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849 Minutes of actions taken by the Board of Governors of the Peri Reserve System on Wednesday, May 26, 1948. ill the The Board met Board Room at 10:30 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Eccles Szymczak Draper Evans Vardaman Clayton Carpenter, Secretary Sherman, Assistant Secretary Morrill, Special Adviser Thurston, Assistant to the Board Riefler, Assistant to the Chairman Smead, Director of the Division of Bank Operations Mr. Thomas, Director of the Division of Research and Statistics Mr. Vest, General Counsel Mr. Townsend, Associate General Counsel Mr. Horbett, Assistant Director of the Division of Bank Operations Mr. Millard, Assistant Director of the Division of Examinations Messrs. Chase and Shay, Assistant Counsel Mr. Thompson, Federal Reserve Examiner, Division of Examinations Mr. Hurley, Technical Assistant, Division of Bank Operations Mr. Mr. Mr. Mr. Mr. Mr. Mr. Bopp, Vice President of the Federal Reserve Bank of Philadelphia Mr° Clayton reported briefly on recent developments in con11t-°11 "th the Home Loan Bank legislation now pending before the : kit:been) including the reporting out by the Senate Banking and 14‘retleY DN41.4toCoMMittee of S. 2417, which would reduce the insurance that ederal savings and loan insurance. titt 4° krther There was agreement action should be taken by the Board at the present tth respect to this legislation. 95k 0 A 5/2648 -2In accordance with the understanding at the meeting of the BOard Yeaterday, Mr. Townsend reviewed the sequence of events which lqd 413 to the action of the Board on October 31, 1947, directing the Le gal Division to make an investigation for the purpose of en- 41144 the Board to determine whether it would institute a proceedthe Provisions of the Clayton Act against Transamerica CorpRe read from section 7 of the Clayton Act and from section or , 4hat Act which places in the Board of Governors authority to t4toree compliance with section 7 where applicable to banks, banking 4380c1ati 0n8, and trust companies. He also said that there were in the 1308 -I'd's files opinions from two former General Counsel of the Iltkrcl that the business of banking was interstate commerce, that re41)it eolzrt d ecisions left no doubt in his mind that banking would Ileid to be interstate commerce, and that, therefore, there was 14) (Nietion that the Clayton Act would be applicable to Transamerica tt it cotIld be established that the acquisition of bank stocks by Nnealterica group had the effect of (1) substantially lessening NIPetttion, (2) restraining commerce in any section or community, (3) tending to create a monopoly in any line of commerce. A8 thttotirdst0 the yardstick for determining the degree of proof which hould have in order to justify the commencement of the Act Proceeding, Mr. Townsend emphasized that the question ,toto the t °ard at this time was not to determine whether there was Ntri "idence to justify the issuance of an order to Transamerica 851 54 / 1 48 -311114ring the disposition of bank stocks, that such evidence could be devel -0Ped only through the medium of a hearing in which there 11°111(1 be full opportunity for both sides to present their cases, and tIlatthe matter now before the Board was to determine whether there 4P1)ellted to be reasonable grounds, on the basis of the investigation til4t4E/ci been made, for the institution of a proceeding under the Cillt°11 Act against Transamerica Corporation for the purpose of de- the information necessary to enable the Board to decide 111411141er the Transamerica group should be ordered to dispose of bank 111(1kli held by it. Mt. to Townsend discussed the three bases in section 7 of the 11311 Aet2 aS referred to above, on which a proceeding could be 'knd stressed the fact that it was not necessary to wait a 111°40Pol1stic condition was an accomplished fact and that ac- 4°4 %lad be taken to prevent acquisitions which would lessen compe- tItl°113 restrain interstate commerce, or tend to create a monopoly. 18() stated that in opinion the question on which the case his 4461t tlIrta would be whether the Transamerica group, through the kttliktsitiot. of bank stocks, was tending toward a monopoly and that : t4t con dition cod could be established there was no question but that ha't EitAtute would have been violated. 14 this C Connection, he read an excerpt from the report of the 4 4.ttee when the Clayton Act was originally passed in 1914 852 N(48 -4/411.0s Stated that one of the objectives of the Act was to prevent eo f er'41s Possible control of great aggregations of capital through tet/m. -441 dir ectorships of banks and banking associations. He also t3tated that the courts, in construing the Clayton Act, had stressed 4Pe4t the fact that the purpose of the statute was to supple4e Sherman Antitrust Act and that it was intended to arrest 111"°PoliFa+st --u-Le conditions in their incipiency. Townsend then discussed in considerable detail the reof the investigation which was made at the request of the 13cleiltielld which was just being completed, and expressed the opinion tb" 'e was ample evidence to establish the fact of an intention the 154rt of Transamerica to acquire enough of the banking re1c)14'"8 the area to an extent which would be not only in viola- or tile Clayton Act but of the Sherman Act as well. He stated tth inv estigation undertook to review the growth of Bank of lt41rLd it$ affiliated institutions which eventually grew into lir4118841lerica group, the methods followed in their expansion down tilePreeent time, the relations of the various concerns in the : ! 111 '4.4d the extent to which the affiliated institutions and their trig -Qources appeared to be controlled by the group. In his the. • Illvestigation disclosed that there had been a continuous tlitt) rition. _ t14e to °II the part of the management from 1903 up to the present th„ 14 to Ile°r4pass more and more banking resources and banking offices knd that their acquisitions had developed or were tend4\'elor) into a monopoly. 853 5/26/48 _5_ be Chairman McCabe raised the question whether the matter should 111"ed before the Attorney General before further action was t61141IbY the Board. In the discussion of this point, reference was 4iet ° the fact that last October when the Board directed that the'Leg41 Division undertake an investigation, letters were sent to : C°41Ptz'oller of the Currency, the Federal Deposit Insurance Corp111404 9 klad the Attorney General advising them that the investigation 1441 154 —ingundertaken, that they were aware, therefore, of what the A 11148 d°ing, and that the Board had no obligation to clear its 81111der the Clayton Act with the Department of Justice. MI% Vardaman suggested that if the Board should decide to titAlta tre b til a proceeding against Transamerica it might tell the De— Justice of that decision. Mr. Townsend responded that 6 a number of procedural questions that should be decided : tkit 11°41 ' d and that if the proceeding were instituted it would kte4111115r())timately 30 days to prepare the necessary papers during htil t145 the Board could advise the Attorney General that it had °Ito i nstitute the proceeding. After some further discussion, Mr. Clayton moved that the Board, having considered the report made by Mr. Town— send with respect to the results of the investigation conducted by the Legal Division pursuant to the request of the Board on October 31, 1947, direct that a proceeding be instituted against Transamerica under the Clayton Act and that Counsel be directed to prepare 854 5/26/48 -6and submit to the Board for action the necessary papers in connection with the institution of the proceedings. There was a discussion of the responsibility of the Board to talca action in the matter and Mr. Vest expressed the opinion that th 141.8 no question about the Board's responsibility under the 04, " 44 Act, but that it should be kept in mind that if the proceedt4 1/elle 4.11.ed instituted the Board should be prepared to have the case through to the Supreme Court of the United States for final (leist°11)Ighich might involve a period of as much as two, three, or t4°re Yettra. MI% Townsend stated that, in accordance with a letter of 11:7ber 28) 1947, addressed to the Board by the Comptroller of the that office was withholding action on a number of applica- tio4 11 N31 t4t, , 1 4 At banks in the Transamerica group to convert existing banks Nlches and that the Board was under obligation to determine c)11111t1Y as possible what action it would take. He also stated w " . --d be his suggestion that, if the Board decided to institit a thilt th ceeding, Mr. Clayton and he meet with the Comptroller of 4t1,11N4cY and such members of the Comptroller's staff as the Atte wish for the purpose of bringing them up to date on the ril4t4er and soliciting their cooperation. Thel'e was a discussion, in response to inquiries from Chairbe ' to what extent, if any, the matter should be dis141th the Attorney General and the Comptroller of the Currency 855 5/26/48 -7- bero ' le action was taken by the Board and the weight of opinion of the ta' ll'ers was that further discussion with the Department of hatic4 - Ifas not necessary. 14r. Townsend stated that it would be his recommendation that the Board acts to institute the proceeding it might address conletters to the Attorney General, the Comptroller of the C141'elig) and the Federal Deposit Insurance Corporation advising the1401% the Board's decision. At the conclusion of the discussion, Mr. Clayton's motion was put by the Chair and carried by unanimous vote with the understanding that letters of advice of the Board's action, in a form satisfactory to Messrs. McCabe and Clayton, would be sent to the Attorney General, the Comptroller of the Currency, and the Chairman of the Federal Deposit Insurance Corporation. Mr. Townsend stated that there were a number of procedural questions which should be considered by the Board in connection with the proceeding and, Upon motion by Mr. Eccles, it was voted unanimously to request Messrs. Evans and Clayton, in consultation with Mr. Townsend, to make a recommendation to the Board as to the action to be taken on these questions. It Past the lunch hour when the discussion of the Transq. 1114 tter was concluded and it was agreed that a meeting of the iltEttid 14)111 Nietile' 41 be held tomorrow morning at 10:30 for the purpose of dis- 4N : 1 14ther the question of action by the Board to increase reglitrements of member banks in central reserve cities. 856 5/2648 -8At this point Messrs. Riefler, Smead, Thomas, Vest, Townsend, 4111stt m ) -illard, Chase, Shay, Thompson, Hurley, and Bopp withdrew tl'°14 th -meeting and the action stated with respect to each of the ktter s he reinafter referred to was taken by the Board: Minutes of actions taken by the Board of Governors of the Fedserve System on May 25, 1948, were approved unanimously. Memorandum dated May 14, 1948, from Mr. Bethea, Director t the 1), 14 the be7sion of Administrative 8ie blottel Services, recommending increases annual salaries of the following employees in that 011, effective may 30, 1948: 4.1t Designation G ri. 44141 M. ?e de E.Palmer ,'„,,,Mae Trivett 1)o-4cilY Saieed L. b. Saunders Snowdon Stenographer Stenographer Clerk-Stenographer Stenographer Stenographer I'L Salary Increase From To $2,243.52 $2,394.00 2,318.76 2,243.52 2,318.76 2,168.28 2,394.00 2,168.28 2,168.28 2,394.00 Approved unanimously. Memorandum dated May t4 t 25, 1948, from Mr. Betheal Director 1.18ion of Administrative Services, recommending that the etptm4ti°11 of Mrs. Edith Comer, a page in that Division, be ac- to 4 01 be 441 tikt effective, in accordance with her request, at the bil8joes5 June 16, 1948, with the understanding that a P4YMeat would be made for annual leave remaining to her taa of that date.
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