CONSOLIDATION OF NATIONAL BANKING ASSOCIATIONS FRIDAY, FEBRUARY 18, 1926 UNITED STATES SENATE, SUBCOMMITTEE ON BANKING AND CURRENCY, Washington, D. C. .The committee met at 10 o'clock a. m. pursuant to adjournment, Senator George W. Pepper (chairman) presiding. The CHAIRMAN. The committee will be in order. Mr. Fitzgerald, we shall be glad to have a statement from you at this time. STATEMENT OF R. M. FITZGERALD, OAKLAND, CALIF. Mr. FITZGERALD. Mr. Chairman and gentlemen of the committee, I am vice president of the Central National Bank, vice president of the Central Savings Bank, with combined assets of $60,000,000. I am authorized, not by a written letter but by phone and personal request, to represent other banks in the immediate vicinity of East Bay, aggregating about $95,000,000, so I speak for banks right around my own vicinity with assets of $155,000,000. Mr. Chairman, I want to continue what I said last night in a rather imperfect way, that the delegation from California owes this committee the deepest obligation for its kindly consideration and patient hearing. We came a long way to talk to you, which would emphasize without any words of mine our deep interest in the matter which is in your hands to decide. Mr. Drum yesterday complained with reference to the hearings that he had no opportunity given him at any of those hearings to hear his side of the question. Mr. Drum was present at one hearing in the House and made a second appearance at the hearing in the Senate and I am very sure his complaints are made more in the heat of advocacy than on cool reflection concerning the facts and I want to say to him, and any other gentlemen present, including Senator Flint, that if in the earnestness of advocacy one word or one tittle dropped from me that they may think is any personal reflection on them, it will not be so, and as to anyone knowing me as they do, I think it would take a good deal to convince them that I intended it. You have all read of the prodigal; you have all seen the picture, and as they were speaking here and have all been talking here in this hearing about the State bank being adopted into the Federal reserve system, I thought of that picture when the fatted calf was killed and the boy who helped to fatten that calf stayed at home, was in the background. It is for that boy or that range of banks that I speak 307 to-day, the ones that have never left the reservation, but in 50 years of struggle with unequal laws and not an even opportunity to do banking business, as the States have given the State banks, I speak to-day for particularly those in California and my remarks are addressed to the situation there. So that when I make a statement and produce the evidence which I will produce it has reference to the most unfortunate condition in the State of California. The State banks and the National banks, as I say, who have never left the reservation, who have fattened by thier money and with their money the Federal reserve treasury until the State banks could come in and find the fatted calf that could then help them-then all I ask is that those banks receive, as I know they will, earnest and careful consideration. Much has been said about service. That is true. We all admit that a bank can not secceed without service. The Standard Oil rendered service. No one has done better with his money for humanity than Mr. Rockefeller, but is that any reason why the Standard Oil did not have to unscramble? Not because they were not rendering service, not because Mr. Rockefeller had not spent his millions on hospitals and on education, and spent his money all over the earth, even amongst the heathen nations for the benefit of humanity. Why it was not thought wise in this country that they should have a monopoly of that business. A branch bank, if it has any advantage at all is a bank that must grow. It can not grow without accumulating the money of the country or the district. There is no other way it can grow. If that is true the larger it grows the better bank it is for those who own it. But are you going to be influenced by the selfish interest which we all have? I claim no vitrue in that. To collect money and have a monopoly is the worst kind of a monopoly that can exist because with a credit monopoly of money there is no business that can not be controlled from the very inception to the end. They have spoken to you about branch banks, the banks being able to move crops. You must concede with me that if their power to do good is unlimited their power to do harm stands with it step by step and arm in arm. Do you want to leave it to the unit banks that have brought this country to the point where it is, or say we will give a money monopoly because they can harvest a crop according to their statement, in some section that the unit bank could not attend to as well? Where is the proof of their statements? My friend, Senator Flint, said yesterday something about that advance of $13,000,000. Gentlemen of the committee, that was to secure the best loan that could be made and it, as he says, was taken off his hands, every dollar, and given to the little banks. I was one. I represent $30,000,000. I took some of that paper. But that is not helping out an industry any more than Blair & Co. or Halsey & Co. buy every issue that is perfectly good and sell it. That is not helping out. It is an unfortunate example. I am not attacking the branch banks within limits. I am opposed to branch banking on principle. I am opposed to the system because I am opposed to monopolies. I do not think they are American. I do not think they ought to be permitted. But I am not in favor of crippling and crushing an industry. Senator EDGE. May I make an inquiry? As I have followed this hearing there seems to be a question on both sides. They have rather undertaken to accuse each other with dealing in generalities. Now, speaking of the menace of branch banking, and I am expressing no personal opinion as to it or its wisdom at least, or what has been the result as far as crushing out the local interests is concerned in your State, we realize that various banks have been purchased, but have you any statistics showing the number of independent unit banks still in existence as compared with those branch banks? Mr. FITZGERALD. From the statistics I have, in the two years last past up to the 1st of January, there went out of the national system in California 29 national banks into the branch bank system. There went out, of State banks about 60 banks, from the national system into the branch bank system. Senator EDGE. If we could get those complete figures for California for use as an example, I think it would be interesting. Mr. FITZGERALD. I have those here. I have the names and the banks that put them over. The CHAIRMAN. Will you file that in due time? (The list furnished in here printed as follows:) List of banks sold to branch banks during past two years NOTE.-Jan. 12, 1925, Railroad National Bank, Roseville, was sold to Farmers & Mechanics Bank of Sacramento. List of banks sold to branch banks during past two years--Continued The CHAIRMAN. If it does not disturb your line of thought I would say that one of the witnesses yesterday, I think, it was Senator Flint, made the suggestion that the danger of monopoly resided not so much in a parent bank with multiple branches as in the possibility of a holding corporation, which without having branches could have an indefinite number of subsidiaries each with its corporate organizations maintained and actually controlled through stock ownership otherwise from a central source. Mr. FITZGERALD. Yes. The CHAIRMAN. That impressed me as an acute observation; that is to say, looking at the Bank of Italy diagram as an illustration, apparently the way that combination works is not merely through branches but through stockholding of other banks, and I was wondering whether you would enlighten us a little bit on that subject as to whether the subject you are speaking on is not one that could be equally well worked out by those districts and worked through a system of holding banks rather than by a straight system of branch banking? Mr. FITZGERALD. There never has been a law passed in this country against trusts that there has not been an effort to beat it. The situation in California with reference to the Bank of Italy is new. Neither the Congress of the United States nor the people of California have had time to realize what has been done in the last two years. The Bank of Italy, since 1921, acquired 76 branches in the State of California. We did not wake up to it. My friend, Mr. Drum, did not wake up to it. Out of those 76 branches, I think we |