How Not to Get Married

Beaming like bridegrooms, officers of New York's Manufacturers Trust Co. and the Hanover Bank five years ago proudly announced a corporate wedding: the nation's seventh and 17th largest banks were merging into Manufacturers Hanover Trust, which, with $6 billion in assets, almost overnight became the U.S.'s fourth biggest bank. The marriage was hardly consummated, however, before a federal judge ordered divorce proceedings on grounds of antitrust violation. Bankers were faced with the staggering project of unraveling 135 merged offices and a million depositors. Last week, after five years of uncertainty, the marriage was saved. The counselor who did it: the U.S. Congress, which passed a bank-merger bill specifying the terms of acceptable new mergers and granting approval to several old ones, including Manufacturers Hanover.

Man from Potman's Switch. The bill capped a period of considerable confusion, if not chaos, in Washington over policy toward bank mergers. The problem was that, with merger applications coming in at the rate of 160 a year, the legislative branch and the judiciary were unable to agree on ground rules for approving them. The Manufacturers Hanover move, like other mergers of the time, was cleared with three regulatory agencies, the Federal Reserve, the Comptroller of the Currency and the Federal Deposit Insurance Corp. The three agencies, following Congressional dictates set down in the bank merger act of 1960, approved any linkup in which community benefit seemed to outweigh the diminishing of competition. But in 1963, reviewing the case of a Philadelphia merger, the Supreme Court ruled that, regardless of economic benefit, a bank merger could still be a legal violation of the Clayton Antitrust Act.

The ruling not only rattled bankers but riled lawmakers, who saw their authority challenged. Congress moved to reframe the law, but unfortunately the task fell to the House banking committee, which is run as a fief by Chairman Wright Patman, 72. Patman, a moonfaced country lawyer from Patman's Switch (pop. 25), Texas, dislikes big banks, tight money and Federal Reserve Chairman William McC. Martin in about equal degree. Sympathetic to the Supreme Court, Patman stalled the revised bill for 25 weeks. When Attorney General Nicholas deB. Katzenbach wrote Patman that he favored a liberalized bank-merger law, Patman just tucked the letter into his pocket. That was too much for committee members who wanted a clarifying bill. One morning when Patman was away, a rump majority secretly met and defiantly approved a bill strengthening the 1960 act.

30 Days to Object. Caught between an outraged chairman and an angry majority, House Speaker John McCormack worked out a compromise. The bill could be reported out, he ordered, but only in proper style and session, and with the chairman's name on it. "Sometimes," grumped Wright Patman as he went through the motions, "we have to take something that is considered bad in order to keep from taking something worse."

Waiting for President Johnson to sign the bill last week, some Congressmen were afraid that something worse might still be ahead. The bill bars monopolies, re-establishes the principle of community benefit, allows the Justice Department 30 days to object to mergers it dislikes. But the wording is so vague that it will almost certainly end up in the courts again for definition. If the Supreme Court stands by its earlier Clayton antitrust opinion, the whole commotion could start all over again.

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