Blocking Bank Mergers

PUBLIC POLICY

Banking is one area where Bobby Kennedy's trustbusters have found the going rough. Legal interpretation has prevented them from blocking bank mergers that the U.S. Comptroller of Currency has approved -- and over the years comptrollers have been reason ably permissive about mergers, partly to compensate for the fact that banks are strictly regulated by federal and state agencies. Last week the U.S. Supreme Court, which has been a vigorous trustbuster lately, opened the banks to Bobby. It ruled that the Justice Department may bring unlimited suits against banks under the Clayton Act's broadly worded and controversial Section Seven, which bans mergers whose effect "may be substantially to lessen competition, or tend to create a monopoly." Voting 5 to 2, the court upheld the Justice Department's protest against the previously approved merger of Philadelphia's second and third largest banks, Philadelphia National and Girard Trust, which together would control 36% of the city's banking assets. The Justice Department now hopes to block pending mergers in Arizona and Kentucky that would create concentrations of more than 50% of the local banking business. It will also try -- with some what less chance of success -- to dissolve the proposed merger of three Milwaukee banks (20% of the city's assets) and the recent linkups that created the Continental Illinois National Bank (with 25.5% of Chicago's assets) and Manhattan's Manufacturers Hanover Trust Co. (13% of New York City's assets).

The substantial effect of the court's decision should be to reduce future attempts to merge by bankers everywhere.

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