Government Regulation of Bank Mergers: The Revolving Door ofPhiladelphia Bank

On November 15, 1960, the second and third largest Philadelphia banks, the Philadelphia National Bank-its assets 1.09 billion dollars, its deposits 603 million dollars-and the Girard Trust Com Exchange Bank-its assets 757 million dollars, its deposits 560 million dollars-applied to the Comptroller of the Currency for approval to merge. The application stated the intention of the Philadelphia National (PNB) to acquire the Girard, including all its assets, deposits, capital, and retained earnings, thereupon to disgorge stock in a resulting bank to Girard shareholders at a ratio of 1.2875 to 1. Both Girard and PNB had a history of merger and acquisition. Since 1950, PNB had acquired nine formerly independent banks and Girard six, and these acquisitions had aggrandized the banks’ asset growth to the extent of 59 and 85 percent, respectively, their deposit growth 63 and 91 percent, their loan growth 12 and 37 percent. IS The new bank to operate under PNB’s national charter would control 36 percent of the area bank total assets, 36 percent of deposits and 34 percent of net loans. The Comptroller of the Currency, passing upon the merger pursuant to his authority under the Bank Merger Act of 1960, took into account, inter alia, the effect of the proposed merger upon competition, including any tendency toward monopoly. Disregarding unfavorable advisory opinions from the Department of Justice, the Federal Deposit Insurance Corporation, and the Federal Reserve Board, he approved the union on February 24, 1961, as in the public interest. On the day following, the Antitrust Division of the Department of Justice, alleging violation not only of section 7 but also of Sherman Act section 1, filed suit to enjoin the merger.