[Congressional Record Volume 144, Number 43 (Monday, April 20, 1998)]
[Senate]
[Page S3246]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    MERGERS IN THE BANKING INDUSTRY

  Mr. DORGAN. Mr. President, I wanted to mention a couple of subjects 
on the floor of the Senate today. The first deals with the proposed 
marriages occurring in the banking industry. In recent weeks, we have 
seen proposals of marriage by a number of our biggest banks, totaling 
some $160 billion. Three of the largest merger proposals include 
Citicorp with Travelers--actually a very large bank with an insurance 
company, NationsBank and BankAmerica, and Banc One with First Chicago. 
I didn't even know there was any romancing going on, and then I open 
the papers and see that all these banks want to gather up and get 
married and be one.
  I think the fundamental question for this country is whether these 
mega mergers serve our economy and our country's best interests? Is 
this good for our country? Will this better serve customers, or will it 
result in bigger profits, perhaps, for the banks that merge and higher 
fees for their customers?
  It is clear to me that the kinds of mergers we are once again seeing 
in this country mean that when two large corporations become one and an 
even larger corporation, there is less competition in our economy. When 
there is less competition and, therefore, more concentration, it seems 
to me it clearly injures the market system which relies on competition 
as a regulator and, by definition, is therefore not good for consumers. 
Without knowing the specific details, I admit, about the individual 
proposals in these mergers, I hope very much that the regulators, the 
Federal Reserve Board and the Comptroller of the Currency as well as 
the Justice Department, will review all of these mergers with a fine-
tooth comb and determine whether this will result in less competition 
that is harmful to consumers, whether it will result in ever higher 
banking fees for their customers, whether it will result in something 
that takes us a step backward rather than a step forward in improving 
our market system in this country.
  As I indicated, I don't know much about the specifics of any of the 
merger proposals I have just described. It is not my intent to come and 
describe the deals or to pass judgment upon them. But I will say this: 
The judgment I have with respect to many of the largest mergers in our 
country, especially in this industry, is that we are left with less 
competition if the merger is approved.
  With respect to this industry, there is one peculiar and defining 
characteristic. The Federal Reserve Board determines by policy that 
there are certain banks in this country that are so-called ``too big to 
fail.'' That is, they are so large in scope that their failure would 
cause such an economic calamity for the country that the Fed will not 
allow them to fail.
  The Fed actually has a list of banks: ``These banks are too big to 
fail.'' All the other banks, the smaller banks, can fail and lose all 
their money. The deposits are insured so the depositors won't lose 
money, but the bank owners, the stockholders, can loose their money. 
The ``too big to fail'' banks cannot fail. They are on the list at the 
Federal Reserve Board as ``too big to fail.''
  I asked the question, if you have a list of ``too big to fail'' banks 
and the big banks merge into even bigger banks, does it not mean then 
the American taxpayer will pay the cost of bad merger judgments if the 
merger goes sour?
  My friend James Glassman, who writes op-ed pieces for the Washington 
Post, a rather interesting guy, I think, and pretty good thinker--I 
disagree with him on a fair number of issues from time to time--but he 
wrote a piece last week about this. He said that most of this is pretty 
good news really. Some call all these mergers the ``elephant mating 
system''--the best thing to do is stand back at a safe distance and 
watch.
  But Glassman says, well, this is really fine. He says at the end of 
his long piece, though, after talking about the virtues of these 
mergers, ``Yes, there are some dangers. The mergers make institutions 
too big to fail. Knowing that regulators won't close them down in a 
crisis, bank managers could get reckless.''
  That ought not be the last paragraph, I say to my friend Mr. 
Glassman; that ought to be the first paragraph.
  The question of public policy on this issue of bank mergers, it seems 
to me, ought to be posed now to the Federal Reserve Board and 
Comptroller of the Currency and to the Justice Department. I asked 
them, do not any longer just be spectators on the question of mergers--
suit up, be involved, get active and make judgments with respect to the 
question of what is best for the market system of this country, what is 
best for the American citizen, not what is best for the newly married 
two corporations that have become bigger and perhaps whose misjudgments 
will now be borne by the American taxpayer under a doctrine of ``too 
big to fail.''

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