United States v. Philadelphia National Bank

PETITIONER:United States
RESPONDENT:Philadelphia National Bank
LOCATION:Beaumont Mills

DOCKET NO.: 83
DECIDED BY: Warren Court (1962-1965)
LOWER COURT:

CITATION: 374 US 321 (1963)
ARGUED: Feb 20, 1963 / Feb 21, 1963
DECIDED: Jun 17, 1963

Facts of the case

Question

  • Oral Argument – February 20, 1963
  • Audio Transcription for Oral Argument – February 20, 1963 in United States v. Philadelphia National Bank

    Audio Transcription for Oral Argument – February 21, 1963 in United States v. Philadelphia National Bank

    Earl Warren:

    — United States, appellant versus the Philadelphia National Bank Et Al.

    Mr. Price you may continue your argument.

    Philip Price:

    May it please the Court.

    I think when we recessed yesterday I had just challenged the statement in that a bank has any control over its deposits.

    I’d like to give two illustrations.

    Some years ago in Pennsylvania, the Secretary of Banking refused to permit any bank to allow more than 3% on –3% or 2.5% or 3% on its current deposits, at a time when New York allowed a half or 1% more than that.

    Until the Secretary of Banking of Pennsylvania changed that regulation, $3 million moved out of the Philadelphia National Bank to New York without any power on the part of the bank to control that move.

    Another illustration; in New York City over a period of six months, a $150 million moved out, was withdrawn from term deposits of New York banks; because of a slight difference in the interest rate it was possible to earn a whole lot amount of money.

    That represented the amount of cash that would have provided commercial and industrial loans of $90 million and as for as demand deposits are concerned, of course by definition, they are withdrawable by the depositor without notice.

    Simply a check will withdraw all the money on demand deposit without prior notice to the bank and the bank has absolutely no control over it.

    Therefore, the number of deposits or the fact that the deposits does not constitute anything in the nature of control that is similar to the kind of control that we talk about when we were speaking of manufacturing company.

    There is no possibility therefore of the price war such as were suggested in the brief of the Appellant.

    There is no power to control anyone because money is the only commodity that banks handle and that is fluent, it moves rapidly throughout the country at no cost and therefore, can be transferred from one city to another by mail, by telegraph and practically by telephone.

    Now the three functions of the commercial bank essentially involve the deposit activity and the lending activity and the collateral services that are rendered by the bank.

    There is no competition, no price competition for deposits, because banks may not allow any interest except that which is permitted by law and regulations and that applies to everybody.

    So there can’t be any advantage for one bank over another in that field.

    Banks have to operate within the limits prescribed by regulation, which amounts to the character of investments they may make, but loans have to be short term to be liquid, they may not be more than 10% of the capital surplus of the company — of the bank, which means in a fact that they may not be more than about 1% of the aggregate deposits of the bank.

    Loans may not exceed 60% of the deposits ordinarily or about six times the capital of the bank.

    60.5% must be kept on deposit with the Federal Reserve as cash reserve and an addition secondary reserve must be kept by the bank itself as a hedge against the possibility of sudden and unacceptable withdrawals.

    So that the operation of a bank is entirely different from any manufacturing company and its stock in trade, cash, is subject to withdrawal practically without notice.

    The term deposits of course 30, 60, 90 days there was that much notice, but when the time runs out, the money maybe withdrawn without any explanation whatever.

    So far as deposits are concerned, there is no competition insofar as loans are concerned.

    There are no price of competition in loans, because the interest rate is in effect fixed by the operations of the Federal Reserve in controlling the volume of money that’s available to banks.

    For example, the open market operations which the Federal Reserve buys and sells some $30 billion worth of government securities, can either withdraw cash from the banks and therefore reduce the capacity of the banks to lend or put cash into the banks when the Federal Reserve buys bonds, buys [Inaudible] and that makes money easier and therefore, interest rates might be affected.

    So that the control of interest rates is not in the hands of the bank stocks, but in the hands of Federal Reserve itself.

    The aggregate money market in the United States, the free quick money market is in excess of $500 billion.

    The amount that any one bank has under its capacity to lend is vastly less than that and therefore, it would be quite impossible for any bank to exercise any control over the money market so far as loans are concerned.

    Now, I’d like to say a word about this — operations of small bank in terms in relation to enlargement.

    Within its resources, within its capacity to lend with 10% limit, the lending limit of the bank itself, a small bank can compete as effectively with a large bank as two large banks with one another.

    That was justified too by all the witnesses who had any knowledge of the operations of banking.

    Philip Price:

    And in that connection, I’d like to say a word about the foolishness referred to yesterday of the three banks.

    It was suggested that the court below indicated that if this merger went through, it will be prepared to approve mergers indefinitely until we were reduced to three banks.

    Nothing can be further from the fact.

    The three-bank question came up in this way, several witnesses testified that so far as out in to choices on the part of a borrower were concerned, that if a borrower were turned down by three banks, you probably didn’t have a bankable loan and he’d have to go some place other than to a commercial bank to get a combination.

    Therefore, the court below in determining whether or not there was any limitation upon competition here, in this case, considered that testimony about three banks and said that in those circumstances and the circumstances plus the evidence in the case, 17 banks in Philadelphia provided ample alternate choices for any perspective borrower for any possible banking need that he might have and that the 41 banks in the four-county area provided just that much more.

    [Inaudible]

    Philip Price:

    No sir, no sir.

    I was speaking only about banks not so all the court was speaking about in connection with those three.

    They also going to get money from insurance companies, they get money from factors; they get money from other sources.

    But speaking purely and simply of the commercial loan, still there were ample alternate choices for any needs of the average borrower.

    Potter Stewart:

    As I — Mr. Price, I understood Judge Loevinger’s point about the three banks, it was this, that this merger would result in one bank having about a third of the business in this four-county area and if that was right for these two banks, then it would be right for other banks.

    So you would end up with three banks in the four-county area, Philadelphia, assuming that the banks wanted to merge.

    Philip Price:

    But they would have to go but —

    Potter Stewart:

    With the three bank point as I understood it?

    Philip Price:

    Well, but it was based upon this suggestion that three banks would be enough to provide what was needed of competition wise and otherwise for the area.

    That of course ignores the authority of the comptroller to determine whether in the public interest it would be better or worse to have three or more or less than three banks in Philadelphia —

    Potter Stewart:

    I suppose there are some communities, small communities in the nation where there is only one bank —

    Philip Price:

    There are 7000 of those, sir.

    Over 7000 have only one bank.

    Great many have only two or three, but here we’re talking out about a particular situation which is Philadelphia where they have 17 to start with, they have 41 in the four-county area, they have 116 in the ten-county area.

    And when you get up above the level of the lowest loans 10,000 and 50,000 loans, you immediately become in competition with New York where there are 17 banks that have lending limits of 100 of a million, over a million dollar.

    Eight which have, I beg your pardon?

    [Inaudible]

    Philip Price:

    In New York, the 17 have a million dollar lending limit, eight have a $10 million lending limit, six a 15 and three have a lending limit in excess of the aggregate of all the lending limits of all the Philadelphia banks put together.

    Arthur J. Goldberg:

    [Inaudible]

    Philip Price:

    The need of the community that have banks — a bank that can handle its own needs.

    The defendants produced the testimony of seven or eight business people, large businesses, Chief Executive Officers of large businesses who said that they would prefer being in the Philadelphia area to borrow from Philadelphia banks, but they were forced go primarily to New York, but also to Chicago, to Boston, to Pittsburgh, to Cleveland, to Dallas to get the money that they needed to operate.

    Arthur J. Goldberg:

    [Inaudible]

    Philip Price:

    The additional business justification is the added money that would be brought to Philadelphia by having business connections of that sort who deposit large sums in the Philadelphia bank from which the competitive bankers in the Philadelphia testified they all would benefit, They welcomed this merger because they said it would bring more money to Philadelphia, more business to Philadelphia and that all the banks including the smaller ones would benefit from it.

    Arthur J. Goldberg:

    [Inaudible]

    Philip Price:

    Every bank has a competitive advantage over every other bank based upon difference in size, because under the law, a bank may not lend more than 10% of its capital and surplus.

    So that a bank that can lend $1 million has a competitive advantage over a bank that may lend over a $100,000 and similarly a bank has a $15 million lending limit has a competitive advantage over one that may lend only 10, but the competitive advantage is measured by the difference of the resources, which under the law, one may use and the other may not.

    So that it does not take away business from a smaller bank, because within the resources of the smaller bank, each one is on a par.

    It only gives it an additional feel within which it may operate, which the smaller bank never had and can’t have under the law.

    Arthur J. Goldberg:

    [Inaudible]

    Philip Price:

    That is so, but that’s merely because of the resources.

    It’s the natural result of having limited resources as contrasted with unlimited resources relatively speaking, so that a — but that doesn’t mean that the bigger bank can take something away from the smaller bank, the smaller bank just can handle to start with.

    And in Philadelphia, the fact that we haven’t got a bank that can handle this business drives it to New York where it can be handled, where it is handled, which now being handled by the banks there, which have this so far competitive advantage.

    Now the purpose of this merger is to make for the first time, a Philadelphia bank competitive with larger banks in New York and elsewhere with which they can’t compete now simply because it’s too small.

    William J. Brennan, Jr.:

    Mr. Price, is there any evidence of exactly how many of these larger loans were lost in New York or Dallas or other banks?

    Philip Price:

    No, sir you can’t tell that, because unless some perspective borrower comes in and said I would have borrowed this, you don’t know.

    William J. Brennan, Jr.:

    I mean these executives who testified?

    Philip Price:

    They were seven or eight business people did testify.

    One said he put a loan of $10 million in New York, $10 million in Chicago.

    Another one he put so much elsewhere, so that they were seven or eight illustrations of it, but obviously the fish that got away that didn’t even nibble, could not be measured and therefore it was maybe a matter of judgment.

    William J. Brennan, Jr.:

    Could you clear up for me a question I asked Judge Loevinger yesterday, what’s the significance of 36 out of area loans over $1 million?

    Philip Price:

    Curiously enough that exhibit which he described to the banks and said they didn’t adequately explain it, it is shown on the face of the paper by as being government exhibit 181.

    So that apparently he didn’t understand his own exhibits.

    That shows that loans over a millions dollars of these particular ones which were calculated in 1955 from somewhat incomplete statistics were made to borrowers outside the four-county area and 34 were inside the four-county area, that’s all that means, but it doesn’t purport to indicate the number that was —

    William J. Brennan, Jr.:

    But I wonder does it mean that the Philadelphia banks now do attract the borrowers from some distance from the four-county area?

    Philip Price:

    Oh, certainly, oh, yes sir. Oh, yes, indeed.

    William J. Brennan, Jr.:

    That is not only for using local four-county businesses, but —

    Philip Price:

    Not at all.

    William J. Brennan, Jr.:

    It might be business in the Detroit area.

    Philip Price:

    They do as 34 — I think 34% of their commercial business is done outside the four-county area, 64% in Dallas.

    William J. Brennan, Jr.:

    Well, I mean outside the four-county were used with businesses outside.

    Philip Price:

    Borrowers outside the four-county area, oh yes.

    William J. Brennan, Jr.:

    Not the borrowers who may have offices outside the area, but clients within the area.

    Philip Price:

    No, not clients within the area, borrowers outside the area.

    There is a large business done with customers who have no connection with Philadelphia at all, where competition with New York banks, but can’t meet them beyond relatively limited amount

    William J. Brennan, Jr.:

    Well then, I gather, is it the hope that if the merger were approved, the larger loan limits would attract even more of this business from outside the area?

    Philip Price:

    Yes, sir.

    That was the opinion of the bankers, not only the bankers, the members of the staffs of the two appellees, but the bankers who were competitors, the seven or eight bankers who testified as competitors that they welcome this merger because they expected to bring this additional business to Philadelphia area for the benefit of them and business generally.

    William J. Brennan, Jr.:

    Well, from that kind of business who but the banks would profit in the Philadelphia area?

    Philip Price:

    The fact that you have deposits makes it available for local loans as well as —

    William J. Brennan, Jr.:

    It would attract more deposits from those borrowers?

    Philip Price:

    I beg your pardon.

    William J. Brennan, Jr.:

    You might hope that it would attract larger deposits from these borrowers of larger loans?

    Philip Price:

    That is the normal practice of borrowers and the evidence showed here that of the large borrowers, a million dollars and up, the Philadelphia National Bank had deposits of about twice the amount of the loans.

    So they had a 100% more available for local use.

    The Girard had about 50% more, so that is the definite advantage that comes from bringing money in from the outside, which the appellant brushes off by saying they don’t believe it, but the evidence shows that was the result of such a visit.

    My time is up, but I would like to say in answer to Mr. Justice Brennan’s question about Clayton Act, a word about it and why it doesn’t apply?

    The Clayton Act when amended in 1950 to extend asset acquisitions was extended only to asset acquisitions by companies, which were subject to the Federal Trade Commission Act, banks are not and therefore, the banks were not covered with section 7.

    And the Attorney General for the last ten years has been actively turned up the swayed Congress to amend the law so as to include banks within its scope.

    Congress has persistently refused to do so.

    And therefore, what the appellant is asking this Court to do here is not only to legislate, but to legislate in a way in which Congress for ten years has refused to do.

    I read yesterday a brief excerpt from a statement by Senator Robertson and I will add only one more to it which is in full volume, who said it is this and this is in discussion of the 1968, it is this distinction between banking and another business, which justifies different treatment for bank mergers and other mergers and which led the senate to reject the flat prohibition of the Clayton Act test, which applies to other mergers.

    So that I suggest here they’re trying to get this Court to do something that the Congress has persistently refused to do and therefore, its price there —

    William J. Brennan, Jr.:

    Well, that’s of some significance [Inaudible]

    Philip Price:

    I can understand why he would not want to discuss it orally and that suggests also I can see why he would try to burst out with all and to suggest also a perfectly good reason by Congress confided to the comptroller, rather than to antitrust department, the Department of Justice, the responsibility for deciding whether a merger was in the public interest or not.

    Now, we go to Mr. Littleton.

    Earl Warren:

    I was wondering if this merger is permitted, would the argument that you are making today also apply in the event of this new merged bank sought to merge with the next largest bank in Philadelphia.

    Philip Price:

    It would have less validity, because it would then be in competition and able to complete with these larger banks in New York, which it now cannot compete with and would be able to hold business or gain business, which now is completely outside of its capacity to handle.

    Earl Warren:

    Well, wouldn’t there still be larger banks in New York that could loan still more money?

    Philip Price:

    There would –-

    Earl Warren:

    Why wouldn’t the same argument apply then if you took a next biggest bank?

    Philip Price:

    Because there are not so many more than a $15 million, I said that there are only six of those in New York.

    Now the three that are enormously large, and there would be no necessity for anybody to achieve a 55 or 60 or $65 million lending limit in order to handle the businesses in Philadelphia that may be in New York

    Earl Warren:

    Why not if there is no area there in around Philadelphia, those four-counties don’t constitute in the area, when you are in competition with New York, why couldn’t you make the same argument to take the next biggest bank and then the next one after that?

    Philip Price:

    Because our argument is confined to the business that originates in the Philadelphia area and this is — the Philadelphia area does not yet need a lending limit anything approaching $50 million.

    Earl Warren:

    I thought you –

    Philip Price:

    It was testified.

    Earl Warren:

    I thought you said a little while ago that a third of your business was commercial business was outside of —

    Philip Price:

    That’s correct, but it isn’t in the $55 million test.

    $15 million would put us in competition with six of the largest banks in New York, which we can’t compete with now and that would be enough to take care of the normal needs of the Philadelphia business, which now has to go to New York, because they want loans in the range of $10 to $12 million.

    Now if at some future day, business in Philadelphia required loans of $50 or $60 million that bridge can be crossed at the time.

    What Mr. Jennings testified that the reason for the so called concentration, which is found objectionable by the appellants, is to meet the existing need in particular localities of business, the local business.

    Now, we are not trying to take business away from New York, we are trying to keep business in Philadelphia which now goes to New York because it can’t be held, can’t be handled at all.

    Arthur J. Goldberg:

    [Inaudible]

    Philip Price:

    The participation is explained in considerable detail in the findings of fact and the opinion and I will summarize it only this way sir.

    They participate with correspondent banks to help them out, smaller banks as their correspondents, but they don’t participate themselves, banks or loans which are in the $10 or $15 to $20 million class.

    Any participation there is made by and directed by the borrower, not by the banks themselves.

    Arthur J. Goldberg:

    Why?

    Philip Price:

    Because it’s much too much trouble for large banks — large borrowers to establish commercial relationships with a number of banks.

    If they can go to one bank and get their entire needs.

    The banks that borrow a $150 or $200 or $300 million, I mean the businesses that borrow that, obviously can’t go to any one bank.

    Those are banks that already have established commercial relationship all over United States.

    So that when they’re borrowing a $100 million, they are passing out to bank ABCD throughout the country, the amount that they want intact and usually that’s $10 million to $15 million top limit.

    But banks themselves do not participate, in their point of view, they may lose a customer.

    But from the point of view of the customer, the customer doesn’t want to be bothered with that kind of arrangement.

    I yield to Mr. Littleton.

    Earl Warren:

    Yes.

    Arthur R. Littleton:

    Mr. Chief Justice, may it please the Court.

    I should like, if I may, to address myself at the outset to the Sherman Act, because in this case the Department of Justice has asked that an injunction issue against this merger under section 1 of the Sherman Act.

    Now the Sherman Act condemns unreasonable restraints.

    The un-contradicted testimony of numerous bankers, businessmen, economists is that not only there had been no unreasonable restraint, there will be no unreasonable restraint from this merger, there will be no restraint of any kind whatsoever.

    This Court has said that for an injunction to issue under section 1 of the Sherman Act, there must be a definite showing of illegality.

    The Department of Justice on whom the burden falls to show that has failed utterly to show any definite facts demonstrating the illegality of this merger.

    Instead of that, they have abandoned such oral testimony as was presented and they presented 100s of pages on it and rely entirely on statistics.

    Now, I’d like to discuss those statistics in a few moments, but right at this point, I should like to amplify what Mr. Price has said about the reasons for the merger.

    Arthur R. Littleton:

    This was not to monopolize, nor to insulate these banks from competition.

    It was for a perfectly good business reason, mainly the whole Philadelphia business, which has been going to New York and to other cities.

    The activities of the outside banks that is the bank’s foreign to Pennsylvania or foreign to the Philadelphia area which come into Philadelphia, our legion, Judge Loevinger would have you to believe and his brief would have you believe that this is de minimis.

    The footnote on page 10 on our brief indicates that in many, many, many places in this record where it is stated that Philadelphia fairly swarms with emissaries from outside banks.

    New York — not only New York, First Boston.

    First Boston National Bank is one of our biggest competitors.

    They have people in there all the time.

    Mellon Bank out in Pittsburgh, which is infinitely larger, very much larger than our bank, constantly in Philadelphia soliciting, even Dallas, Cleveland, St. Louis, because there are many cities in the United States much smaller than Philadelphia that have a larger bank and these banks come into these fast growing Philadelphia industries and get the business which should be going to Philadelphia banks and which would be going to the Philadelphia banks under the testimony of the businessmen, another bankers who were called, provided there was the bank with a lending limit sufficient to take care of their needs and with resources which would enable them to make the kind of loans that these enlarging and growing businesses require.

    It was demonstrated and there are exhibits to show that business and industry have grown in the Philadelphia area in the last 10 years at just twice the rate that the bank’s resources and the bank’s lending limits have grown.

    This is because of the great upsurge of business in the Delaware Valley.

    This is one of the main reasons and purposes of this proposed merger.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    Not at all, not at all.

    That doesn’t follow at all.

    It —

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    I suppose they are, but there is ample competition from outside as well as from inside the Philadelphia area or the four-county area that Judge Loevinger contends for.

    At all times, there’s infinite competition.

    As Mr. Price has said, there are 17 banks in New York with a lending limit of a $1 million or more.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    Certainly it would.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    I guess he would.

    Excuse me sir, I can’t see any reason why he shouldn’t be able to.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    No, he hasn’t.

    Excuse me?

    If you’d turn to page — if you’d turn to page 13 of our brief, you’ll see that a customer that wants up to a $1 million would have 7 alternative choices in the four-county area.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    Well, how many of you need to have competition, if Your Honor please.

    Arthur R. Littleton:

    This doesn’t effect competition in that area and it enables us to compete with the giants from the industry existing not only in New York, but in other parts of the United States that are coming in and getting this Philadelphia business.

    Now the Congress in adopting the Bank Merger Act of 1960 and incidentally, that is printed in full in the appendix to our brief, showed and the congressional record, I beg your pardon, the legislative history which is also in our appendix for a large part, also showed the considerations that were given and all the way through those debates and the reports of the Senate Committee and the reports of the House Committee, it is shown and demonstrated that Congress felt that banking should not be subjected to the same kind or restrictions or to be subjected to the same test as those under the Clayton Act, but they wanted to have some definitive statute and they passed the Act of 1960, which put in the hands in this case, because it’s a National Bank, of the Comptroller of the currency, the duty of ascertaining the facts relative to any merger where the resultant bank was to be a National Bank.

    They said that he should consider six banking factors or elements and also the possibility of the effect of the merger on competition or tendency toward a monopoly.

    Hugo L. Black:

    May I ask you one question relevant to that argument —

    Arthur R. Littleton:

    Yes.

    Hugo L. Black:

    Just as to the thrust of it?

    Are you — is your argument that the new act of Congress repealed the Clayton Act insofar that it applies to banks?

    Arthur R. Littleton:

    If Your Honor please, it didn’t repeal the Clayton Act, [voice Overlap] because the Clayton Act by its terms does not apply to banks.

    Hugo L. Black:

    I mean the sections which you refer —

    Arthur R. Littleton:

    Section 7?

    Hugo L. Black:

    Yes.

    Arthur R. Littleton:

    Of the Clayton Act?

    It is not apply to banks by its terms.

    My argument does not say it repealed the Sherman Act under which this action is brought for an injunction.

    The act of 1960, we argued —

    Hugo L. Black:

    You did not say that it didn’t repeal the Sherman Act to that extent?

    Arthur R. Littleton:

    We are not arguing that here.

    We argue that below if Your Honor please and there is a great deal of weight that can be given to it if you go through the legislative history of this case, but Judge Clary decided that against this below, because he said while he was greatly impressed that this is something that is intended by Congress to be left entirely to the Comptroller of the Currency in this case by the Federal Reserve that for it to be a State Bank, nevertheless he felt that the Sherman Act still applied.

    Now I would say to you that we consider whether we should raise it up here, the El Paso case came down in the mean time and that didn’t give us very much encouragement.

    We filed our brief and Pan America came down and while at first that made us wonder upon analysis, I don’t believe it could have been very much help in this situation, but we came to the conclusion if Your Honors please, that we have here so strong a case, because there is not one scintilla of evidence in this case and is so found by the District Court that showed that will be the slightest restraint or the slightest tendency toward a monopoly, and he is found that straight through and there is no countervailing testimony.

    Tom C. Clark:

    Well, then what was the objection of the Federal Reserve Bank?

    Arthur R. Littleton:

    The Federal Reserve Bank filed a report on the competitive aspects only, under this act of 1960.

    If it is one that needs to be determined by the Comptroller of the Currency, he has the authority, the jurisdiction, the responsibility to determine whether the merger should be approved.

    He asked for an advisory on the effect and competition from FDIC from Federal Reserve Board and the Attorney General.

    He is not bound by that.

    That is purely an advisor and —

    Tom C. Clark:

    Well, what — is there a report in the record, I glanced through it and it’s so large and [Inaudible] I was not able to find it.

    I wondered if there is a copy in the record?

    Arthur R. Littleton:

    Copy of the Federal Reserve?

    Tom C. Clark:

    Yes.

    Arthur R. Littleton:

    Copy of the FDI stage, copy of Federal Reserve.

    Tom C. Clark:

    You know the page [Inaudible] —

    Arthur R. Littleton:

    I’ll give it to you right away.

    Tom C. Clark:

    You probably would give it to me.

    Arthur R. Littleton:

    But while I am getting to page — may I just read you from the Senate Committee on banking and currency and the legislative record, the Committee wants to make crystal clear its intention that the various banking factors in any particular case maybe held out way the competitive factors and that the competitive factors, however, favorable or unfavorable are not in and of themselves controlling on the decision.

    And of course, the banking agencies are not bound in their considerations of the competitive factors by the report of the Attorney General.

    They will have much information in their own files and they may obtain information or advice on the competitive factors from other sources.

    The Committee Amendment is only intended to make sure that the banking agencies get a report on the competitive factors from the Attorney General in each case, but it’s up to the particular Administrative Officer and the very thing that you’ve mentioned if Your Honor please, the size of this record shows the wisdom of leaving it entirely in the hands of the Administrative Officer, to which the Comptroller of the Currency in this case, because he took months to go into all this and he came to his conclusion after he reviewed all the six banking factors, including the convenience and the needs of the public, which makes it a public interest test, a reasonable test as Your Honors had said under — in the Section 1 of Sherman Act cases.

    And if I had my choice, I would say that it ought to be left with the Administrative Officer, but I don’t think that we should argue that here, because if it’s decided against below and I say I don’t think the decisions of this Court would sustain us, but nevertheless it indicates.

    I would say to you if Your Honor please —

    [Inaudible]

    Arthur R. Littleton:

    That the Federal Reserve report is Government Exhibit 161 in the record 2822.

    William J. Brennan, Jr.:

    That’s the page.–

    Arthur R. Littleton:

    That’s the page.

    Hugo L. Black:

    28.

    Arthur R. Littleton:

    28 22.

    William J. Brennan, Jr.:

    Could you just say in a sentence and the fact what was the Federal Reserve report?

    Arthur R. Littleton:

    Federal Reserve report came to a conclusion that it would have an effect on competition and —

    William J. Brennan, Jr.:

    An adverse effect.

    Arthur R. Littleton:

    Adverse, adverse effect in competition.

    Earl Warren:

    As you indicated is, there is no competitive disadvantage, would you mind telling us why the — or what the Federal Reserve Bank said made it anti competitive?

    Arthur R. Littleton:

    Well, I think just size and concentration, the things that Judge Loevinger had been arguing here Your Honors, but you see, it’s an irrelevant —

    Earl Warren:

    You say you’d judge that — is that what they said?

    Arthur R. Littleton:

    That’s what they said.

    Yes, that’s what they said, but I submit to Your Honors that the Federal Reserve advisory report on competitive aspects of this is irrelevant in this situation.

    Here we had a two months’ trial.

    The Department of Justice could have called people from the Federal Reserve to come in and give their reasons and be subjected to cross-examination.

    The District Court said, he is not going to substitute the ex parte report of anybody who doesn’t come in and like all the witnesses that we had, the banker witnesses and the customer witness and the economists, who subjected themselves to searching cross-examination on this, he is not going to substitute or the decision of the man in whose hands Congress placed the responsibility for this job on such an ex parte untested report, which was written months in advance of this trial and was written without the advantage of hearing all the facts and figures which were developed at the trial.

    And for that reason —

    William J. Brennan, Jr.:

    I gather these advisory — are they ever conceded by their –-

    Arthur R. Littleton:

    They were not.

    What they’re doing now — I think each one of the banking bodies, the comptroller, the Federal Reserve, I think with this merger now they do have a hearing that which anybody can appear.

    William J. Brennan, Jr.:

    But they did not.

    Arthur R. Littleton:

    But they did not at this time, any place.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    Yes.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    Yes.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    That’s for the new merged bank, there is none now.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    No sir.

    Excuse me, there are two.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    Yeah, well, all right, false, but then —

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    Right sir.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    You see —

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    That’s right Mr. Justice Goldberg, a resident in Philadelphia, but you have Philadelphia swarming and teaming, where there was one witness who said that the New York bankers said, Philadelphia is a happy hunting ground of New York Banks.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    All right.

    Well it maybe so, probably not except that in Philadelphia we don’t have a big enough bank to properly compete with these giants?

    In Pittsburgh they do, in Boston they do.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    But of course, the competition that existed between the two disappeared, but it has to be significant competition.

    It has to be significant.

    Competition, this Court has said, it has to mean something, it has to be of some value, this has no value.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    That is right, that is right.

    To state it another way, we take the figures that Judge Loevinger insisted on yesterday, because he said he wanted to talk about people instead of dollars and he said that 96% in numbers of customers under $10,000 were in the four counties.

    All right, we will take that and rotate — we will accept this four-county area for purposes of argument.

    96% of these bank’s customers will have 41 alternative choices to go for their banking, how many more do you need to have competition.

    At the same time, at the other end of this scale, we will be able to compete in the big national market, not only for big national business, but to hold our own business.

    The Court found and made a definite find that this merger would bring many, many beneficial effects to the Philadelphia area and my time doesn’t permit me to go over all of them, but they are in our brief, because I want to move to the final point of my argument, which I believe is the touchtone in this whole case.

    Certainly, Judge Loevinger here has predicated his entire argument on it.

    Earl Warren:

    Mr. Littleton, I’d like to ask you just one question about the Federal Insurance Deposit Corporation, did they express an opinion?

    Arthur R. Littleton:

    They expressed the opinion that this would benefit competition and would be helpful to competition in the regional, national and international field, which is what we were trying to get.

    They said it probably would have some effect on local competition.

    Again, nobody from FDIC was called, nobody came.

    This was a report written long before this trial.

    They didn’t have the benefit of what was coming to the trial.

    May I ask Your Honors to turn to page 18 of our brief, because this is really the crux of this case?

    Now Mr. Price has demonstrated to you all I think that banks cannot control their deposits.

    Judge Loevinger made some statement yesterday that this big bank would be able to control its depositor and control it — controlling its borrowing.

    Judge Loevinger would think of that and reflect on it a minute, he’d see how unsensible that is, I don’t know where he has his bank account, but let’s assume he has it in the biggest bank in New York.

    He can change his depository right now by writing out a check for his balance and depositing them in the smallest bank in Washington and immediately he has affected a change and no matter how big the bank is, it couldn’t control him at all in doing that.

    If he had a loan outstanding, he could go to any bank in Philadelphia or Washington or New York because I assume Judge Loevinger’s loan would be a good loan [Laughter] and in less than 24 hours those banks would be delighted to take the loan over from the biggest bank in New York and the biggest bank in New York couldn’t stop it, of course there is no control.

    But let’s —

    [Inaudible]

    [Laughter]

    Arthur R. Littleton:

    He would be with me if I were a banker, but let’s accept the fact that even though we can’t control our deposits that this big risk of concentration, they use this nasty word concentration, what it means is their share of the banking assets in a given area.

    They say that would be 36% and in this if Your Honors please, I say is the touchtone of this case.

    If you look at page 18, it is a schedule of cities of over 100,000 populations with the concentration in the biggest bank in each as of June 30th, 1956.

    If we get down to Philadelphia, it is 79 and there we have inserted the concentration, which the Department of Justice claimed this bank will have after the merger and look there are 78 cities of 100,000 or more in the United States of America which have a higher concentration of banking assets in the lead bank in each of those cities than this bank would have after the merger.

    Well, now was there ever a better opportunity for the Department of Justice in any antitrust case to show, to predict what the effect of this concentration created by this merger would have on competition, what restraints it would produce?

    There they have 78 test tubes.

    They did not bring in a single witness from any one of those cites to say what the effect on competition in banking, this so-called concentration in the lead bank in each of those cities has.

    I don’t know whether they even looked into the test tubes, but if they looked they apparently didn’t like what they found and the reason they didn’t is because all the testimony in this case is to the contrary, namely that there is ample and active competition in banking in every one of those cities.

    Arthur R. Littleton:

    Now how can they come in here and say, sure we haven’t produced anything to show what’s going on in San Francisco, where they have a bank with 58.7% concentration.

    They don’t say there is no competition in banking in San Francisco.

    This great concentration in the lead bank in San Francisco is a restraint, while we know there is active competition in banking in San Francisco, but they haven’t tried.

    Look at Saint Paul, Minnesota 55.6% and in Duluth, Minnesota 44.7% and in Minneapolis, Minnesota 38.3%, all much higher concentrations than this merged bank will have and I assume that Judge Loevinger would have had ample opportunity and ability to produce witnesses from those three Minnesota cities to show if witnesses could be found to say that, “Oh yes, this concentration in the lead bank has completely blocked competition.”

    Hugo L. Black:

    Would you agree that he could ask the witness or just assuming the witness would tell us on some of the cities and say has this concentration in this bank reduce competition, and just asking that as a conclusion —

    Arthur R. Littleton:

    Well he could —

    Hugo L. Black:

    How is he going to prove it?

    Arthur R. Littleton:

    Well, he brought little bankers from little towns all over the United States, including one from some little town of 4000 in California to ask him about that, he could certainly have brought somebody from there.

    From San Francisco, why he goes all the effort to bring the little man from the town of 4000 in California instead of bringing somebody from San Francisco.

    Hugo L. Black:

    Isn’t it always a question in an antitrust case?

    I’m asking because I just want to view as to whether — to what extent competition has been reduced?

    Does it not necessarily follow that if you had 50 banks in a place and you suddenly merged all of them but six, the competition would be reduced whether anybody said it or not?

    Arthur R. Littleton:

    Well it might be sir, it might be sir, but that isn’t our case.

    Hugo L. Black:

    Well I understand it is not — it’s always a question of how many?

    Arthur R. Littleton:

    That’s right.

    Hugo L. Black:

    And of course, that’s the way it always starts and if you have — how low do you get before it becomes the —

    Arthur R. Littleton:

    We are trying, but this one merger case.

    Hugo L. Black:

    I would have to say that it is unreasonable, well that’s the problem.

    Arthur R. Littleton:

    We’re trying this one merger case —

    Hugo L. Black:

    I’m not saying it is easy.

    Arthur R. Littleton:

    Right.

    And they have not shown where Philadelphia is any different from any of these other cities.

    Hugo L. Black:

    Suppose not?

    Arthur R. Littleton:

    Why 36.2?

    Hugo L. Black:

    Maybe someone that knows something about these cities, who has lived in them or does live in them would know pretty well from having lived there or something, well that gave that bank [Inaudible] kind of runs that.

    Arthur R. Littleton:

    Well, then if it is up to the Department of Justice on whose shoulders the burden the proof is to produce such people.

    We produced one man from Camden and you’ll notice Camden has got a very high concentration.

    Hugo L. Black:

    [Inaudible]

    Arthur R. Littleton:

    We produced the President of not the First Bank, but one of the banks lower down on the list and we said to him, how about this concentration in your city in the Camden Trust Company.

    The man we called is President of the First Camden National.

    Hugo L. Black:

    He favored it, didn’t he?

    He favored reducing the number of banks, didn’t he?

    Arthur R. Littleton:

    No, he didn’t at all.

    Hugo L. Black:

    Well, what did he said about competition?

    Arthur R. Littleton:

    What he said was that the fact that Camden, the Camden Trust Company has this higher concentration of assets than we have doesn’t give it the slightest power.

    Hugo L. Black:

    Well, he was a lender, not a borrower?

    Arthur R. Littleton:

    Well, he was a very sophisticated banker if you please and he said that he was giving and he was interested in the success of his own bank and he said, they can’t affect us in anyway.

    Hugo L. Black:

    I would say that —

    Arthur R. Littleton:

    They can’t affect.

    Hugo L. Black:

    I would say that a banker would be sophisticated enough to know that we can reduce the number of lenders that he had to compete with, but he would have a more — it would be easier for him to —

    Arthur R. Littleton:

    He was there —

    Hugo L. Black:

    [Inaudible] he wanted.

    Arthur R. Littleton:

    He was there to testify, and he did.

    He was there to testify as to whether the fact that the Camden Trust Company, a bank much bigger than his had 55% of whatever the percentage was of the banking asset had anti competitive effect on him and he said, “No, we compete everyday.”

    They said, they can’t —

    Hugo L. Black:

    Did he say anything about lenders, about borrowers?

    Arthur R. Littleton:

    He said we make loans.

    They can’t control us in the loans, they can’t control us in interest rates, they can’t control us in service charges.

    And he says, it’s not only us it’s the other smaller banks, they are all competing.

    There is no, there is no bad effect on competition, simply because the lead bank so-called, the number one bank has this so-called concentration of assets.

    Hugo L. Black:

    You would agree here that they would at some point at which it would have an effect on competition, wouldn’t it?

    Arthur R. Littleton:

    You mean the merger and merger and merger?

    Hugo L. Black:

    That’s right.

    Arthur R. Littleton:

    Oh!

    Certainly there’d be some point, but that would have to be determined by the facts.

    And all the facts that have been brought out in this merger by bankers, by the very competitors that Judge Loevinger says he is trying to protect from anti competitive effects or restraints from this merger.

    They were the ones, who came in and said, but this merger is not going to hurt us, there is no way in which it can do anything but help us, it will bring more business in.

    There will be a greater pool of credit in Philadelphia.

    We will share in this.

    It will bring business in the industry in Philadelphia.

    Arthur R. Littleton:

    We’ll lend maybe to them, we maybe the second bank, we’ll lend to the satellite companies, it will come around a big company.

    We will lend to the individual officers and employees.

    This is going to be good for Philadelphia.

    Hugo L. Black:

    That would be somewhat wouldn’t it, like getting one of the automobile manufacturers and process where they — being reduced from year-to-year, one of them to testify that he wasn’t hurt by the fact that the competition was being reduced to fewer and fewer businesses.

    Arthur R. Littleton:

    Well I submit to Your Honor that if there are 41 banks left in the area, which the Department of Justice has picked out which we accept for purposes of argument that is not being reduced very, very much.

    Hugo L. Black:

    I’m asking you these questions, because I realize the difficulty of [Inaudible].

    Arthur R. Littleton:

    Yes but the burden —

    Hugo L. Black:

    How you prove it?

    Arthur R. Littleton:

    Here, here —

    Hugo L. Black:

    Whether you have to have evidence and if so, what evidence?

    Arthur R. Littleton:

    Well, it’s the Department of Justice who has to produce the evidence.

    Our evidence was that there is ample and active competition in every one of these cities, which has a higher concentration of assets in the lead bank than the Philadelphian National and Girard will have after they are merged and that is shown on page 18.

    Hugo L. Black:

    Well –-

    Earl Warren:

    I’m looking at page 18 and I notice that the one with the lowest concentration in any of these 110 cities is the one that you [Inaudible]

    Arthur R. Littleton:

    Yes, New York, because that’s where the giants in the industry are, of course.

    Earl Warren:

    But there is no one over 21% there and you already have 36%.

    Arthur R. Littleton:

    Well, that doesn’t have any effect on us.

    I mean that doesn’t relate to us.

    Earl Warren:

    Well, then if that doesn’t have any affect on you, why do the rest of these figures or why are they so important that the New York —

    Arthur R. Littleton:

    The ones that we —

    Earl Warren:

    The New York figure that is your greatest competitor you say, the one that is taking all your business away doesn’t have more than 21% concentration in any one of its biggest banks, why then do these others that have different percentages help you?

    Arthur R. Littleton:

    I don’t think the two things are related if Your Honor please.

    The reason that in New York, the biggest bank only has 21% is because there are a lot of giants of almost equal stature in New York, all of which come over and compete with us.

    Now you take the other cities that I speak of, the 78 [Inaudible]

    Earl Warren:

    Chicago only has 25?

    Arthur R. Littleton:

    That is right, because you have giants in Chicago, but look at San Francisco, look at Los Angeles, look at Detroit, look at Boston all of which have bigger banks than we have.

    There the concentration in the lead bank is much greater than ours.

    The point I’m trying to make if Your Honors please is if there is no adverse effect on competition, if there is no restraint in those 78 cities, how can the Department of Justice come in here and say because Philadelphia will have a lead bank with 36.2% for the banking assets after this merger, there is bound to be a restraint.

    The way for them to prove it was to bring people into show that there was such a restraint in these other places.

    What’s peculiar about Philadelphia?

    Arthur R. Littleton:

    They haven’t shown any peculiarity about Philadelphia.

    Why should we be kept in this position?

    Hugo L. Black:

    May it not be true, I realize the force of your argument, but look at Gary, Indiana, 88 and four-tenths of a percent, do you need much proof there to think that they might be [Inaudible]

    Arthur R. Littleton:

    We had used the proof by people who knew.

    Hugo L. Black:

    From Gary, Indiana?

    Arthur R. Littleton:

    From every one of these cities.

    Hugo L. Black:

    88 and four-tenths of a percent.

    What do they say about Gary?

    What is the population of Gary?

    Arthur R. Littleton:

    The comptroller — the First Deputy Comptroller of the Currency, the man who had formerly been First Deputy Comptroller of the Currency stated that he had made a study, that the Comptroller of the Currency’s office had made a study three years before of all cities over 50,000 and with one slight exception, every city with a greater concentration in the lead bank than Philadelphia will have after this merger is enjoying adequate and ample banking competition and the public is being served.

    Hugo L. Black:

    Did that include Gary?

    Arthur R. Littleton:

    I don’t know whether it included Gary or not.

    Hugo L. Black:

    I would think if these figures might indicate to me that it has drawn influence that maybe the comptrollers has not been controlling them much, if they then done this by merger, if they’ve done this by merger —

    [Laughter]

    Arthur R. Littleton:

    If Your Honor please, I think you picked onto Gary, but you got to remember it, you probably want —

    Hugo L. Black:

    That’s one on the list you showed me.

    Arthur R. Littleton:

    That’s right.

    The proximity of Gary to Chicago, you see Gary is right next to Chicago.

    And this naturally has that effect and they’re in competition, you see they are in the competition with all the Chicago banks for the business just as we are with New York.

    William J. Brennan, Jr.:

    Mr. Littleton is there any evidence in the record or the reaction of the other Philadelphia banks in this view?

    Arthur R. Littleton:

    Yes, sir.

    We called eight or nine heads of other banks large and small and they are in agreement that this merger would be a good thing for Philadelphia; it would not affect them competitively.

    There would be no restraint.

    They’d be able to compete just as well as they’re and the competition in banking in Philadelphia is right at this height, right at this height sir.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    No, sir.

    Arthur J. Goldberg:

    [Inaudible]

    Arthur R. Littleton:

    No sir, there was no [Inaudible]

    Tom C. Clark:

    Mr. Littleton I understand [Inaudible] there is no controversy [Inaudible] in relevant market?

    Arthur R. Littleton:

    Judge Loevinger said yesterday that Judge Clary had predicated his opinion on a mistaken view of the market.

    Arthur R. Littleton:

    Judge Clary didn’t.

    He didn’t agree with them that the four-county area was the relevant market, neither did we, but Judge Clary accepted it for purposes of argument and made all his findings and wrote his opinion as if the four county area is irrelevant.

    We are doing exactly the same thing in this argument.

    We are not making any point of that here.

    Although, it is the most tortured lot of statistics that they put in there, because they do not pay any attention to the 43% of our loans that come from outside and incidentally, if Your Honor please, right over in Camden, RCA, one of our good customers, would be a better customer if we had greater resources and had a higher lending rate, that they will not even include in our relevant mark.

    Tom C. Clark:

    I take it then we should consider the four counties as relevant?

    Arthur R. Littleton:

    We are perfectly satisfied if you consider the four counties as relevant, because the testimony of the witnesses, it seems to me is unanswerable.

    It hasn’t been answered by government.

    All they do is bring in these statistics that after this merger we will control 36.2% of the banking assets in the Philadelphia area and I say that that table on page 18 completely destroys that as the argument.

    William J. Brennan, Jr.:

    Well Mr. Littleton well if that is — we can accept the premise that the market in the four county area, does that now hold at least for the Sherman Act problem we have decide, the issue be reasonable?

    Arthur R. Littleton:

    Well it narrows it in the fact that it seems to me that if you start with a relevant market of the four counties, if you are willing to accept it, I should think you would want to consider it a little, because it goes so against the reality —

    William J. Brennan, Jr.:

    I know, but why should we, if Judge Clary and you argue it here on the premise without quarrelling over it, why shouldn’t we approach the decision and if we did then would we have to decide anything except the issues reasonably?

    Arthur R. Littleton:

    That’s right.

    Thank you Your Honor.

    Earl Warren:

    Mr. Loevinger.

    Lee Loevinger:

    Chief justice, may it please the Court.

    Hugo L. Black:

    May I ask you before you start?

    Lee Loevinger:

    Yes, sir.

    Hugo L. Black:

    Do you agree that Section 7 of the Clayton Act does not apply to bank?

    Lee Loevinger:

    No, sir.

    As a matter of fact, I think there has been a little misapprehension about that, Your Honor.

    The Court below held that it did apply to banks.

    It was held that it did apply to banks by the Court of the Third Circuit in the Transamerica case.

    The argument in this case is whether or not the transaction involved here comes within the scope of Section 7 of the Clayton Act as an acquisition of stock rather than assets.

    I’d like not to get into that because it’s a narrow technical point.

    Hugo L. Black:

    I didn’t understand the statement made, but you said that [Inaudible] just everybody knew that Section 7 didn’t apply to banks.

    Lee Loevinger:

    No, sir.

    Hugo L. Black:

    [Inaudible]

    Lee Loevinger:

    The Court below held that it does and it has been held that its does, I think it’s clear that it does.

    The question is, as to the character of the transaction and because of the narrowness of that point.

    Lee Loevinger:

    I would rather rest it on my brief than proceed to the discussion of the merits of this case.

    William J. Brennan, Jr.:

    Mr. Loevinger if you are right.

    If your argument in the brief is right, certainly it’s a different problem, isn’t it, that Section 7 applies?

    [Inaudible] very different —

    Lee Loevinger:

    I think the case is so clear under Section 7 that there is no use discussing it and I want to discuss the —

    Hugo L. Black:

    Well, why discuss the other then?

    Lee Loevinger:

    Sir.

    Hugo L. Black:

    Why discuss the other four under Section 7.

    I don’t understand?

    Lee Loevinger:

    Because there is a question as to the character of the transaction involved here as to whether or not it is a stock rather than an asset acquisition.

    William J. Brennan, Jr.:

    But if we agree with your position then certainly the tendency too is a very different test.

    Lee Loevinger:

    Yes, sir, but I think that the restraint of competition in this case is so clear that the issue ultimately presented to this Court and which this Court should decide is whether a restraint in a market as large, important and significant as Philadelphia can be justified by an alleged or supposed advantage in a small national submarket or a small national market for multi-million dollar loans.

    This is the business justification that Mr. Justice Goldberg was talking about and that I think is the crux of the case and perhaps I should —

    Hugo L. Black:

    Are you raising your claims under 7?

    Lee Loevinger:

    No sir, I am resting on the brief, sir.

    You find the Sherman Act question [Inaudible]

    Lee Loevinger:

    Yes, sir this case is complex and difficult and that involves enough figures as it is, without getting into the technicalities of the precise transaction and as to whether stock or asset acquisition involved in this long agreement drafted by Philadelphia lawyers.

    [Inaudible]

    Lee Loevinger:

    No, sir.

    I think that you got exactly the same problem.

    I think there isn’t any real dispute as to the fact.

    I think real dispute is that the legal test applied by the lower Court.

    [Inaudible] figures and you are asking us to overrule findings of the district court made [Inaudible] both sides?

    Lee Loevinger:

    No, sir.

    [Inaudible] stand in this Court, it seems to me asking us to overturn findings made by the district court not on the basis of [Inaudible]

    Lee Loevinger:

    No, sir.

    I disagree wholly with Your Honor, and I’d like to tell you why. In the first place, it is not live testimony as it has been represented.

    For example, this alleged testimony about Gary, Indiana was testimony by Mr. Jennings who had one time had been a Deputy Assistant Comptroller, but is now President of the largest bank in Texas and was at that time that he testified.

    And his testimony was that he thought that there was plenty of competition in Gary, Indiana even though it had approximately 90% of its assets in one bank.

    And he is the man who testified and this is the testimony they rest on that the two banking alternatives is plenty for anybody who is seeking a bank loan.

    Hugo L. Black:

    [Inaudible] he ever borrowed any money and [Inaudible]

    Lee Loevinger:

    No sir, he didn’t.

    [Laughter] The banks have referred to this table on 18 as heart of their case.

    I call the Court’s attention to the fact that the concentration ratio was essentially inverse to the size of the community.

    And that New York and Chicago as the Chief Justice noted are close to the [Inaudible] Now, it is true that we didn’t call any people from all of these 100 communities, they mentioned Saint Paul, Minneapolis and Duluth.

    It might be of interest to know at the time of the trial, witnesses in those cities from the banks were being called before a grand jury and within the last two weeks we’ve returned three indictments and filed three civil antitrust suits in Saint Paul, Minneapolis and Duluth with respect to banking.

    I don’t think that they can make very much out of that.

    As far as live witnesses, the fact is that the banks themselves called no live witnesses from the other six to eight banks in Philadelphia.

    They called banks only from small — witnesses from small satellite banks that have large deposits or that held stock in one of the banks involved in the present merger.

    Further, it is perfectly clear as we point in our reply brief that when these banks say that competition would be increased what they are saying is in the words of one of the witnesses, competition will get worse.

    We’re going to have to work harder and compete harder in the face of the advantages of the merged bank in order to maintain our place.

    This is what they mean when they say that competition will be increased or competition will remain the same, because the merged bank will have so much of an advantage that the other banks will be at a disadvantage.

    Now, it’s true that we’re resting on statistics to a large extent, but I take it that this means that what we are using is facts instead of speculation and I call the Court’s attention to page 18 of our reply brief, for example.

    There is all this talk about; you need a big lending limit in order to compete with the New York banks.

    Now here are the — according to the defendant’s own exhibit, Exhibit 1 here are the amounts of loans in other cities that the New York banks have ranged according to size.

    And I call the Court’s attention to the fact that of the cities that had more loans from New York banks, most of them have larger lending limits in Philadelphia.

    There is simply no relationship between this large lending limit and the amount of business done in a community by the New York banks.

    That business done in a community by the New York banks is governed by the need for the specialized kind of services that the defendant’s own witnesses testified they got from the New York banks in the international market with respect to specialized oil departments and other things of precisely this character.

    Now, when you talk about business justification, the best example or the best evidence of what the business justification can be in this national multi-million dollar market is what it actually has been.

    It’s very easy for a banker to get up and say, well, we’d like to compete with the Bank of London and the Chase Manhattan and these big banks, we would love to be in this big market.

    What have they done?

    Both these banks here have ample lending limits and ample funds to get into the multi-million dollar market now and so, they can loan up to $6 million and $8 million respectively.

    There are $5 million or more loans amount to 9 in total number and $56 million in total amount.

    This is less than one one-hundredth of a percent of the total number of loans less than 6% of the total amount of loans.

    So that for this market or submarket, they are going to sacrifice competition in the Philadelphia market and I submit that whatever the rule of reason may dictate in other situations that, that cannot be a sufficient business justification for this kind of a merger in this situation.

    Now, Mr. Price has argued that there is a difference between banking and other types of business.

    He has said that the difference between banking and other types of business is the significance of deposits, now precisely we concede exactly that.

    It is perfectly true banks don’t manufacture their raw material or their products as other businesses do, they are dependent on deposits and that is the — but what Mr. Price or Mr. Littleton failed to do is to point out the significance of this fact.

    The significance of this fact is that when you combine banks controlling 36% of the deposits in Philadelphia, you have eliminated competition from 36% of the market in Philadelphia, because it is the deposits, which constitute the pool from which the loans are made.

    This isn’t a matter of one less out of 40 banks.

    Lee Loevinger:

    This is a matter of the credit pool from which loans can’t be made, being combined in two massive chunks of 15 and 21%.

    So the 36% of it constitutes a single unified control and there isn’t any question that they do in fact control the 36% of the deposits in Philadelphia.

    It’s perfectly obvious that the smaller banks are going to have their credit pool exhausted long before this massive bank that has more loans than all the 35 small banks and three times as many, as I recollect the 35 small banks, but together each one of these banks has more deposits than all the 35 small banks put together.

    So that this isn’t eliminating one bank, this is the equivalent of wiping out all 35 small banks in Philadelphia as active competitors in the loan pool.

    Mr. Clark or Justice Clark or Justice Brennan, I believe asked for the report of a Federal Reserve Board of Governors, this is worthy of a note.

    This is what the Federal Reserve Board of Governors said, and I quote, “The proposed consolidation of two of the three largest banks in the area would substantially less in both existing and potential competition.

    The resulting bank would obtain dominant position with pending competitive advantages which is strongly adverse to the preservation of the effective competition,” at page 2834.

    Now, it has been said that we called no witness from the Federal Reserve Board, it’s perfectly true.

    No witness appeared for the comptroller either and it is significant, the Federal Reserve Board opinion is preceded by an extensive analysis with many facts with careful reasoning that leads up to the conclusion.

    The decision of the comptroller was simply as far as we can ascertain an oral decision rendered go ahead and merge boys and the only thing — the comptroller held no hearings, the comptroller took no evidence aside from what was submitted to him by the advisory agencies and the banks, the comptroller wrote no opinion, the comptroller gave no reasons for his opinion and the only thing from the comptroller that appears is a letter of approval that appears at page 3049 that’s dated February 28th, three days after this lawsuit was started, because it refers to the lawsuit.

    So that if any weight is going to be given to the opinions of Federal Regulatory Agencies, I respectively submit that the Federal Reserve Board opinion on its face is entitled of vastly more weight than the opinion of the comptroller and that the conclusion that it comes to is indubitably the correct conclusion.

    And faced with that issue of whether or not in the minute, not minute, let me strike that from the record — that in the national market for multimillion dollar loans, you are not entitled to give a questionable and small advantage to these banks at the expense of competition in the whole vast Philadelphia market.

    [Inaudible]

    Lee Loevinger:

    Two months to be precise sir.

    [Inaudible]

    Lee Loevinger:

    No, sir.

    I said that his approval was rendered three days after the lawsuit in this case was — or his letter of approval was dated three days after we filed our lawsuit.

    Our lawsuit was filed February 25th, 1961, his letter was dated February 28th it appears in the record at page 3049 and refers to the fact of the pending lawsuit.

    [Inaudible]

    Lee Loevinger:

    It should be looked at from the point view of the customers and of the competitive bank sir.

    I understand that [Inaudible]

    Lee Loevinger:

    Precisely, yes sir.

    [Inaudible]

    Lee Loevinger:

    Yes, sir and that is why we think that the restraint is so indubitably clear.

    Mr. Littleton has argued before the Court and it’s clear on the record that over 99% of the customers of both banks are borrowers — of the borrowers are under $50,000 borrowers.

    And therefore, by the clear and unequivocal testimony confined to the Philadelphia market, within that market the proposed, by their own statement, the proposed merger would combine 36% of the available credit pool into the control of a single bank and would deprive the customers of the alternatives presently before them with the division of this 36% between at least two banks.

    So, I think that from the viewpoint of the customers, there can’t be any question that there is a significant and substantial and important restraint or limitation upon competition.

    Hugo L. Black:

    What is the percentage of the next largest bank?

    Lee Loevinger:

    The next largest bank would be about 50%, against smaller, the figures as I gave them yesterday and as I recollect them Your Honor are that this bank would have assets amounting to 37% of all the bank assets in Philadelphia.

    The next largest bank would have — it would be 50% larger than the next largest bank, three times as large as the third bank and larger than all the remaining banks put together.

    Hugo L. Black:

    What you have is a combination of the two largest banks, is that it?

    Lee Loevinger:

    These are technically the second and third largest bank, but at the present time, the Philadelphia National and the First Pennsylvania Company, which is the largest are very close and in some respect the Pennsylvania, the Philadelphia National is larger.

    There are essentially two important large banks in Philadelphia that are —

    Hugo L. Black:

    This will leave two large banks.

    Lee Loevinger:

    Yes sir.

    Hugo L. Black:

    How does that figure — what’s the relative figure or percentage?

    Lee Loevinger:

    This one would be 50% larger than the second bank, three times as large as the third bank and as large as all the remaining banks combined plus some left over.

    William J. Brennan, Jr.:

    That’s understandable with evidence of some of these other Philadelphia banks that this would be a good thing both for them and for their customers, is that it?

    Lee Loevinger:

    No sir, I deny that.

    Mr. Horne President of the Broad Street Trust, when called — asked whether or not a merger of a bank giving it a larger lending limit would be good, he said as a matter of pride, yes.

    As a matter of competition, I don’t know.

    That’s the largest Philadelphia banker that was called or the representative of the largest Philadelphia bank.

    The representative of other banks said, it would increase competition and what they clearly meant was that they were going to have to the work harder to maintain their position in the face of the advantages held by the merged bank and several of them made this perfectly clear.

    The testimony is cited in our replied brief —

    William J. Brennan, Jr.:

    Was there any specific fact finding by Judge Clary on this subject?

    Lee Loevinger:

    Yes, I believe Judge Clary said that the competition would be increased in Philadelphia and he referred to this kind of testimony.

    Hugo L. Black:

    Did anyone of them testify that increased competition to the extent that the banks from which this man was testifying might have to lend money at a lower rate?

    Lee Loevinger:

    No, sir.

    There is no testimony that this would have any effect on rates directly.

    William J. Brennan, Jr.:

    Would you agree — I think Mr. Price told us, it couldn’t have any effect on rates.

    Lee Loevinger:

    No, sir, I disagree.

    I think that this is wholly false —

    William J. Brennan, Jr.:

    Maybe be I misunderstood Mr. Price?

    Lee Loevinger:

    He did say that and this is one of the points I – Mr. Price suggested if I recollect correctly that rates are controlled.

    This not only is not true but the thing that we are seeking to do here to preserve competition is necessary to the Federal system of regulation.

    The Federal Reserve Board does not undertake directly to control interest rates.

    Interest rates are not set by the Federal Reserve Board —

    William J. Brennan, Jr.:

    What is the fact among the Philadelphia banks today, they all charge the same rates or?

    Lee Loevinger:

    No, sir.

    There are varying rates, there are varying service charges, there are differences in service charges and in rates between the two banks involved here and there is in evidence the report of task forces, setup by these two banks to determine what the rates should after merger and the Court found and it is the fact that in every case the rate adopted was the one more favorable to the bank and less favorable to the borrower, but with respect to this matter of the regulation of rates sir, if I may explain our view.

    Lee Loevinger:

    In fact, what the Federal Reserve Board does is set the so-called rediscount rate, which is essentially the rate at which the banks can borrow.

    Now it is indispensable to the influence upon the economy of this rediscount rate that the rates to private borrowers should flexible enough, so that they follow the rediscount rate move up and down as a Federal Reserve Board establishes the rediscount rate.

    If there is monopoly or restraintive trade or other inflexibility in the banking system, then the banks cannot respond in moving their interest rates to follow the rediscount rates, so that the whole scheme of federal influence upon the economy falls.

    And there is no direct control by the Federal Reserve Board, there is simply an indirect influence through its ability to set the rediscount rates and if we permit restraint, if we permit monopoly, its influence is reduced and eventually to nothing.

    Arthur J. Goldberg:

    [Inaudible]

    Lee Loevinger:

    Yes Sir.

    Arthur J. Goldberg:

    [Inaudible]

    Lee Loevinger:

    Yes sir.

    Arthur J. Goldberg:

    [Inaudible]

    Lee Loevinger:

    Yes sir.

    Arthur J. Goldberg:

    [Inaudible]

    Lee Loevinger:

    Yes sir.

    Arthur J. Goldberg:

    [Inaudible]

    Lee Loevinger:

    The merger has no other point sir.

    There would be no reason for a merger, if it didn’t give it a competitive advantage.

    Arthur J. Goldberg:

    [Inaudible]

    Lee Loevinger:

    As a matter of fact, there is a specific testimony on that sir from the President of the Girard bank, who got up and testified that one of the reasons for the merger was that they were spending too much time competing with each other.

    And that if they could have this merger, they could stop wasting their energy competing with each other and go out into the national and the international field and spend their energies there.

    This was his testimony as to the reason for the merger.

    May I ask you a question?

    Lee Loevinger:

    Yes sir.

    You said yesterday [Inaudible]

    Lee Loevinger:

    Yes sir.

    [Inaudible]

    Lee Loevinger:

    I believe that when you talk about relevant market, this is a conclusion of law sir.

    The fact that it’s denominated to finding a fact is insignificant.

    The facts are perfectly clear and in fact, the Lower Court adopted or affirmed numerous of the findings of facts proposed by both sides.

    Among those, it included a finding proposed by the defendants that the relevant market was not Philadelphia.

    I think that this is so clearly observed that it’s scarcely deserves a very serious consideration, because the fact is that Philadelphia is a market and is relevant to this case.

    The question is whether or not the affects of this merger in the Philadelphia market are to be disregarded, because of the potential advantage in the national market, which the Court directed its attention to.

    [Inaudible]

    Lee Loevinger:

    Yes sir.

    [Inaudible]

    Lee Loevinger:

    Yes sir.

    I think this is a conclusion of law, not a finding of fact and I think that none of the facts that are specifically found as such, when they are separated out from the conclusion of the Court below need to be reversed.

    [Inaudible] the effect on competition is pertinent?

    Lee Loevinger:

    Yes sir.

    And those findings [Inaudible]

    Lee Loevinger:

    No, sir because again these are conclusions.

    The Court and the findings that it found are specifically — the proposed findings are all key to testimony, the findings are key to testimony of the kind that I’ve referred to, a team of bankers who said the merger would increase competition meaning, we’re going to have to work harder if this merger is permitted.

    The President of I think it was one of the — I have forgotten which organization said “We are going to have to compete harder, because the merged bank will have more offices and will do more advertising then we will so we’re going to have to work harder.”

    Another witness said, “The competition in his words were; will get worse” and what he meant was that we are going to have work harder.

    This is all cited in our reply brief sir, set out there and it is perfectly clear what is meant by so-called increased competition.

    What is meant by increased competition in this sentence is increased competitive pressure on the other Philadelphia banks.

    William J. Brennan, Jr.:

    You mean in effect, we are going to have to struggle harder to hang on to what we have got?

    Lee Loevinger:

    Yes sir, precisely this is what they said in almost those words.

    Thank you, sir.