 1 - 6 3 3 3 2 _ ~ — i i i - - 2 » • * 7 5 k 2 l — - — - - 1 ~ - 2 1 1 1 2 1 1 .. ~" — _ "~ 91 38 30 42 2 1 1 Pacific Coast Washington Oregon — _ ~ UNITED STATES 198 108 10 k k U — - 3 3 1 31 1 , 2 - 3 - 2 2 $50,000 and over Total 168 18 71 10 — — — - — — — ~ — — - — _ _ - „. „. - «,. —. .. ~ — - — ~ ~ _ — - _ *"* ... — _ —' | 7 — 1 1 6 l 26 9 9 - : 1 1 31 13 15 10 28 8 2 7 U 6 l 551 \ Table XVII - Loans and Investments of Suspended Banks in Groups and Chains, by State and by Size of Loans and Investments, 19^1-1931 State by geographic division Under $150 $150250 Hew England Massachusetts Vermont - Mi ddle Atlantic New Jersey Uew York Pennsylvania North Central Michigan Y/isconsin Illinois Indiana Southern Mountain Kentucky Tennessee Size, group—loan 3 and i:tivestmenJ;s in thousands c)f dollars $250$500$750- $1,000- $2,000- $5,000- $10,000- $50,000 1,000 500 750 50,000 and over 2,000 5,000 10,000 - - $ 760 760 8,286 3,^9 3,078 1,799 8,759 3.^93 io,94l 2,549 - ~474 - 268 $ 233 772 337 206 2,846 $ 3,735 39S 1,379 346 2,356 2,102 229 35 4,336 930 - - - 5,949 4,766 768 175 24o 6,486 4,279 1,458 9,775 4,073 4,823 "749 879 Southwestern Arkansas Oklahoma Texas 3,985 2,391* 1,350 24l 3,330 2,671 506 653 6,277 4,838 388 1,051 6,808 6,257 551 — 9,477 9,477 4,904 4,9o4 - 10,478 21,074 47,932 7,175 - 5,084 47,932 23,189 22,205 10,911 8,392 20,775 22,205 2,4i4 10,911 2,l42 2,142 83,151 57,038 26,113 - 17,024 13,986 1,597 1,441 7,284 4,838 1,188 1,258 - 8,815 10,478 — Southeastern Georgia Florida Alabama Mississippi $ 474 - $ $ 5,790 $11,232 $16,428 $ 28,484 28,484 4,651 11,232 16,428 1,139 — - 89,oo4 12,224 10,727 66,053 552 71,077 3,608 — 85,293 59,180 26,113 5,005 13,722 3,990 6,i4i 5.005 13,722 - 13,783 13,783 - 4,982 - $ 61,934 60,795 1,139 83,626 8,389 15,113 4,490 2,384 2,106 Total 89,359 17,108 61,637 2.323 8,291 44,553 35,812 5,532 3,203 Table XVII - Loans and Investments of Suspended Banks in Groups and Chains, by State and by Size of Loans and Investments, 1921-1931 (Continued) S t a t e by geographic division Western Grain Minnesota North Dakota South Dakota Iowa Missouri Nebraska Kansas Under $150 $150250 Size group?— l o a n s and investments i n thousands of d o l l a r s $50 o$250$750- $1,000- $ 2 , 0 0 0 - $5.ooo~ $10,000- $50,000 500 750 1,000 2,000 5,000 10,000 50,000 and over $ 6,584 $ 8,609 $10,450 $ 5,S67 $ 2 , 5 9 1 $ 4,779 $ 6,924 781 — 510 1,685 956 1,420 -. 530 3.798 3,680 2 , 8 0 3 502 615 379 U14-3 1,252 1,810 1,627 4,779 2,120 3,^31 1,577 393 360 SIS 7S9 707 S18 1,95^ 2S1 722 301 262 388 258 680 Rocky Mountain Montana Idaho Wyoming Colorado Arizona Utah - — 246 206 - P a c i f i c Coast Washington Oregon 2U2 2H2 — _ — UNITED STATES ~ kfk 233 366 6o4 - 746 435 311 1,082 745 573 1,686 — 549 1,137 _. -. — 2,U65 _ _ 2,465 — 1,601 1,601 — ^,783 — 1,415 — i,4oi 1,967 _ — $ 45,804 2,362 2,442 - — - 5,121 — — 2,621 2,500 - _ ~ ~ — - __ — Total _ — — - — - 5,352 10,811 1,496 15,462 5,639 5,289 1,755 — — — - _ ~ «. — - 17,53^ 1,121 1,964 3.420 _ — _ — 2,529 2,278 311 mm $17,735 $20,515 $32,522 $23,000 $25,653 $58,887 $78,689 $6U,712 $197,983 - 4,569 6,072 3S8 $519,696 - t" ~ i'v i i* - Table State "by geographic division Disposition of Suspended Banks in G-roups and Chains 1921-.1930(1) XL ' In process Disposition Completely Total number Eeopened Taken! suspended over of liquidation not recorded liquidated Hew England Ve rmont mm 1 — Middle Atlantic New York Pennsylvania 1 _ m ~ ~ ~ Nortil Cental Michigan Indiana 1 — -. ~ - Southern Mountain Kentucky Tennessee 1 1 - ~ 5U 1 ! j - j 1 22 1 20 Western grain Minnesota North Dakota South Dakota Iowa Nebraska Missouri Kansas 20 l l 1 ~ 1 2 1 1 „. mm - «. - 3 — - l 2 76 32 32 k S k 37 1 Ik 1 95 5 50 S __ ~ — _ - 7 6 7 10 l 1 1 2 ~ 5 3 - ~ 2 _ ~ 26 23 161 1 3 8k 3 % - 10 6 92 9 — 3 3 Q\ _ ~ — — — - 17 133 6 60 2 9 4 25 l 2 19 — 7 g 5 28 10 11 10 u 1 2 - 2 1 1 - — ! 2 1 1 4 «. — — - 12 1 1 — " I 2 2 s k - - 59 - l 1 - 5 2 2 l _ - 1 - j «• 3 1 | •? _ 11 1 : 5 «. 3 _ 1 1 ~ 26 27 Southwestern Texas Arkansas Oklahoma Pacific Coast Washington Oregon 1 1 Southeastern Georgia Florida Alabama Mississippi Rocky Mountain Montana Idaho Wyoming Colorado Arizona Utah 1 r 6 6 3 — — - i "*" i j i i 1 | l ij- — 6 l i 3 1 2 1 1 UNITED STATES 103 11 252 53 2 . U26 '!) Disposition at the time the schedules were prepared during the latter half of 1930 and the first naif of 1931. - If;; - - lviii ~ "POSSIBLE CONTROL OF ELECTIONS OF FEDERAL RESEfiVE B A M DIRECTORS BY GROUP B A M S IN NI33TH FEDERAL RESERVE DISTRICT "For purposes of election of class A and class B directors of Federal reserve banks, member banks in each Federal reserve district are divided into three groups, each electoral group consisting as nearly as possible of banks of similar capitalization. Each group of banks is permitted to elect one class A and one class B director. Each member bank certifies its first, second, and other choices for a director of class A and class B, respectively. Only one choice for any one candidate may be voted. A candidate having a majority of first choice votes is declared elected. In case no candidate has a majority of first choice votes, the first and second choice votes are added together and if any candidate then have a majority of electors voting he is declared elected; if not, the first, second, and other choice votes are added and the candidate then having the highest number is declared elected, "In the ninth Federal reserve district the electoral groups of member banks are as follows: Group 1 consists of banks having a capital and surplus of $400,000 and over, Group 2 of banks having a capital and surplus of from $60,000 to $3991999» a n & Group 3 of banks having a capital and surplus of less than $60,000. At the end of 1929, there were 6S3 member banks in the Minneapolis district, of which 30 were in Group 1, 299 i n Group 2, and 35^ i n Group 3"The number of member banks in the ninth district belonging to the Northwest Bancorporation group and in the First Bank Stock Corporation group, together with the percentage of the number of banks in each of these groups to the total number of banks in each electoral group are shown below: Member banks in the ninth Federal reserve district, by electoral groups, December 31, 1929 j All member banks All member banks First Bank Stock Corporation: Number Per cent of total in group Northwest Bancorporation: Number Per cent of total in group First Bank Stock Corporation and Northwest Bancorporation combined: Number Per cent of total in group 6S3 Ifamber of "banks in G-roup i G-roup Group 1 2 30 _1_ 35U 299 65 7 ^7 9-5 23.3 15.7 11 3.1 1^ ^3.3 30 12 8.1 10.0 3^ 120 17.6 20 66.7 77 25.8 23 6.5 55 i (l) Includes 1 bank which joined the group in January, 1930* _hV - "It will he noted that the First Bank Stock Corporation and the llorthwest Bancorporation together control bb.7 per cent of the member hanks Group 1, the group of largest hanks, in the Minneapolis Federal reserve district; and it is manifest that acting together these two corporations could easily control the elections of class A and class B directors in this group hy having the memher hanks which they own vote for a particular candidate. On the "basis of their present holdings, therefore, these two corporations "oy their combined action would he able to place upon the hoard of directors of the Federal Reserve Bank of Minneapolis a class A director and a class 3 director from Group 1. Moreover, the First Bank Stock Corporation and the Northwest Bancorporation together control approximately 25 per cent of the hanks in Group 2 in the Minneapolis district. While this number is, of course, not sufficient to control absolutely the elections of class A and class B directors in the district, it is obvious that by acting jointly, they could give to any specified candidate a large number of votes and with some additional votes from independent banks might bring about the election of the desired candidate. This would be more easily accomplished in an election where there were several candidates in the field, in which case control of a plurality of the votes might be sufficient to elect. Under some circumstances, therefore, on the basis of present stockholdings, the two corporations acting together might conceivably succeed in electing a class A and a class B director from both Group 1 and Group 2 in the Minneapolis district, a total of four directors. "Acting separately, the northwest Bancorporation, owning as it does, approximately U3 per cent of the member banks in Group 1, could probably control the election of class A and class 3 directors in that group in many cases, unless the opposition were united on one other candidate. The First Bank Stock Corporation, however, owning about 23 per cent of the member banks in Group 1, would probably find it difficult to compel the election of any candidate in the group unless it were able to obtain the support of at least some of the banks owned by the northwest Bancorporation, It is doubtful whether either the First Bank Stock Corporation or the northwest Bancorporation could, acting separately, control the elections of class A or class B directors in Group 2, as their separate holdings in this group are only about lo per cent and 10 per cent, respectively. u As shown in the above table, the holdings of these two corporations in member banks in Group 3, the group of smallest banks, are relatively small and it is very doubtful, on the basis of the present holdings, that much influence could be exerted by these two corporations on elections of class A and class B directors in this group, unless it be noy moral suasion or some method other than direct control of votes. "T/hile the above shows the possibility of the control of elections of Federal reserve bank directors by group hanking systems, I wish to point out that there would be no likelihood of similar control of such elections in the case of branch banking. A parent bank and all its branches constitute but one corporate entity and, accordingly, a member bank with any number - w- of "branches v/culd he entitled under the lav/ to only one vote in elections of class A and class 3 directors* For ezample, if the Northwest Bsncorporation v/ere a memher "bank with a large number of "branches instead of a holding corporation ov/ning stock in a large number of individual hanks, it would have only one vote in elections of class A and class B directors, whereas it now controls a large number of votes as indicated above." (Source: United States Congress, 71st, 2nd Session, Hearings "before the House Committee on Banliing and Currency on Branch, Chain, and G-roup Banking under H. Res. lUl, February 27, 1930, jyp. 125,126.) _ I VI - APPENDIX B Digest of State Laws Relating to the Purchase of Corporate Stocks by Banks and Trust Companies ) VJ| _ ]>34 DIGEST OF STATE LAWS RELATING TO THE PURCHASE OF CORPORATE STOCKS BY B A M S A1ID TRUST COMPANIES. (Superseding X~SftOS) On page 456 of the Federal Reserve Bulletin for July, 1930, there was published a. digest of State laws relating to the power of "banks and trust companies to invest in or purchase stocks of other corporations, including stocks of other hanks and trust companies, which was prepared by the Counselfs office of the Federal Reserve Board with the assistance of the Counsel to the various Federal reserve "banks, and which showed the status of the State legislation dealing with this siibject as of March 1, 1930. The following digest of the laws of the several states, which was also prepared by the office of the BoardTs Counsel with the assistance of the Counsel to the various Federal reserve "banks, supersedes the digest published in the Federal Reserve Bulletin for July, 1930, and shows the status of th$ State legislation dealing with the purchase of or investment in corporate stocks "by hanks and trust companies as of August 1, 1932. The digest does not cover permission granted to banks and trust companies to invest in or purchase stock in municipal or other public corporations, Federal reserve banks, joint stock land banks, corporations engaged principally in foreign banking operations, safe deposit companies, or similar institutions affiliated in some respects with the business of banking. ALABA1IA. Barks and trust companies doing a banking business - Purchase of stocks permitted, "but amount of stool: in bank limited* The laws of this State provide that banks and trust companies doing a banking business "may * * * buy and sell * * * bonds, stock, * * *." (Civil Code of Alabama, sec. 6365; Com- bined Banking Laws of Alabama, 1928, sec. 6365, p. 29). However, "Ho bank shall subscribe for or own exceeding ten per cent of the capital stock of any other bank, or invest or have invested an amount exceeding in the aggregate 25 per cent of its own paid in capital stock in the capital stock of any other bank or banks. Any bank acquiring capital stock in any other bank in the usual course of business in payment of an indebtedness owing to it, must sell such portion of said stock as is in excess of the amount which it is permitted to hold and own as herein provided within one year from the time the same is acquired." (Civil Code of Alabama, sec. 6355; Combined Banking Laws of Alabama, 1928, sec. 6355, p. 25.) ARizom. Purchase of corporate stocks permitted. Under the laws of this state, "No ban];, trust company or loan association, may purchase, own, hold, or sell or otherwise dispose of the shares of the capital stock of any other corporation, unless, such purchase shall be authorized ^oy the executive committee or approved by the board of directors; and if the purchase is of stock in a bank the approval of said purchase must also be had from the superintendent," - l/tf—6-w- L-34 (Revised Code, 1928, sec. 224), The term "bank" as used above includes savings banks (Rev. Code of 1928, sec. 209); but, in another provision of the laws of this State which enumerates investments that may be made by savings banks, it is provided that "It shall be "unlawful for any savings bank to invest or loan any of its capital or any of the money of its depositors, in the shares, stocks or bonds of any mine or mining company or oil company * * *," (Laws of 1929, ch. 32-) ARKANSAS. Banks ~ no specific statutory provisions* There do not appear to be any statutes in this State specifically authorizing banks to purchase the kinds of corporate stocks covered by this digest. However, the laws provide that "no bank shall employ its moneys, directly or indirectly, in trade or commerce by buying and selling goods, chattels, wares and merchandise, nor be the purchaser or holder of its own capital stock, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith; and stock so purchased or acquired shall, within twelve months of its purchase, be sold or disposed of at private sale; after the expiration of said twelve months any such stock shall not be considered as part of the assets of any bank. Provided, that it may hold and sell all kinds of property that may come into its possession as collateral security for loans or any ordinary collection or debts, in the manner provided by law. Provided, further - / * - 1^34 that any goods or chattels coming into its possession as aforesaid shall he disposed of as soon as possible, and after twelve months from the date of acquirement shall cease to he reckoned as a part of its assets. rt (C. & M. Dig., sec. 695; Banking Laws, 1931, sec. 28, p. 24.) Trust Companies - Purchase ^ stocks permitted. Trust companies are authorized "to "buy and sell all kinds of * * * stocks, and other investment securities. n (Act of April 13, 1903, sec. 2, p. 228, as amended "by Acts of 1923f Act 627, sec. 10; Banking Laws, 1931, sec. 163, (9), p. 131.) CALIF0B1TIA. Banks - General power to purchase corporate stocks denied. The Bank Act of California provides that tfNo "bank shall, except as otherwise provided in this act, purchase or invest its capital or surplus or money of its depositors, or any part of either, in the capital stock of any corporation unless the purchase or acquisition of such capital stock shall be necessary to pre- vent loss to the bank on an obligation owned or on a debt previously contracted in good faith. Any capital stock so purchased or acquired shall be sold by such bank within six months thereafter if it can be sold for the amount of the claim of such bank against it; and all capital stock thus purchased or acquired must be sold for the best price obtainable by said bank within three - /*)- L-34 years after such purchase or acquisition unless the superintendent of hanks shall extend the time of its sale for a period not to exceed two years, (California Bank Act, 1931, sec. 37.) Exception - Stock in one trust company« However, with the previous written consent of the superintendent of hanks, a commercial bank "may purchase or otherwise acquire and hold the whole or any part of the capital stock of not more than one trust company organized and existing under the laws of this state, and doing business in the same county in which the principal place of business of such bank is located; provided, however, that not more than an amount equal to twenty-five per centum of the capital and surplus of any such bank may be at any one time invested in the capital stock of such trust company or such other corporation." (California Bank Act, 1931, sec. 37). Savings banks are authorized to make investments of their funds only in such stocks as are enumerated in the California Bank Act, and there is not included in this enumeration the kinds of corporate stocks contemplated by this digest. (California Bank Act, 1931, sees. 61, 62 and 145.) Trust companies - Investment in corporate stocks prohibited* Trust companies are not authorized to purchase corporate stocks of the kinds contemplated by this digest for the reason that investments of their funds are made subject to the provisions — /yi! - -*-$-* governing the investment of funds by savings banks. Ir-34 In this connection, the California Bank Act provides that "every trust conxpany shall invest its capital and surplus * * *, in accordance with the laws relative to the investment * * * of funds deposited with savings banks, * * *." (California Bank Act, 1931, sec. 105.) C0L03AP0. Banks may not purchase corporate stocks. The laws of this State prohibit a bank from purchasing "the stock of any other corporation, except such as it may necessarily acquire in the protection or satisfaction of previously existing loans made in good faith." (Compiled Laws of Colorado, 1921, sec. 2683; Banking Law Pamphlet, 1928, sec. 33, p. 19.) Savings banks are authorized to make certain investments* but corporate stocks of the kinds contemplated by this digest are not included in the classes of authorized investments. (Compiled Laws of Colorado, 1921, sec. 2685; Banking Law Pamphlet, 1928, sec* 35, p. 20.) Trust Companies authorized to buy and sell stocks. Trust companies "incorporated ijnder the provisions of this act" are authorized stocks * * * "• "To purchase, invest in and sell (Compiled Laws of Colorado, 1921, sec. 2765; Banking Law Pamphlet, 1928, sec. 128, p. 66.) , — /X!l! - Ir-34 (X)MECTICUT. Purchase of corporate stocks permitted up to certain amount. Banks and trust companies, under the laws of this State, "may purchase and hold corporate securities of any description, provided the total amount at the purchase price invested in corporate stocks shall at no time exceed ten per centum of its combined capital, surplus and undivided profits, and provided its investment in the stock of any one corporation shall exceed neither five percentum of the stock of that corporation nor three per centum of such combined capital, surplus, and undivided profits, except that such corporate stocks as were owned on April 1, 1931, may be retained * * *.n (General Statutes of Conn,, sec. 3885, as amended by P. A, 1931, sec. 508a; Banking Law Pamphlet, 1931, sec. 3885, p. 17.) Savings banks and banks and trust companies maintaining savings departments, may make limited investments of their savings deposits in the stock of certain banks and trust companies located in the State of Connecticut and in Boston, Mass., New York, N. Y., and Philadelphia, Pa., (Oeneral Statutes of Conn., Revision of 1930, sec* 3908; and sec. 3995 (26); Banking Law Pamphlet, 1931, sec. 3908, p. 28; and sec. 3995 (26) p. 77.) -—li—• L~34 DELAWAKE, Banks and Trust Companies may purchase stocks* The laws of Delaware provide that "No bank or trust company shall invest more than twenty-five per centum of its total capital, surplus and undivided profits in the stock, * * * of any one corporation * * * .^ (Act of March 31, 1931, sec, 13; Banking Laws, 1929, p. 26,) The term ""bank?1 as used above includes savings banks• (Act of March 31, 1921, sec. 1; Banking Law Pamphlet, 1929, sec# 1, p. 14.) FLORIDA. Banks and Trust Companies may not purchase stocks. It is unlawful "for any bank or trust company organized under the laws of this State and doing business in this State, to directly or indirectly invest any of the f-unds of said bank or trust company in stock of any incorporated company in this State or elsewhere * * * .« (Compiled G-eneral Laws of Florida, 1930 Supp., sec* 6084.) Savings Banks may purchase bank stocks. The capital and deposits of a savings bank and the income derived therefrom may be invested "in the stock of any bank incor- porated under the authority of this State, or the stock of any "banking association incorporated under the authority of the United States * * *". Law (Compiled General Laws of Florida, 1927, sec. 6120; Banking Pamphlet, 1930, sec. 4179, p. 35) Trust Companies may purchase stocks. A trust company in this state "shall have power: * * * to purchase, invest in and sell stocks, * * *.,T (Compiled General Laws of Florida, 1930 Supp., sec, 6126 (10)) NOTE: It will be observed that there is an apparent conflict in the laws of this State and it is understood that none of the statutes above referred to has received judicial construction. GEORGIA. Banks may not purchase stocks. Under the laws of this State "No bank shall subscribe for, purchase or hold stock in any other bank * * * nor in any other cor- poration, unless the same shall have been transferred to it in satis-* faction of a debt previously contracted or shall have been purchased at a sale under a power contained in a note or other instrument by which it was pledged to the bank or under a judgment or decree in its favor, and all such stock shall be disposed of by the bank within six months, unless the Superintendent of Banks shall extend the time for good cause shown,r? (Amendments to Banking Act of Georgia approved August 25, 1927, sec. 10) The term "bank* as used above includes - Ixvt —iSr* savings banks. 3>34 (Banking Act of Georgia, 1919, as amended, 1925, Article 1, sec. 1.) Trust Companies operating as investment bankers may deal in stocks and bonds. "Trust companies, operating as investment bankers, and maintaining departments for the purchase and sale of securities, may purchase for resale whole issues or parts of issues of stocks, bonds and debentures of industrial, railroad and public service corporations and other investment securities, and may resell and deal in the same, under such regulations as may be prescribed by the Superintendent of banks." (Trust Company Act of 1927, sec. 5A) IDAHO. Purchase of bank stocks prohibited. The laws of this State prohibit a bank from purchasing "any shares of * * * any other bank wherever organized, or situated * * * unless such * * * purchase shall be necessary to prevent loss upon a debt previously contracted in good faith; and stock so purchased * * * shall within six months from the date of acquirement be sold or disposed of at public or private sale; after the expiration of six months any such stock shall not be considered as a part of the assets of such bank. » (Laws of 1925, ch. 133, sec. 29; Banking Law Pamphlet, 1931, sec. 29, p. 19.) Savings banks are empowered to make certain investments of their deposits; but they do not have the power to invest in the kinds of corporate stocks contemplated by this digest. (Laws of 1929, ch. 54, p. 73; Banking Law Pamphlet, 1931, sec. 2, p. 53.) M-44-* Ir-34 The term "bank" as used in the Idaho laws includes trust con>* paiiies . (Laws of 1929, ch. 192, p. 353; Banking Law Pamphlet, 1931, sec, 2, p. 5.) There is also an express provision providing that trust companies are authorized to purchase, invest in and sell such securities as are permitted in the case of commercial banks• (Laws of 1929, ch* 192, sec* 2; Banking Law Pamphlet, 1931, sec. 5, p. 7.) ILLINOIS. Bo Statutory provisions. The statutes of Illinois do not appear to ^contain any provisions authorizing or prohibiting banks or trust companies to purchase corporate stocks* IWIMA. Commercial "banks or trust companies - llo specific statutory provisions* The statutes of Indiana contain no provisions specifically authorizing or prohibiting commercial banks or trust companies to purchase corporate stocks* Savings banks not permitted to purchase corporate stocks contemplated by this digest» Savings banks may "invest the money deposited therein" only in such bonds, notes, etc., as are specifically enumerated, and there is not included in this enumeration aay corporate stocks of the kinds contemplated by this digest, (Acts of Extra Session of 1869, p. 104, sec. 19, as amended by Acts of 1875, p. 129, Acts of 1893, p. 273, Acts of 1903, p. 211 and Acts of 1917, p. 416.) -^^t&^ L-34 IOWA. Investment in corporate stocks of the kinds contemplated by this digest prohibited* The laws of Iowa provide that banks and trust companies shall invest only in such stocks, bonds, and securities as are specifically enumerated therein, and there is not included in this enumeration any stocks of the kinds contemplated by this digest, (Banking Laws, 1931, ch. 413; sees- 9183, 9183-CI; ch. 415, sees. 9269, 9271; ch. 416, sec. 9284; ch. 416-A1, sec. 12772). These laws also provide that "Ho state bank, savings bank, or trust company shall make any loan or discount on the security of the shares of its own capital stock, or be the purchaser or holder of any shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith; and stock so purchased or acquired shall be sold at public or private sale, or otherwise disposed of, within one (1) year from the time of its purchase or acquisition unless the time is extended by the superintendent of banking." (Banking Laws, 1931, ch. 413, sec, 9184.) KANSAS. Banks may not purchase Corporate Stocks* A bank "shall not invest any of its funds in the stock of any other bank or corporation * * *." (Laws of 1897, ch. 47, sec. 11, as amended by Laws of 1915, ch. 88, sec. 1; Laws of 1921, ch. 70, sec, 1; Laws of 1927, ch. 88, sec. 2; Banking Law Pamphlet, 1931, sec. 30 r p. 12.) «-«r- L-34 The term "bank" as used above includes savings banks. (Laws of 1897, ch. 47, sec. 35, as amended by Laws of 1907, ch. 64, sec, 1; Banking Law Pamphlet, 1931, sec. 43, p. 16#) Trust Companies authorized to purchase stocks. A trust company in this State may "buy and sell all kinds of * * * securities and stocks: Provided, that the total investment of any such trust company in bank stock shall at no time exceed one-fourth its paid-up capital stock; * * * Provided, that the total investment in bank stock held by any trust company in excess of one-fourth of its capital shall be disposed of within two years from the passage of this act.u (Laws of 1901, ch. 407, sec. 2, as amended by Laws of 1903, ch. 528, sec.l; Laws of 1907, ch. 425, sec. 1; Banking Law Pamphlet, 1931, sec. a36(8).4 p. 42,} KENTUCKY Ho statutory Provisions. The laws of Kentucl^y contain no specific provisions with reference to the purchase by banks and trust companies of the kinds of corporate stocks contemplated by this digest* With reference to banks, the laws do provide that no bank shall employ its moneys, directly or indirectly, in any enterprise or business except as authorized by law; but the right to purchase corporate stocks does not appear to be authorized by law* (Carroll's Kentucky Statutes, 1930, sees. 579, and 582; Banking Law Pamphlet, 1930, sees. 579 and 582.) - /x x 7.-34 Trust companies are not authorized expressly to purchase corporate stocks, hut the laws do provide that "the capital stock of a trust company, and the funds in its possession, not held in a fiduciary capacity, may he invested in such manner as the directors deem prudent and safe; * * *.» utes, 1930, sec. (Carrollfs Kentucky Stat- 614; Banking Law pamphlet, 1930, sec, 614). LOUISIANA. Purchase of any Corporate Stocks Permitted. Banks and trust companies are empowered "to receive, hold, purchase, acquire and convey, "by and under their corporate name, such property, real and personal, including loonds, stocks and securities ;of the United States, or of any of the United States, or of any corporation, "board or "body, public or private thereof, as may he necessary, proper or convenient to the objects of the association, and to exercise in relation thereto, all the direct and incidental rights of ownership. t! (Laws of 1902, Act. No. 45, sec, 1 (2) and sec. 7, as amended hy Act No. 238 of 1910, and Act No. 179, as amended; Banking Laws, 1928, sec. 1 (2), p. 26, sec. 7, p. 30, sees. 1 -32, pp. 3-21) MAINE. "Trust and hanking companies" - No specific statutory provisions* "banking The/laws of Maine do not contain any provisions expressly authorizing "trust and hanking companies" to purchase corporate - ,X *> - 1-3. stocks, hut the laws dc give such companies the power Hto hold and enjoy all such estate, real, personal and mixed, as may "be obtained n oy the investment of its capital stock or any other moneys and funds that may come into its possession in the course of its "business and dealings, and the same sell, grant and dispose of; * * *•" (Public Laws, 1923, ch. 144, sec. 61; Banking Laws, 1931, sec, 61, p. 30.) Savings "banks may invest in stock of certain corporations and banks. ~ Ano"unt of investment limited, With reference to savings batiks, the laws provide that they "may hereafter invest their funds as follows, and not otherwise: * * * * * * * * * * * * * * * * * * * * * * * * * "SIII *** (a) In the stock of any Maine corporation, other than a banking corporation, actually conducting in this state the business for which such corporation was created, provided such corporation has for a period of three years next preceding the investment earned and received an average net income equivalent to at least six per cent upon the entire outstanding issue of the stock in question, "(b) The aggregate of all investments made by any bank in stock shall at no time exceed five per cent of its deposits, and not more than one per cent of the deposits of such bank shall be invested in the stock of any single corporation. ITo such bank shall hold by way of investment or as security for loans, or both, more than one-fifth of the capital stock — I *X !/ — "of any corporation; "but this limitation shall not apply to assets acquired in good faith upon judgments for debts or in settlements to secure debts," (Public Laws, 1923, ch. 144, as amended, sec. 27; Banking Law Pamphlet, 1931, sec. 27, pp. 9 and 18.) H XX. ** In the capital stock of any "bank in this state in- corporated under the laws of this state or the United States; and in the capital stock of any "bank in any of the other states of New England or in the state of New York incorporated under the laws of any of those states or the United States and located in a city having a population of not less than two hundred and fifty thousand; provided, that any such bank located outside of this state shall be a member of the Federal Reserve Bank System and shall have a capital and undivided profits of not less than ten million dollars. "A savings bank shall not hereafter acquire bank stock, both by way of investment and as security for loans, which, together with its present holdings, shall be in excess of seven and one-half per cent of its deposits; nor shall hereafter acquire stock in any one bank which, together with its present holdings shall have a book value of more 1*h.an one per cent of its deposits; nor shall hereafter acquire bank stock, which, together with its present holdings, shall exceed ten per cent of the capital of any one bank." (Banking Lav; Pamphlet, 1931, sec. 27, p. 19#) MARYLAUD. Purchase of Corporate Stocks permitted to Trust Companies. A trust company is given the power nto exercise, by its directors, duly authorized officers or agents, all such powers as shall be usual in carrying on the business of "banking * * * by purchasing, investing in and selling stocks, * * * and other securities * * * M . (Laws of 1910, ch. 219, «•- 19- a - L~34 as amended "by Laws of 1931, ch. 429, sec. 46; Banking Law Pamphlet, 1931, sec. 46 (9), p. 25.) Banks ~ Ho specific statutory provisions. x There do not appear to he any provisions in the laws of Maryland specifically authorizing or prohibiting hanks to purchase corporate stocks. MASSACHUSETTS. Purchase of Corporate Stocks ~oy Trust Companies permitted. A trust company nay "invest its money or credits, whether capital or general deposits, in the stocks, honds or other evidences of indebtedness of corporations or of associations or trusts, * * * M (General Laws, Ch. 172, sec. 33; Trust Company Pamphlet Laws, s e c 33, p. 21.) _ /AX\ V - L-34 Limitation upon Purchase of Stocks in other Trust Companies. The laws provide, however, that "ITo trust company shall hold more than ten per cent of the capital stock of any other (General Laws, Ch. 172, sec. 43; Trust Company trust company". Pamphlet Laws, sec. 43, p. 23.) Savings Banks may Purchase Certain Bank and Trust Company Stocks** Amount limited. Savings "banks may invest their deposits and income derived therefrom r, In the stock of a trust company incorporated under the laws of and doing "business within this commonwealth, or in the stock of a national hanking association located in the New England States and incorporated under the authority of the United States, which has paid dividends of not less than four per cent therein in cash in each of the five years next preceding the date of such investments and the amount of whose surplus is at least equal to fifty per cent of its capital; hut a savings hank shall not hold, "both hy way of investment and as security for loans, more than twentyfive per cent of the stock of any one such company or association, nor shall it hold hy way of investment stock of such companies and associations having an aggregate initial cost in excess of fifteen per cent of the deposits of such savings hank, or stock of any one such company or association having an initial cost in excess of one per cent of the deposits aforesaid." (General Laws, ch. 168, sec, 54, (7th), as amended hy Acts of 1929, ch. 315; Savings Banks Pamphlet Laws, sec. 54 (7th), p. 39.) _ / XX V - L~34 MI CHI GAIT. Purchase prohibited of hinds of corporate stocks contemplated by this digest* The laws of Michigan provide that "ban?is and trust companies may only purchase certain specifically enumerated stocks, bonds and other securities, and this enumeration does not include any of the stocks contemplated hy this digest. (Laws of 1919, Act. ITo. 94, sec. 1; Laws of 1929, Act No. 6S, sec. 4 and Act No. 67, sec. 24; Laws of 1931, Acts Ho. 14 and Ho. 238.) MEfcTESOTA. Purchase of corporate stocks contemplated by this digest not permitted. The statutes of Minnesota provide that "banks and trust companies may only purchase or invest in such stocks, bonds, etc., as are specifically enumerated, and there is not included in this enumeration any of the stocks contemplated by this digest. (G-.S. 1923, sees. 7649 and 7663; sec. 7714, as amended by Laws of 1927, ch. 368 and ch. 422, and hy Laws of 1931, ch. 296; and sees. 7716, 7735, 7738, 7740 and 7810). MISSISSIPPI. Purchase of hank stocks prohibited. The laws of this State provide that tflTo part of the stock of any bank * * * shall he owned hy any hank under the provisions of this act. Any such stock owned hy any bank at the time this act ! L-34 takes effect shall he disposed of within twelve months after such time. In cases where such stock is taken as collateral and the purchase thereof shall "be necessary to prevent loss upon a debt previously contracted in good faith, then in such cases such stock shall "be sold hy the bank within twelve months from the time that it was required." (Laws of Mississippi, 1922, Chap. 172, sec. 49; Brown1s 1925 Miss, and Federal Statutes pertaining to Banks and Banking, P. 71.) The term "bank" as used in the banking laws of Mississippi includes trust companies and savings banks. (Laws of Mississippi, 1914, chap. 124, sec. 66; Brown1 s 1925 Miss, and Federal Statutes pertaining to Banks and Banking, p. 72.). MISSOURI. Purchase by Trust Companies of Corporate Stocks permitted but amount limited. A trust company in this State is authorized "To buy, invest in and sell all kinds of * * * stocks or other investment securities.,? (Rev. Stats, of Mo., 1929, sec. 5421). The laws provide, however, that such a company "shall not invest or keep invested in the stock of any private corporation an amount in excess of fifteen per centum of the capital and surplus fund of such trust company; nor shall it purchase or continue to hold stock of another bank or trust company if by such purchase or continued investment the total stock of such other bank or trust company owned and held by it as collateral will exceed fifteen per centum of the stock of such other bank or trust company: Provided, however, that this limitation shall not apply * * * to the ownership by such trust company or its stockholders of a part or all of the capital stock of one bank organized under the laws of the United States or of this State." (Paragraph 9, sec. 5429, Rev. Stats, of Mo., 1929) There are no statutory provisions in this State governing the purchase by "banks of the kinds of corporate stocks contemplated by this digest. MONTAITA. Banks prohibited from -purchasing stocks. A commercial or savings bank is prohibited from purchasing or investing "in the capital stock of any corporation, unless the purchase or acquisition of such capital stock shall be necessary to prevent loss to the bank on a debt previously contracted in good faith. Any capital stock so purchased or acquired shall be sold by such bank within six months thereafter, if it can be sold for the amount of the claim of such bank against it; and all capital stock thus purchased or acquired must be sold for the best price obtainable by said bank within one year after such purchase or acquisition." (Laws of Montana, 1927, Chap, 89, sec. 39; Banking Laws, 1927, Sec. 39, p. 32.) Trust Companies authorized to purchase stocks. The laws of Montana authorize the organization of a trust company which may invest in corporate stocks and other securities, and also provide that: "The board of directors of any such corpora- tion is authorized to invest the capital and assets of said corporation * * * in * * stocks and bonds of corporations * * *." (Laws of Montana, 1927, Chap. 89, sec. 4(c) (8), and sec. 26; Banking Laws, 1927, sec. 4 (c) (8), and sec. 26.) 7 L-34 Investment Companies may purchase stocks. The laws of Montana authorize the formation of investment companies with the power to receive deposits. These companies are authorized to buy and sell stocks as well as other securities, (Laws of Montana, 1927, Chap. 89, sec. 4(d); Banking Laws, 1927, sec. 4(d).) lTS3HASiq> Banks - Purchase of Corporate stocks prohibited. The laws of this State provide that no "bank "shall * * * he the purchaser or holder of * * * the shares of any corporation, unloso such * * * purchase shall he necessary to prevent loss upon a deht previously contracted in good faith; and such stock so purchased or acquired shall, within six months from the time of its purchase "be sold or disposed of at public or private sale; or in default thereof, a receiver may he appointed to close up the "business of the hank: Provided, in no case shall the amount of stock so held exceed ten per cent of the paid-up capital of such "bank." (Comp. Stats, of Nebraska, 1929, sec. 8-137; Banking Law Pamphlet, 1931, sec. 8-137,p. 11.) Savings banks are not permitted to purchase corporate stocks* (Comp. Stats, of Nebraska, 1929, sec. 8-155; Banking Law sec. 8-165,p. 14.) Pamphlet, 1931 L~34 _ / X Xffi ~-g4=ar— NEBRASKA. Trust companies - Except for stock in other trust companies and certain corporations, may purchase corporate stocks. Trust companies in this State have the power ,f To "buy, hold and own and sell * * * stocks, * * * and other investment securities, * * * except * * * stocks of any corporation that have not earned annual dividends of at least four per cent per annum for at least three years just prior to the date of such purchase and stock of any corporation organized under this article" (trust company). (Comp. Stats, of Nebraska, 1929, sec. 8-206; Banking Law Pamphlet, 1931, sec. 8-206, p. 27.) KEVADA. Purchase of corporate stocks prohibited* Under the laws of this State, n!To bank shall * * * invest any of its funds in the stock of any bank or trust company or corporation. * * * •" (Comp. Laws of 1929, sec. 662; Banking Law Pamphlet, 1931, sec. 13, p. 8.) the word ""bank" as thus used includes savings banks and trust companies. (Comp. Laws of 1929, sec. 724; Banking Law Pamphlet, 1931, sec. 75, p. 24.) HEW HAMPSHIRE. Purchase of Corporate Stocks permitted. Trust companies are authorized and empowered "to negotiate, purchase and sell stocks, bonds and other evidences of debt; to do a general banking business; and to conduct a savings department.M (Public Laws, ch. 265, sec. 31; Banking Law Pamphlet, 1931, sec. 31, p. 46.) Limitation upon such purchase. The laws of this State provide, however, that "The total liabilities of a person, firm or corporation, including in the liabilities of a firm the liabilities of its several members, for money "borrowed of the commercial department of a trust com- i L~34 pany or other corporation of a similar character, whether organized under the provisions of this chapter or otherv/ise, shall at no time exceed ten per cent of its capital stock actually paid in and surplus, nor shall such corporation purchase or hold, "by "way of investment, the stocks and "bonds of any corporation to an amount in excess of said ten per cent.1' (Public Laws, ch. 265, sec. 37; Banking Law Pamphlet, 1931, sec. 37, p. 47.) Savings Banks and Savings Departments of Banks and Trust Companies. Subject to- certain conditions, savings banks and savings departments of banking and trust companies may make limited investments in the capital stock of banks, trust companies and certain other corporations. (Public Laws, ch* 260, sec. 16; ch. 262, as amended by ch. 39, Laws of 1927, ch. 122, Laws of 1929, and ch. 96, Laws of 1931, sees. 1, 7, 8, 9, 12, 13, 14, 15; Banking Law Pamphlet, 1931, sec. 16, p. 8, sees. 1, 7, 8, 9, 12, 13, 14, 15, pp. 21, 25-32.) HEVT JERSEY. Banks (other than savings ba.nks) and Trust Companies authorized to purchase Corporate Stocks. Banks (other than savings banks) "in addition to the power and authority now conferred wpon then, shall be authorized to purchase, invest in and sell stocks of corporations'1. (Laws of 1927, ch. 12, Banking Law Pamphlet, 1932, sec. 10, p. 58.) L-34 - 29 =~ Trust companies are authorized "to purchase, invest in and sell stocks * * * and other securities; * * *»t# (Laws of 1899, ch. 174, sec. 6 (10); Banking Law Pamphlet, 1938,fi-cc,S (10), p. 79,) Savings banks may only invest in certain specifically enumerated securities, and there is not included in this enumeration any of the corporate stocks contemplated by this digest. (Laws of 1931, ch- 167.) mm MEXICO. Commercial banks and trust companies - Ho express statutory provisions. There do not appear to be any provisions in the banking laws of New Mexico expressly permitting or prohibiting commercial banks and trust companies to purchase stocks in other corporations. Trust companies, however, are authorized ,!* * * to purchase, invest in and sell all kinds of * * * investment securities'1. (1929 New Mexico Statutes Annotated, sec. 13-303, paragraph 7; Bank Code, 1929, sec, 60(7)t p. 22); and, with reference to banking commercial banks, the/laws of New Mexico provide that » * * * no bank shall at any time have invested more than thirty per cent of its unimpaired capital and surplus in the notes, bonds: or other securities of any person, firm or corporation * * * n . (1929 New Mexico Statutes Annotated, sec. 13-137; Bank Code, 1929, sec. 36, p. 15.) Savings banks may only invest their deposits in certain specifically enumerated securities, and there is not included - / X JX * M > - —&8- L-34 in this enumeration any of the corporate stocks contemplated "by this digest* (1929 New Mexico Statutes Annotated, sec. 13-201; Bank Code, 1929, sec. 56, p. 20.) NEW YORK. Trust companies permitted to purchase stocks. Trust companies have the power "to purchase, invest in and sell stocks * * * and other securities; * * *". (Banking Law, sec. 185 (9).) Limitation upon purchase of corporate stocks. A trust company "Shall not invest or keep invested in the stock of any private corporation an amount in excess of ten percenfruin of the capital and surplus of such trust company; nor shall it purchase or continue to hold stock of another moneyed. cor~ poration if Dy such purchase or continued investment the total stock of such other moneyed corporation owned and held "by it as .collateral will exceed ten per centum of the stock of such other moneyed corporation, * * * ' » . (Banking Law, sec, 190 (9).) Banks ~ Ho statutory provisions, "but purchase generally of corporate stocks held prohibited. Banks proper and savings banks are permitted to purchase certain classes of corporate stocks, but none of these stocks is of the type contemplated by this digest. 106 and 239.) (Banking Law, sees. —29-^. The banking department of the State of New York has held that banks have no authority to buy stocks other than those classes above referred to, and the courts in this State have rendered decisions to the effect that banks can not purchase stocks of other corporations for the purpose of selling at a profit, can not become stockholders in a railroad corporation, and can not purchase State stocks to sell at a profit. NORTH CABOLIIIA.. Purchase of Corporate Stocks permitted, but amount of purchase limited. "No bank shall make any investment in the capital stock of any other State or National bank; Provided, that nothing herein shall be construed to prevent the subscribing to or purchasing of the capital stock of * * * central reserve banks, having a capital stock of more than one million dollars; by banks doing business under this chapter, upon such terms as may be agreed upon. To constitute a central reserve bank as con- templated ^oy this chapter, at least fifty per cent of the capital stock of such bank shall be owned by other banks." (Dode of North Carolina, 1931, sec. 220(c); Banking Laws, 1931, sec. 220(c), p. 20.) Limitations upon Furchase of Stocks. "The investment of any bank in the capital stock of such central reserve bank * * *, shall at no time exceed ten L - / X * * • v' - L-34 ~-«e— per cent of the paid-in capital and permanent surplus of the hank making same, Uo "bank shall invest more than fifty per cent of its permanent surplus in the stocks of other corporations, firms, partnership, or companies, unless such stock is purchased to protect the hank from loss. Any stocks owned or hereafter acquired in excess of the limitations herein iiijposed shall he disposed of at public or private sale within six months after the date of acquiring the same, and if not so disposed of shall be charged to profit azid loss account, and no longer carried on the bocks as an asset. The limit of time in which such stocks shall be disposed of or charged off the books of the bank may be extended by the commissioner of banks if in his judgment it is for the best interest of the bank that such extension be granted." (Code of North Carolina, 1931, sec. 220(c); Banking Laws, 1931, sec. 220(c) p. 20.) Commissioner of banks may suspend limitations on amount may purchase. "The board of directors of any bank may, by resolution duly passed at a meeting of the board, request the commissioner of banks to temporarily suspend the limitations on loans and investments as same may apply to any particular loan or investment, which said bank desires to make in excess of the provisions of sections 220(b), 220(c), * * * . Upon receipt of a duly certified copy of such resolution, the commissioner of banks may, in his discretion, suspend the limitations on loans and investments in so far as it would apply to the loan or investment which such bank desires to make." (Code of ITorth Carolina, 1931, sec. 220(e); Banking Laws, 1931, sec. 220(e), p. 21.) Purchase of Stock of Corporation Owning Laaid or Building used by Bank, A bank may invest "fifty per cent of its unimpaired capital and permanent surplus in the stock or bonds of a corporation owning the land, building or buildings occupied ^oy such bank as its banking home11 and a bank may not be compelled "to surrender or dispose of any investment in the stock or bonds of a corporation owning the lands or buildings occupied "oy such bank as its banking home, if such stocks or bonds were lawfully acquired prior to the ratification of this Act; Provided further, however, that the commissioner of banks may, in his discretion, authorize banks located in cities having a population of more than five thousand, according to the latest United States census, to invest an amount greater than fifty per cent of its unimpaired capital and permanent surplus in the stocks or bonds of a corporation owning the land, building or buildings occupied by such bank as its banking home." (Code of ITorth Carolina, 1931, sec. 220(b); Banking Laws, 1931, sec. 220(b), p. 19.) Definition of term "bank". "The term ^ank* shall be construed to mean any corporation, partnership, firm, or individual receiving, soliciting, or accepting money or its equivalent on deposit as a business: Provided, however, this definition shall not be construed to include building and loan associations, Morris -olan co moanie s, industrial banks -r~3g^ or trust companies not receiving money on deposit." L~34 (Code of North Carolina, 1931, sec. 216(a); Banking Laws, 1931, sec. 216(a), p. 3.) NORTH DAKOTA. Piirchase of Corporate Stocks "by Banks prohibited. Except for the authority to invest in the kinds of corporate stocks not contemplated by this digest, the laws of North Dakota provide that "No "bank, except as in this section specifically author- ized, shall * * * employ or invest any of its assets or funds in the stock of any corporation, bank, partnership, firm or association, nor shall it invest any of its assets in speculative margins of stocks, bonds, * * *.w (Laws of 1931, ch. 96, sec. 33, p. 145.) The above prohibition is expressly made applicable to savings banks. (Laws of 1931, ch. 96, sec. 49 (i) , p. 1590 OHIO. Banks (other than savings banks) not permitted to purchase corporate stocks of kinds covered by this digest. Banks, other than savings banks, are authorized to make certain investments of their capital, surplus, undivided profits and deposits in certain securities, stocks and bonds, but apparently they are not authorized to make investments in the kinds of corporate stocks contemplated by this digest. (Throckmorton1s Code of 1930, sees. 710- 111, 710~llla, 710-121; Banking Law Pamphlet, 1931, sees. 710-111, 710-llla, 710-121.) Savings banks - purchase of bank stocks forbidden, but "stocks of companies" may be purchased* A savings bank is empowered to invest its funds in "stocks of companies, upon which or the constituent companies comprising the same, dividends have been earned and paid for five consecutive years next prior to the investment and stocks of companies taken on a refinancing plan involving an original investment, which was legal at the time it was made: provided, every such investment shall be authorized by an affirmative vote of a majority of the board of directors of such savings bank"; but "No purchase or investment shall be in the stock of any other corporation organized or doing business under the provisions of Section 710-41 (concerning incorporation of commercial and savings banks and trust companies) or Section 710-180 (concerning special plan banks) of the General Code or of the National Banking Act of the United States", (114 Ohio Laws, p. 153, sec. 1, amending Throck- morton's Code of 1930, sec. 710~140(b); Banking Law Pamphlet, 1931, sec. 710-140(10, P* 59 ) Trust Companies - Purchase of bank stocks prohibited, but other corporate stocks may be purchased. "A trust company may invest in * * * stocks and bonds of corporations when authorized by the affirmative vote of the board of directors, or of the executive committee of such trust company" but the prohibition against savings banks purchasing banl-c or trust company stocks is also imposed upon trust companies. (Throckmorton's Code of 1930, sec. 710-1665 Banking Law Pamphlet, 1931, sec. 710-166, p . 680) OKLAHOMA Banks - Purchase of any kind of corporate stocks prohibited. A bank "shall not invest any of its funds in the stock of any other bank or corporation * * *•" (Oklahoma Statutes, 1931, w-S4r3- L-34 sec* 9135; Banking Laws, 1926, sec. 11, p. 15.) The Constitution of Oklahoma also provides that "No trust company, or bank or banking company shall own, hold or control in any manner whatever, the stock of any other trust company or bank or banking company, except such stock as may be pledged in good faith to secure bona fide indebtedness, acquired upon foreclosure, execution sale, or otherwise for the satisfaction of debt; and such stock.shall be disposed of in the time and manner hereinbefore provided," months from the date of acquisition). (within twelve (Constitution of Oklahoma, Article 9, sec. 41#) Trust Companies ~ May purchase any kind of stocks, except in a bank or in another trust company. Trust companies are given the power "to buy and sell * * * all kinds of * * * stocks, and other investment securities". (Oklahoma Statutes, 1931, sec, 9206; Banking Laws, 1926, sec, 119(9), p. 64.) In view of the above provision of the Oklahoma Constitution prohibiting a trust company to "hold or control in any manner whatever, the stock of any other trust company or bank or banking company", it would seem that the power given to trust companies to "buy and sell * * * all kinds of * * * stocks, and other investment securities", is restricted in so far as the provisions of the Oklahoma Constitution are arrolioable, 03EG0N,. Purchase of corporate stocks prohibited^ Except for the authority to -ourchas\ certain classes of corporate stocks not contemplated by this digest and except for stock acquired or purchased to save a loss on a preexisting debt, the laws of Oregon provide that "Hereafter no bank or trust company shall invest any of its assets in the capital stock of any other corporation". In case stock is purchased or acquired to save loss on a preexisting debt, such stock must be sold "within 12 months of the date acquired or purchased, or within such further time as may be granted by the superintendent of banks". (Oregon Code, 1930, sec. 22-911; Banking Law Pamphlet, 1930 sec. 22-911, p.46) Savings banks and savings departments of banks or trust companies are not authorised to invest funds in the kinds of corporate stocks contemplated by this digest. (Oregon Code, 1930, sec. 22-1109, as amended by Laws of 1931, ch. 278, p«454.) PENNSYLVANIA. Banks (other than savings banks) and trust companies permitted to purchase corporate stocks„ The laws of Pennsylvania provide that "any corporation created by general or special laws, may purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of, the shares of the capital stock of * * * any other corporation or corporations, public or private, of this or any other State * * * and while the owner of said stock may exercise all the rights, powers and privileges of ownership, including the right to vote thereon". (Act of July 2, 1901, Public Laws, p. 603, as amend- ed by Acts of Inarch 27, 1929, Public Laws, p* 74, and April 18, 1929, Public Laws, p. 544*) There are no statutory limitations in Pennsylvania upon the right of State banks, other than savings banks, and trust companies to purchase stocks of other corporations, and it has been considered that such institutions have the right, under the provisions of the Act of July 2, 1901, as amended, to purchase such stocks. Savings banks, however, do not possess the right their funds in stocks of other corporations. tct invest Such banks, by the provisions of Section 17 of the Act of May 20, 1889, P. L. 246 (Westls Penna. Statutes, 1920, sec. 19770), are permitted to invest money derived from deposits only as specified in the Act of May 20, 1889, and, as there are no provisions in this act or in amendments thereto (Act of June 28, 1923, P. L. 884, and Act of Jmie 22, 1931, P. L. 600) permitting such banks to invest their funds in stocks of other corporations, it has been considered that they are without this power. RHODE ISLAND. Banks proper and trust cojQnggjtige ~ No specific statutory provisions. The laws of Rhode Island do not contain any express authority for banks proper and trust companies to purchase corporate stocks\ but a trust company is authorized" * * * to invest its capital stock and moneys in its hands in such bonds, obligations, or property, real, personal, or mixed, as it may deem -orudent, * * * n (General Laws, 1923, ch. 271, sec. 4; Banking Laws, 1929, sec. 4, p. 16). L~34 Savings "banks and banks and trust companies receiving savings deposits - purchase of steam railroad and bank stocks permitted. Deposits in savings banks end in the savings departments of banks and trust companies, and, in the case of savings banks, the income derived from investments held, may be invested, subject to detailed limitations, in the capital stock of banks and trust companies and certain steam railroad companies. (General Laws, 1923, sec. 1, Clause IV, Clause VII, as ajnended by Laws of 1927, Ch. 1034, Clause XIV, Clause XV, as amended by Laws of 1925, Ch. 653 and Laws of 1927, Ch. 1034; Banking Law Pamphlet, 1929, sec. 1, p. 22, Clause IV, p. 30, Clause VII, p. 37, Clause XIV, p. 43, Clause XV, pp. 44-45.) SOUTH CAROLINA Banking Corporations and trust companies may purchase corporate stocks. Sec. 4301 of the 1922 Code of this state provides that "Two or more persons desiring to form a corporation for any purpose or purposes whatsoever" (except for certain purposes not of a banking or trust company character) may do so upon filing "a written declaration" setting forth certain required information; and, if certain other prescribed condtions are met, the Secretary of State will issue a charter. Section 4319 of this Code (Banking Law Pamphlet, 1930, sec. 10, p. 7) provides that "Every corporation chartered under this Article shall have the following powers, to wit: * * 5. To make contracts, to loan money, to acquire and to transfer property, both real and personal, including shares of stock in L-34 .»—££--fit--*" other corporations, possessing the same powers in such respects as individuals now enjoy." Section 3992 of the Code (Banking Law Pamphlet, 1930, sec. 71, p» 33) provides that "Every banking corporation may * * * deal in * * * public and other securities, and stocks of other corporations; * * * may purchase and hold such * * * personal property * * * as may be deemed necessary or convenient for the transaction of its business, and may sell and dispose of the same at pleasure; * * *•" Additional authorization to trust companies to purchase corporate stocks a Trust companies are also specifically authorized "to buy, * * * invest in and sell all kinds * * * of stocks or other investment securities «" (Banking Law Pamphlet, 1930, sec 9(10) p. 158) Limitation on amount trust company may_ invest in stock of any corporation* A trust company, however, "Shall not invest or keep invested in the stock of any one private corporation an amount in excess of twenty-five per centum (25%) of the capital and surplus fund of such trust company; nor shall it purchase or continue to hold stock of another bank or trust company if by such purchase - y^lV - L-34 or continued investment the total stock of such other bank or trust company owned or held by it as collateral will exceed twenty-five per centum (25%) of the stock of such other bank or trust company; Provided, however, That this limitat- ion shall not apply to the * * * ownership by such trust company, or its stockholders, of a part or all of the capital stock of one bank organised under the laws of the United States or of this State, nor to the ownership of a part or all of the capital of one corporation, organized under the laws of this State, for the principal purpose of receiving savings deposits :;c * * or investing in other securities in which trust companies may invest" under the laws of this H State. (Banking Law Pamphlet, 1930, sec, 12(7), p. 164*) SOUTH DAKOTA Banks prohibited from purchasing corporate stocks» No bank shall "invest any of its funds in the stock of any other bank or corporation, nor make loans or discounts on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares unless such security or X c v -• purchase shall "be necessary to prevent loss upon a debt previously contracted in good faith; stocks so purchased or acquired shall, -within six months of the time of its purchase, be sold or disposed of at public or private sale; ami after the expiration of six months any such stock shall not be considered as part of the assets of such bank*" (South Dakota Revised Code, 1919, sec, 8983; Banking Law Pamphlet, 1932, sec. 8983, p. 33.) Trust Companies prohibited i?rom Purchasing Corporate Stocks. No trust company shall "invest any of its funds in the stock of any other trust company or corporation, nor make any loans or discounts on the security of the shares of its own capital stock, nor be the purchaser or holder of any shares unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith; and stock so purchased or acquired shall, within six months of the time of its purchase, be sold or disposed of at public or private sale; and after the expiration of six months any such stock shall not be considered as a part of the assets of any trust company*" (South Dakota Revised Code, 1919, sec. 9050; Banking Law Pamphlet, 1932, sec* 9050, p. 82.) — Xdv/ - L~34 TENNESSEE. Banks and trust companies authorized to deal in stocks. Section 3887 of the new Code of Tennessee, which "became effective January 1, 1932, authorizes hanks and trust companies to "deal in * * * "bonds, stocks, or other securities generally, * * * and have and possess all other rights which appertain and belong to a hanking institution, except the power to issue notes for the purposes of currency, which power is withheld," EEUS. Purchase of Corporate Stocks Permitted. In this State hanks (other than savings hanks) and trust companies may purchase, invest in, and sell stocks and other securities, (Rev, Stat., 1925, Articles 396 (9) and 1513; Banking Laws, 1932, Article 396 (9), p. 14, and Article 1513, p. 74.) Limitation upon purchase of "bank stocks* It is -unlawful for any State hank or trust company "to own more than ten per cent of the capital stock of any other hanking corporation, or to make a loan secured hy the stock of any other hanking corporation, if ^oy the making of such loan the total stock of such other hanking corporation hold hy it as collateral will exceed, in the aggregate, ten per cent of the capital stock of such other hanking corporation, unless the ownership or the taking of a greater percentage of such capital stock as collateral shall he necessary to prevent loss upon a _ ydVMf- The above-quoted provision of the laws of Utah is made applicable to savings banks, (Compiled Laws of 1917, sec* 1016; Banking Laws, 1927, sec. 1016, p. 15*) VERMONT. Purchase of certain bank or trust company stocks permitted. Banks and trust companies are empowered to invest their assets "in the stock of aay national bank in the New England States or the state of New York, or in the stock of any banking association or trust company incorporated under the authority of and located in such states, or in the stock of any bank incorporated under the authority of and located in the Dominion of Canada; but a bank shall not hold bank stock both by the way of investment and as security for loans in excess of ten per cent of its assets, nor, in any one bank, more than five per cent of its assets, or more than two hundred thousand dollars, or more than ten per cent of the capital stock of any one bank1-'* (General Laws, sec. 5363, par. (a), subdivision VI, as amended by Acts of 1929, Act No. 90, sec. 5.) VIRGINIA Purchase of corporate stocks permitted. Banks and trust companies in this Stat& are empowered to purchase and sell "all stocks and bonds". (Acts of 1928, ch, 507, sees, 1 and 12; Banking Laws, 1929, sees. 4149(1), 4149(13), pp. 24 and 30,) TCASHDTGTOff. Purchase of corporate stocks prohibited. The laws of this State provide that a bank or trust com~ pany shall not "subscribe for or purchase the stock of any other banking house or trust company, or of any domestic or foreign corporation of any character, * * *; Provided, That such "bank and/or trust company may purchase, acquire and hold shares of stock in any other corporation which shares have been previously pledged as security to any loan or discount made in good faith and such purchase shall be necessary to prevent loss upon a debt previously contracted in good faith and stock so purchased or acquired shall be sold at public or private sale or otherwise disposed of within two years from the time of its purchase or acquisition". (Laws of 1929, sec, 5, p. 101; Banking Laws, 1929, sec. 46, p. 26.). The laws also provide that corporations doing a trust business may not invest trust funds in corporate stocks. (Laws of 1929, ch. 206; Banking Laws, 1929, sec. 77, p. 37.) Savings banks are covered bjr the above excerpt from the laws of Washington. (Laws of 1917, sec. 14, p. 275; Banking Laws, 1929, sec. 24, p. 11•) -CL~ L-34 WEST VIRGINIA Mo Statutory Provisions, There do not appear to be any provisions in the laws of the State of West Virginia authorizing banking institutions, which term includes trust companies, to purchase corporate stocks, WISCONSIN Mutual savings banks prohibited from purchasing corporate stocks - No statutory provisions covering other banking institutions, Except for mutual savings banks, the banking statutes of Wisconsin contain no provisions with reference to the purchase of corporate stocks by banks and trust companies. The provision with reference to mutual savings banks provides that f,No mutual savings bank shall invest any part of its deposits in the stock of any corporation * * *.w ('Wisconsin Statutes, 1929, sec, 222,15, as amended by Laws of 1931, ch. 27, p. 42; Banking Law Pamphlet, 1932, sec, 222.13, p. 109,) WYOMING Purchase of corporate stocks prohibited. The laws of the State of Wyoming provide that not State bank shall invest any of its assets in the capital stock of any other corporation/1 except for such stock t!as it may acquire or purchase to save a loss on a pre-existing debt, and stocks so acquired or purchased shall be sold within twelve months from the date acquired or purchased; provided, that - O - a further time may be granted by the State Examiner.1' L (1931 Wyoming Revised Statutes, sec. 10-133.) The term "State bank" as used in the above excerpt from the laws of Wyoming includes every individual, firm or corporation doing a banking business, and a banking business is engaged in "where credits are opened by the deposit or collec- tion of money or currency or negotiable paper subject to be paid or remitted upon draft, receipt, check or order". (1931 Wyoming Hevised Statutes, sec. 10-110.) The statutes of Wyoming contain n© provisions authorizing trust companies not doing a banking business to purchase corporate stocks. CLfl - APPENDIX C Digest of State laws Relating to the Purchase or Ownership of Bank Stock "by Holding Corporation^ . cm - X-7258 DIGEST OP STATE LAWS RELATING TO THE PURCHASE OR OWNERSHIP OF EMIK STOCK BY HOLDING CORPORATIONS. (Superseding X-6392) There is given "below a digest of the laws of the several States relating to the purchase or ownership of the stock of hanks "by holding corporations-. This digest has heen prepared hy the Office of the General Counsel to the Federal Reserve Board, with the assistance of the Counsel to the various Federal reserve Panics, and shows the status of the State legislation dealing with this subject as of August l-9 1932. The States not mentioned in this digest apparently have no legislation affecting this subject directly or indirectly. X-7258 - ew ALABAMA., There does not appear to "be any legislation in this State specifically authorizing a holding corporation to purchase or own hank stocks; hut Section 7015(10) of the Code of Alabama, which relates to the powers, rights and duties of corporations in general, authorizes a corporation "to subscribe for, acquire, hold, and dispose of the stock, bonds or other evidence of indebtedness of any other corporation of this or any other State or foreign countries, and while owner thereof to exercise the rights, privileges, and powers of ownership, including the right to vote, subject to the limitations of such rights in this chapter contained; * * *• w A2IZ0KA. There do not appear to be any statutes in this State specifically dealing with this subject. In these circumstances, it may be that holding corporations are authorized to purchase bank stocks under the provisions of Section 579 of the 1928 Revised Code of Arizona, which became effective July 1, 1929. . This section relates to corporations in general and provides that any corporation shall have power "to make contracts, acquire and transfer property, possessing the same powers in such respect as private individuals now enjoy. X-7258 ABICANSAS. There do not appear to he any statutes in this state specifically authorizing or forbidding a holding corporation to purchase or own bank stock, hut Section 3 of Act No. 252 of the 1931 Acts of Arkansas, approved March 31, 1931, provides that "any person or persons, and/or any company, co-partnership, corporation or other legal entity in which such person or persons own or control a substantial interest, owning either singly or jointly an aggregate of fifty (50) per cent or more of the capital stock of three or more hanks and/or trust companies, thus forming a chain or group of haiiks and/or trust companies, shall be, and are herehy prohibited from "borrowing from, or "becoming indebted to, such hanks and/or trust companies, thus owned and controlled, in any amount or in any mannertf; and this would seem to recognize by implication the right of holding corporations to own hank stocks. CALIFORNIA. There does not appear to he any statute in this State which specifically authorizes a holding corporation to purchase or own hank stocks* However, the General Corporation Law enacted by the 1931 Legislature of this State (C.C. 341), provides that "Every corporation heretofore or hereafter organized has power * * * (10) To acquire, subscribe for, hold, own, pledge and otherwise dispose of and vote shares of stock, bonds and securities of any other corporation, domestic or foreign.u X~7258 IDAHO There does not appear to te any statute in this State specifically dealing with the purchase or ownership of hank stock by holding corporations; hut Section 10 of Chapter 262 of the 1929 laws provides that a corporation formed under the general corporation law may "acquire, purchase, guarantee, hold, mortgage, own, vote, sell, pledge and/or otherwise dispose of and deal in shares * * * of other corporations, domestic or foreign11. There is also no double liability against stockholders of State banks in this State, but the banking law requires that stockholders at the time of the organization of such banks must produce satisfactory evidence that they have a net worth over and above all liabilities and exemptions of at least three times the amount of the capital stock taken by them in the process of such organization. (Sec. 12(e), Bank Act of 1925). ILLINOIS. The General Corporation Law of this State provides that corporations organized thereunder may ,r own, purchase or otherwise acquire * * * stocks, * * of any corporation, domestic or foreign." The statute contains some restrictions, such as forbidding the holding of stock in a building corporation, but there is no express prohibition therein upon the right of a corporation to own stock in a bank, although there may be an implication to that effect. (See Section 2, page 743, of the Illinois Revised Statutes of 1931, (Smith and Hard) prohibiting the organization of a corporation under the _ d v// — X—7258 (Illinois - continued) provisions of the general corporation law for the purpose of engaging in a "banking business and the case of Central Life Securities Company, v. Smith, 236 Ted. 170). Moreover, Section 6 of the Illinois Banking Act, "by referring to stockholders cf hanks "by the use of the pronouns "he" or "she", may create the implication that it was intended that such stockholders should "be natural and not artificial persons. TSDIKKk. There do not appear to be any statutes in this State specifically authorizing or forbidding corporations to own bank stocks; but section 4 of an act of the Indiana Legislature approved March 2, 1931, provides in part that, "The shareholders in any corporation formed under the provisions of any law of this State for any purpose whatsoever, and the shareholders in any corporation formed under the laws of any other State or country and admitted to do business in this state, shall be held individually responsible for all contracts, debts and engagements of any bank, the shares of which are held by any such corporation, each to the amount which the said shareholder's interests in said corporation, as represented by his shares of capital stock in the same, bears to the total amount necessary to be collected from the holders of shares of stock in any such bonk, * * *"; and this would seem to recognize by implication the right of holding corporations to own bank stock. On the other hand,, section 2 cf chapter 215 of the 1929 (Indiana -* continued) Acts of Indiana provides that, "corporations may he organized for pecuniary profit under this act for any lawful "business purpose or purposes, except * * * corporations for the conduct of a hanking, * *, trust * * * business"* Section 3 of this chapter also authorizes such corporations "to acquire, guarantee, hold, own and vote and to sell, assign, transfer, mortgage, pledge or otherwise dispose of the capital stock, bonds, securities or evidences of indebtedness of any other corporations, domestic or foreign," but provides that, "Ho corporation shall, by any implication or construction, be deemed to possess the power of carrying on the business of receiving deposits of mone:,r, bullion or foreign coins, or of issuing bills, notes or other evidences of debt for circulation as mono;/'." It thus appears that the provisions of the 1929 statute proh:i>\ the organization and operation thereunder of a corporation to do a banking business; and, in these circumstances, the provisions might' be construed as prohibiting a holding corporation from owning a controlling interest in the stock of a bank, since such an interest would permit the corporation to control the operation of the bank and thereby enable it to accomplish indirectly what the law prohibits it from doing directly, IOWA. Section 7940 of the 1927 Iowa Code, which authorizes corporations to hold stock in railway corporations, and Section 8434 of this Code, which recognizes the right of holding corporations to own stock in a public utility, contain the only provisions of the Iowa Laws relating to the ownership by corporations of stock in other corporations. However, Section 9 of Article VJII of the Iowa Constitution, which fixes ~. t-\ A ~~ X-7258 (I owa - c ontigaQd); the liability of stockholders ofbanks and refers to such stockholders by using the pronouns "he" or "she", may "by implication require stockholders in "banks to he natural and not artificial persons, KilHSiS. There does not appear to be any legislation in this State expressly authorizing or forbidding a holding corporation to own bank stock; but it would seem that the right of corporations to own bank stock is recognized by implication by reason of a statute enacted in the year 1931 (Laws of 1931, ch. 83). This statute authorizes the bank commissioner or his assistants to examine "aziy investment or holding company or corporation which is affiliated with any bank or trust company". The "bank commissioner is also authorized T*to exam- ine any copartnership, corporation or association", domestic or foreign, "holding as much as twenty-five per cent of the capital stock of any bank or trust company doing business in Kansas: Provided, That the bank commissioner may require the deposit of bonds of the United States, state of Kansas, or of some county, school district or municipality of the state of Kansas, with the state treasurer to secure the shareholders1 liability on said stock held by it: And provided further, That if any such copartnership, corporation or association shall fail or refuse to secure such shareholders1 liability as required, of it by the bank commissioner, said copartnership, corporation or association shall have no power to vote its stock at a shareholders1 meeting nor can said stock thereafter be represented on the board of directors of said bank or trust company", KENTUCKY. There is no law in this State limiting the power of cor- _ &y*'~ X-7258 (Kentucky - continued) porations to hold bank Stock unless it "be Section 567 of Carroll^ Kentucky Statutes, which read as follows: "ITor shall any corporation directly or indirectly, engage in or carry on in any way the "business of "banking, or insurance of any kind, unless it has "become organized under the laws relating to hanking and insurance * * *", A double liability is imposed upon stockholders of "banks for all contracts and liabilities of such banks by Section 595 of Carroll! s :• Kentucky Statutes. LOUISIANA. There are no laws in this State dealing specifically with this subject. .Although subdivision II (e) of Section 12, (P. 417), Act No.. 250 of the 1928 Acts of the Louisiana Regular Session, permits corporations "to acquire * * * and to hold, * * * shares * * * of any other corporation, domestic or foreign", it is not clear whether this subdivision is an authorization to holding corporations to acquire or hold shares of "banking institutions in view of certain other subdivisions of Section 12, namely, I and II, Sections 1 (P. 409) and 2 (P, 411) of the aforesaid 1928 Acts and Sections 1 (P. 1196) and 5 (P. .1203) of Volume 2 of the 1920 Constitution and Statutes of Louisiana. MICEIGAfl. There do not appear to be any laws in this State specifically authorizing a holding corporation to purchase or own "bank stocks; but Section 10 of Act No. 327 of the 1931 Public Acts authorizes corporations in general "to guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of, the shares of the capital stock of, or any bonds, securities or evidence of indebtedness created _ d.XT \ - X-7258 (Michigan ^ continued), by, any other corporation or corporations of this state or any other state, country, nation or government, and while the owner of the same, to exercise all the rights, powers and privileges of ownership including the right to vote thereon if such right he an incident of the same:.- * * *" Section 9968 of the 1929 Compiled laws of Michigan also provides that a corporation "shall have power in furtherance of the objects of its existence,, to purchase and hold shares of stock or memberships of its own or other corporations organized under the laws of this or any other state (j'orisdiction or sovereignty)"; and section 9969 of these laws provides that "when any such corporation shall "be a stockholder in any other corporation, as in this subdivision provided,, its president and other officers or any of its directors shall he eligible to the office of director of such corporation,-the same as if they were individually stockholders therein, and the corporation holding such stock shall possess and exercise in respect thereof, all the rights, powers, privileges and liabilities of individual owners or holders of such stock", MINNESOTA. There do not appear to he any laws in this State dealing specifically with this subject • With reference to the liability of a stockholder in a corporation, Section 1 of chapter 210 of an act approved April 18, 1931 (Mason's Minnesota Statutes, 1931 Supplement, Section 7465-1) provides that "except as provided "by Section 7465, Mason!s Minnesota Statutes of 1927,-no stockholder or member of any corporation or of any cooperative corporation or association, however or whenever organized, except a stockholder in a hanking or trust ~~ d-X// - X-7258 (Minnesota «r continued) corporation or association, shall "be liable for any debt of said corporation, cooperative corporation or association". Section 7465 of Mason1s' Minnesota Statutes of 1927 to which the act of April 18, 1931, refers, provides that "Every stockholder sliall be personally liable for corporate debts in the following cases: I. .For all unpaid installments on stock owned by him or transferred for the purpose of defrauding creditors. 2. For failure by the corporation to comply substantially with the provisions as to organization and publicity. 3. For per- sonally violating any of such provisions in the transaction of any corporate business as officer, director, or member, and for fraudulent or dishonest conduct in the discharge of any official duty*. MISSOURI. There do not appear to be any laws in this State relating specifically to this subject, although trust companies may purchase or hold stock in other banks or trust companies. (Paragraph 9, Section 5429 of the 1929 Revised Statutes of Missouri.) FiDYAJA. There does not appear to be any statute in this State relating directly to the subject of this digest; but the General Corporation Law (Comp. Laws of 1929, Sec. 1608, as amended by the Laws of 1931, Ch. 224, sec. 6) provides that every corporation shall have power "to guarantee, purchase, hold, sell, assign, transfer, mortgage. (Nevada - Continued) »1V X-7258 pledge or otherwise dispose of the shares of the capital stock of * * * any other corporation or corporations of this state, or any other state or government * * *Jf Ml JERSEY. There does not appear to "be any statute in this State prohibiting absolutely the ownership of "bank stock "by holding corporations. However, section-3 of Chapter 273 of the 1928 laws prohibits corporations that own more than ten per cent of the stock of any bank or trust company in the State from purchasing after the date the statute became effective more than ten per cent of the stock of any other bank or trust company doing business in the State, This statute does not require corporations to dispose of any bank stock that they may have owned before the law became effective and certain institutions (enumerated in Section 14 of the laws above referred to) are specifically exempted by Section 3 from its provisions, Section 3 reads as follows*: ,r 3. Any corporation, other than corporations specifically exempted from the provisions of this act, which now or hereafter owns mere than ten per centum of the number of shares of the capital stock now or hereafter at any time issued and outstanding of any bank or trust company or national bank, now or hereafter doing business in this State, shall not purchase more than ten per centum of the number of shares of capital stock at any time issued and outstanding of any other bank or trust company or national bank, now or hereafter doing business in this State.11 (New Jersey - continued) Section 14, wniciri enumerates the specifically exempted institutions referred to in Section 3> reads as follows: "14. The provisions of this Act and the penalties thereof shall not apply to the following corporations, viz.: Banks and trust companies organized under the laws of this State and national "banks doing "business in this State, nor to such "banks, Trust companies and national "banks while acting in a fiduciary capacity representing any individual or individuals or the estate of any individual; nor to any other corporation the entire capital stock of which is owned "by or held in trust for the shareholders of any hank or trust company organized under the laws of this State or any national hank doing "business in this State, in the same relative proportion as the stock held in said hank, trust company or national "bank." Under the laws of New Jersey, stockholders of New Jersey hanks and trust companies are not subject to a double liability, as are stockholders of national hanks and of hanks and trust companies in other States; nor do these laws impose such a liability upon stockholders of holding corporations, NEW MEXICO, There apparently are no laws in this State dealing specifically with the subject of this digest; but Section 32-301 of the 1929 Annotated Statutes of New Mexico authorizes corporations in general to "purcliase, hold, * * * the capital stock of, * * * any other corporation or corporations, of this or any other territory or state * * * ", and no limitation is placed upon the amount of such stock that may be so purchased or held. X-7258 ITORTK DAKOTA. There do not appear to he any statutes in this State expressly authorizing or forbidding a holding corporation to purchase or own "bank: stock; hut section 21 of Chapter 96 of the 1931 Session Laws, which, among other things, pertains to the transfer of the capital stock of a State hank, recognizes that a stockholder in such a hank may he a corporation as well as a natural person. This section provides that "every person or corporation becoming a shareholder by such transfer shall in proportion to his shares succeed to all rights and liabilities of prior holders of such shares existing by reason of ownership thereof•" A double liability is also imposed upon stockholders in banks by section 22 of these laws. OHIO. There do not appear to be any laws in this State dealing specifically with this subject. Stockholders in barjkinff corporations are subjected to double liabilities for debts of the bank (General Code of Ohio, Section 710-75). _ <J~*v# - X-7258 0XLAH0I1A, There do not appear to be any laws in this State dealing specifically with this subject and it may be that holding corporations may purchase and hold stock in banking institutions. Section 9725 of the 1931 Oklahoma statutes provides that "All corporations organized for any of the purposes authorised by this section shall have the power to own and hold stock of other corporations, except as prohibited by the Constitution of this State11 . Section 41, Article 9 of the Constitution of Oklahoma, forbids corporations to own or hold stock in other competitive corporations engaged in the same kind of business and banks or trust companies to own or hold stock in other banks or trust companies, except in those cases where such corporations or banks or trust companies have acquired such stock to secure or satisfy a bona fide indebtedness, and in such cases the stock must be disposed of within twelve months* Section 12802 of the 1931 Oklahoma Statutes makes it unlawful for corporations to combine to place the control of corporations in the hands of a trustee or a holding corporation, if the intent and purpose of such combination is to restrict or restrain trade. In view of the a,bove quoted provision of Section 9725 of the 1931 Oklahoma Statutes, and since neither the prohibitions of the Constitution referred to therein, nor the provisions _ <kX*" ~ X-7258 Oklahoma, continued of Section 12802 of the 1931 Oklahoma Statutes appear to be specifically applicable, in that the Constitution prohibits only banks or trust companies from owning or holding stock in other banks or trust companies and does not purport to prohibit corporations in general from owning or holding stock in other corporations, if the latter are not engaged in the same kind of business as, and do not compete with, the purchasing corporations, and Section 12802 of the statutes only affects combinations in restraint of trade, it may be that holding corporations may purchase and hold stock in banking institutions. OREGQIT; Under the provisions of a# Act of this State approved March 9, 1929 (Chapter 444, General Laws of Oregon, 1929; Oregon Code, 1930, sec. 25-502) any corporation "now or here- after organized in this state, or licensed to do business herein" may own, hold or control the stock* of any bank or trust company and while so owning, holding or controlling such stock the corporation is subject to the following restrictions:. (l) It shall not borrow money ot otherwise secure credit directly or indirectly, from such bank or trust company, unless the loan or credit is adequately secured by collateral other than stock or evidences of indebtedness of any corporation which it controls*. _ <!LX V»tl - X-7258 Oregon, continued (2.) It shall not sell any stock, securities or other evidences of indebtedness of any other corporation which...it controls, to or through the bank or trust company in which it owns or holds stock; nor can it use such bank or trust company as an agent for the purpose of selling or otherwise disposing of such stock, securities or other evidences of indebtedness without first obtaining permission from the Oregon Corporation Commissioner. (3) It shall not carry as an asset any expenses incident to organization or to the sale of stock after organization. Penalties are prescribed for violations of this act by corporations or their officers or employees, and all corporations heretofore organized under the laws of Oregon or licensed to do business therein must bring themselves v/ithin the provisions of this act within six months after the date it became effective. There is no provision in this act imposing upon the stockholders of corporations owning or holding stock in banks or trust companies the liability imposed upon the stockholders of such banks or trust companies. PEMSYLVAI7IA. There do not appear to be any provisions in the statutes of this State specifically covering the purchase or ownership of stock in institutions engaged in a banking business. However, under Section 1 of an Act of July 2, 1901 ( P.- L. 603, as amended by an Act of April 18, 1929 ), and Section XX of paragraph 5598 of West!s 1920 Pennsylvania Statute Law, it might be held £-*<Y _ X-7258 Pennsylvania, continued, that corporations are authorized to exercise this power* Section 1 of an Act of July 2, 1901 ( P. L. 603, as amended by an Act of April 18, 1929), provides that " * * * any corporation created "oy general or special laws, may purchase, hold, * * * the shares of the capital stock of * * * any other cor- poration or colorations of this or any other State, and while the owner of said stock may exercise all the rights, powers and privileges of ownership, * * *• u Section XX of paragraph 5598 of West*s 1920 Pennsylvania Statute Law provides that a corporation may "be formed,. "For any lawful purpose not specifically designated "by law, as the purpose for which a corporation may be formed." There does not appear to he any statute in this State expressly providing that stockholders of corporations owning stock in "banks are subject to a stockholders1 liability similar to the liability imposed upon stockholders of "banks. Section 1184 of the Pennsylvania Statutes imposes a double liability iproon stockholders of "banks and it has "been held that stockholders of trust companies are not subject to a double liability. Pratt, (1909), (See cases of DeHaven 72 Atl, 1068, 223 Penn. 633, and v, Gordon, Secretary of Banking v. TCirmeberger, (1932) 16 District and Ocunty 506 )• - *-*•** ~ X-7258 TEMESSEE, There do not appear to he any provisions in the statutes of this State directly covering the purchase or ownership of stock in hanking institutions by holding corporations; hut section 4084 of the new Code of Tennessee, which became effective January 1, 1932, provides that "All private corporations for profit organized under the laws of Tennessee for the transaction of any lawful "business, or to promote or conduct any legitimate object or purpose, shall have the right, power, privilege, and immunity to purchase, hold, own, sell, transfer, assign, vote, mortgage, pledge, a.nd otherwise deal in stocks, bonds, or evidence of indebtedness of other corporations in the same manner and with all the rights, powers, privileges, and immunities of individual owners, except that this statute shall in no way be construed to give corporations power to create unlawful monopolies, trusts, or combinations in restraint of trade". TEXAS. There do not appear to be any statutes in this State dealing specifically with this subject; and, in view of the following, it is not clear whether or not holding corporations may purchase and hold stock in banking institutions* Article 513 of the 1925 Hevised Statutes forbids banks or trust companies "to own more than ten per cent of the capital stock of any other banking corporation^ * * * " unless the ownership - CJ*-XJ ^ X-7258 Texas, continued of such excess stock "shall "be necessary to prevent loss upon a debt previously contracted in good faith; * * * " , and in such cases the stock must not "be owned for a longer period than six months. Article 1302 of the 1925 Revised Statutes permits private corporations to "purchase, * * * hold, of capital stock, * * * own, * * * shares of foreign or domestic corporations not competing with each other in the same line of "business; provided the powers and authority * * * conferred shall in no way affect any provision of the anti-trust laws of this State". Article 7426 of the 1925 Hevised Statutes trust to be defines a "a combination of capital, * * * "by two or more persons, firms, corporations, * * * : To create, or which may tend to create, or carry out restrictions in trade or commerce * * * or to create or carry out restrictions in the free pur- suit of any "business authorised or permitted "by laws of this State" or "To prevent or lessen competition in aid0 to com- merce,, * * * ." Article 7427 of the 1925 Revised Statutes states that a monopoly exists when two- or more corporation^ combine or consolidate to bring the "direction of the affairs" of such corporations "under the same management or control for ^ _ &J##)t ~~ X-7258 Texas, continued the purpose of producing, or where such common management or control tends to create a trust", or where "any corporation acquires the shares * * * of stock * * * of any other corporation or cor- porations, for the purpose of preventing or lessening, or where the effect of such acquisition tends to affect or lessen competition, whether such acquisition is accomplished directly or through the instrumentality of trustees or otherwise11. UTAH,. There do not appear to be any laws in this State dealing specifically with this subject and it may be that holding corporations are authorized to purchase and own bank stocks under the authority granted to corporations in general by Section 869 of the 1917 Compiled Laws. This section provides that poration * * * shall have power to * * * buy* "the cor- use, mortgage, sell, or otherwise dispose of personal property * * *". There are no laws in this State expressly prohibiting the ownership "by holding companies of the stock of banks but there is a provision prohibiting holding companies from holding or acquiring stock in other corporations* Section 4925 of the 1917 General Laws of Vennont contains this prohibition and reads as follows: _ _ <1X#UJ " X-7258 Vermont, continued "She corporation shall not he permitted to acquire or hold stock in other corporations to such an extent that its primary business is the holding of such stock. A violation of this provision shall he cause for the dissolution of the corporation under the provisions of Section 4944." There are no laws in this State imposing upon stockholders or holding companies a stockholders1 liability similar to that imposed upon holders of bank stock. WASHINGTON. There do not appear to be any provisions in the laws of this State expressly authorizing the purchase or ownership of bank stocks by holding corporations; but section 3810 of Remington's 1922 Compiled Statutes provides that "any corporation here- tofore or hereafter organized under the laws of this state or of any other state or territory of the United States and doing business in this state shall have power and authority to subscribe for, acquire by purchase or otherwise and to own, hold, sell, assign and transfer shares of the capital stock of any other corporation * * *." During the 1929 Regular Session of the Legislature of this State, a bill known as "Substitute House Bill Ho. 72" was introduced to restrict the ownership of bank or trust company stock "by cor-* porations, to. twenty per cent of the capital stock of such bank or trust company; but this bill did not pass» ci~*LV*v — X-7258 ffsstf fiaaiNiA. Under date of February 23, 1929, an Act was passed "by the Legislature of this State affecting the purchase or ownership of stock in hanking institutions "by firms, associations or corporations. (Section 9, Chapter 23, Acts of 1929). Section 9 of this Act pro- vides in part as follows: "It shall be "unlawful for any firm, association or corporation to purchase and hold stock in any hanking institution organized or authorized to transact business hereunder for the purpose of selling, negotiating or trading participation in the ownership thereof either for the purpose of perfecting control of one cr more such banking institutions or for the purpose of inducing other persons, firms or corporations or the general public to become participating owners therein. Nothing herein shall prevent the ownership of stocks in any such banking institution by any corporation for investment purposes.* With reference to the liability imposed upon stockholders in banks, Section 9 provides as follows: "Each stockholder of any banking institution organized under the laws of this state, in addition to the liability imposed upon him as stockholder of a corporation under the provisions of the general corporation laws shall be liable to the creditors of the banking institution, on obligations accruing while he is a shareholder, to an amount equal to the par value of the shares of stock held 'by him." WISCONSIN. In 1929 legislation was enacted in this State regulating the ownership of stock in banks and trust companies. (Chapter 445, Wisconsin Laws of 1929 - Published, August SO, 1929). Relevant provisions of this act are summarized briefly as follows: No corporation organized under the lavfs of Wisconsin is permitted to hold more than ten per cent of the stock of any bank or trust company, unless seventy-five per cent of the stockholders of both corporations vote in favor thereof at a meeting especially ~'35"^ X-7258 Wisconsin, continued* called for that purpose* Ho State hank or trust company may vote to authorize a foreign corporation to purchase stock in such State "bank or trust company,' unless such foreign corporation shall have qualified to do business in Wisconsin* Whenever the ownership or control of a majority of the stock of any State or national hank doing business in Wisconsin is held by any foreign corporation which has not qualified to do business in the State, such "bank shall be disqualified to act as a depositary for any public fpnds of the State or any subdivision thereof, or as a depositary for reserve funds of State banks until such foreign corporation shall have qualified to do business in the State, Domestic corporations and foreign corporations authorized to do business in the State which own or control the stock of a State bank or trust company shall be held liable for any assessment made against the stockholders of such bank or trust coinpany to the par value of the stock so owned or controlled; and such holding corporations are required to dexoosit y/ith the State Treasurer securities equal to fifty per cent of the par value of the stocks qf State banks or trust companies owned or controlled by such holding companies*, except that the aggregate amount of such securities shall not exceed the largest amount required to be deposited by Wisconsin tru$t companies. If the stockholders*' liability of any £uch holding company is not fully paid,, the stockholders of such holding) company are liable for an assessment sufficient to cover the deficit. — <!L * > V 1 — APPENDIX D If this report is printed, it is suggested that the answers to the questionnaire from eight leading groups "be reproduced in fall. The Marine Midland Corporation, Buffalo, New York; Guardian Detroit Union Group, Inc., Detroit, Michigan; Wisconsin Bankshares Corporation, Milwaukee, Wisconsin; First Bank Stock Corporation, Minneapolis, Minnesota; Northwest Bancorporation, Minneapolis, Minnesota; First Security Corporation of Ogden, Ogden, Utah; Marine Bancorporation, Seattle, Washington; and Anglo National Corporation, San Francisco, California,have given the Committee permission to make such reproductions. It would take from 75 ^o 100 single spaced mimeographed pages to reproduce the answers from these eight groups.