VOL. 2

WORK OF THE BOARD.

Much of the time of the Federal Reserve Board during September has been devoted to the consideration of, and action upon, applications for permission under the Kern amendment to the Clayton Act for the same person to serve at the same time as an officer, director, or employee of a member bank and not more than two other banks which are not in substantial competition with the member bank. These applications were received with the recommendation of the Federal Reserve Agent for the district from which they came and were first given examination and recommendation of a subcommittee appointed by the Board. They were then taken up by a committee of members of the Board on the Clayton Act, through which course they were presented for Board action.

The Kern amendment, it is to be noted, is drawn in broad terms. It prescribes no fixed procedure to be observed by the Board in reaching its conclusions, and it lays down no rules of investigation. It leaves the Board to determine for itself, on its own judgment and in its own way, whether or not in any given case banks are, on a consideration of all the relevant facts and circumstances, to be regarded as in substantial competition. It is to be noted, however, that while the Board has full discretion to determine what shall constitute evidence of the existence or of the extent of competition between banks, there its discretion ends wherever "substantial" competition is found to exist between banks, the prohibition of the law becomes automatically operative. Clearly, therefore, the Board's responsibility begins and ends with the determination of the fact and the degree of competition.

No. 10

Broadly speaking, each case has had to be investigated and considered by the Board essentially on its own merits. It should, however, be stated that the Board has taken the position that what is commonly regarded as potential competition, as well as actually existing competition, must properly be considered as a factor in cases where the resources of the banks concerned are of such magnitude or of such character that the ability of the banks jointly to grant or to withhold credit or otherwise to influence the conditions under which credit could be obtained should fairly be held to constitute such banks a dominant factor in the general loan market.

Applications of 707 officers, directors, and employees have been approved and 113 applications disapproved by the Board to September 26. Where received in time to permit of early action by the Board, these approvals and disapprovals were sent out on September 15, thus giving the banks, the applications of whose officers, directors, or employees were not granted, a month in which to hold new elections. During the consideration of the applications the Board requested the presence in Washington of several of the Federal Reserve Agents, in order that the situation of the banks involved in the applications might be better understood. Where the Board finds that there is substantial competition, it is not within its power to grant consent. It desires, however, to offer every opportunity to applicants to present additional facts or arguments bearing upon the subject and will therefore grant hearings upon the petition of applicants. The first of these hearings will occur on October 3.

Amendments to the Federal Reserve Act, which were printed in the September Bulletin, with the announcement that they had been agreed to by both Houses of Congress, were