Section 7 of the Clayton Act and “Control” in Bank Holding Company Regulation
Author | James F. Falco |
Published date | 01 December 1973 |
Date | 01 December 1973 |
DOI | http://doi.org/10.1177/0003603X7301800402 |
SECTION
7 OF
THE
CLA
nON
ACT
AND "CONTROL" IN
BANK
HOLDING
COMPANY
REGULATION
by
JAMES
F.
FALco·
I.
INTRODUCTION
AND
BACKGROUND
At
the timeof the enactment of the
Bank
Holding Com-
pany
Act of
1956,1
the
Board
of Governors of the
Federal
Reserve System" estimated
that
there were46 bankholding
companies
that
would be subjected to
its
regulation because
of the Act's definition of a bank holding company as a com-
pany
owning 25%
or
more of the shares of each of two
or
more banks."The
BHCA
defined a "company" in such man-
ner
as to specifically exempt so-called one-bank holding com-
panies,
that
is, companies managing
or
controlling no more
than
a singlebank," from BHCA coverage and, therefore,
federal regulation. One-bank holding companies were specifi-
cally exempted from federal regulation of the formation and
expansion of bank holding companies because they were few
in number;
their
relevance to the two principal problems
zeroed inon by Congress in enacting the regulatory legisla-
tion" was speculative"
and
inconsistent with the philosophy
•Antitrust Division, Department of Justice, Washington, D.C.
I12 U.S.C.
§§1841-49
(1956), as amended 12 U.S.C.
§§1841-50
(1970) [hereinafter BHCA].
•12 U.S.C.
§1841
(f)
[hereinafter Board].
8S.Rep.1095, 84thCong., 2dSess.(1956),reprinted in1956 U.S.
Code
Congo
&Ad.News2482, 2483[hereinafter 1956 Legis. Hist.].
4
ld.
at
2488.
II
ld.
at
2483:
"(1)
The unrestricted ability of a bank holding
company group to
add
to the number of its banking units, making
possible theconcentration of commercial bankfacilities in a par-
ticular area under a single control andmanagement; and (2) The
combination under single control of both banking and nonbanking
enterprises, permitting departure from the principle that banking
institutions should not engageinbusinesswholly unrelated to bank-
ing.Suchacombination involves thelending of depositors' money,
715
716
THE
ANTITRUST
BULLETIN
of the bill"
prepared
by the Committee on Banking
and
Cur-
reney," As originally enacted, the BHCA, in terms, did not
immunize violations of existing law;
nor
did
it
create any
defenses to
"any
prohibited
antitrust
or monopolistic act,
action, or conduct." \I
Following the Supreme Court's decision in United States
v. Philadelphia National Bank, which held
that
Section 7 of
the Clayton
Act
applied to bank mergers despite enactment
of the Bank Merger Act of 1960
;10
and, Congress' subsequent
amendment of the Bank Merger Act to provide, inter alia, a
unique affirmative merger defense
for
banks shown to be in
prima
facie violation of Section 7 of theClayton Act, the
so-called "convenience and needs" defense
not
available to
nonbanks P! Congress passed the first amendments to the
BHCA
in 196612
that
made available the unique
antitrust
whereas other types of business enterprise,
not
connected with bank-
ing, do notinvolve this element of trusteeship."
6[d. at 2488-89:
"It
is.possible to conjure upvisions of monopo-
listic control of banking in a given area through ownershipof a single
bank with many
and
widespread branches.However, in the opinion
of your committee, no present danger of such control through the
bank holdingcompanydevices threatens to a degree sufficient to war-
rant
inclusion of such a company within thescope ofthis bill. Should
legislation of
that
nature
prove desirable in the future, the Congress
is free toact upon ashowing of needforsucha law."
7[d.
at
2482:
"In
general, the philosophy of this bill is
that
bank
holding companies ought to confine
their
activities to the management
and
control of banks
and
that
such activities shouldbe conducted in a
manner consistent with the public interest."
8
Id.,
"The Committee on Banking
and
Currency, to whom was
referred thebill(S. 2577)todefine bank holdingcompanies, control
their
future expansion,
and
require divestment of their nonbanking
interests
....
"
912 U.S.C. §1849 (1956), as amended12 U.S.C. §§1849(a)-(f)
(1966).
10
374 U.S.321(1963).
11
United States v. First CityNational Bank of Houston, 386 U.S.
361 (1967); United States v. Third National BankinNashville, 390
U.S. 171 (1968).
:ut Act of
July
1, 1966, Pub. L.No. 89-485, §7,80' Stat. 237,
amending 12 U.S.C. §1842 (1956).
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