Appendix — United States v. Connecticut Nat. Bank
Supreme Court brief1974
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IN THE
Supreme Court of the Anited States
OcToBER TERM, 1973
No. 73-767
U
UNITED STATES OF an
— V. —
THE CONNECTICUT NATIONAL BANK, THE First NEW
HAVEN NATIONAL BANK, AND JAMES E. SMITH, Cour-
TROLLER OF THE CURRENCY
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
INDEX
Page
Relevant Docket Entries 1
Complaint by the United States filed August 23, 1971 8
Answer of The Connecticut National Bank and The First
New Haven National Bank filed September 18, 19711 12
Order filed October 20, 1971 n
Comptroller of the Currency to intervene .. 18
Intervenor’s Answer filed November: 22, 1971 19
Plaintiff's Answer to Defendants’ Interrogatory No. 18 25
N
ii INDEX
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, commencing October 10, 1972:
Appearances [2]
Testimony of Frederick Glantz
—direct—[43]
—cross—[83]
—redirect—[123]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on October 11, 1972:
Appearances [132] :
Testimony of Neil B. Murphy
—direct—[136]
—cross—[208]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on October 12, 1972:
Appearances [280]
Testimony of Neil B. Murphy (continued)
—cross—[281]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on October 17, 1972:
Appearances [429]
Testimony of Neil B. Murphy (continued)
— ———ů —— ———
redirect [547]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for N District
of Connecticut, on October 19, 1972:
Page
31
112
199
INDEX
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on October 20, 1972:
Appearances [713]
Testimony of Jack C. Myles
—direct—[716]
—cross—[746]
—redirect—[765]
Testimony of Alexander Hawley (continued)
—cross—[773]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on October 25, 1972:
Appearances [813]
Testimony of Alexander Hawley (continued)
Testimony of Charles J. Stokes
—direct—[868]
—voir dire—[872]
—direct—[879]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on October 26, 1972:
Appearances [935]
Testimony of Charles J. Stokes (continued)
—direct— [936]
—cross—[1013]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on October 27, 1972:
Appearances [1124]
Testimony of Charles J. Stokes (continued)
—cross—[1141]
—redirect—[1199]
iv INDEX
Page
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on October 31, 1972:
Appearances [1218] 755
Testimony of Merton J. Peck
—direct—[1219] 756
—voir dire—[1224] 759
—direct—[1226] 760
—cross—[13826] 821
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on November 1, 1972: .
Appearances [1352] 837
Testimony of Merton J. Peck (continued)
—cross—([1353] 838
—redirect—[1422] 880
Testimony of Frank G. Chadwick
—direct—[1430] 885
—cross—[1479] 915
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on November 2, 1972:
Appearances [1511] 933
Testimony of William S. Krafchik
—direct—[1512] 934
—cross—[1583] 976
—redirect—[1626]
Testimony of Carl B. Adolphson
—direct—[1638]
—cross—[1643]
—redirect—[1658]
Testimony of James J. Terzakis
—direct—[1666]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on November 7, 1972:
Appearances [1679
te? INDEX:
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, On November 7, 1972 :—Continued
Testimony of James J. Terzakis (continued)
—direct—[1680]
Testimony of Paul H. Johnson
—direct—[1737]
Testimony of Thornton B. Morris
—direct—[1757]
—cross—[1767]
Testimony of John L. Donovan
—direct—[1784]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on November 8, 1972:
Appearances [1836]
Testimony of Thomas F. Richardson
—direct—[1865]
—cross—[1881]
Testimony of John L. Donovan (continued)
—direct—[1904]
—cross—[1928]
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on November 9, 1972:
Appearances [1999]
Testimony of John L. Donovan (continued)
—redirect—([2021]
—recross—[2024]
Testimony of Robert J. Blinken
—direct—[2037]
—cross—[2043]
Testimony of James H. Gilbert
—direct—[2059]
—cross—[2067]
vi INDEX
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on November 9, 1972 :—Continued
Testimony of William Schmiedel
—direet—[2071] 1262
—cross—[2082] 1269
Testimony of Virgil DeChant
—direct—[2090] . 1274
—cross—[2099] 1279
Testimony of Leon J. Simkins
—direct—([2110] 1286
—cross—[2116] 1290
Testimony of Frederick M. Robison
—direct—([2122] 1293
—cross—[{2128] 1297
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on November 15, 1972:
Appearances [2144] 1306
Testimony of James E. Hagen
—direct—([2147] 1308
—cross—[2164] 1319
—redirect—([2169] 1321
—recross—[2169] 1321
Testimony of Michael F. Fountain
—direct—(2173] 1324
—cross—[2177] 1327
Testimony of Peter Stassa, Jr.
—direct— [2224] 1352
—cross—[2238] 1360
f redirect [2253] 1369
Stipulation of November 8, 1972, concerning business solici-
tation in Connecticut by representatives of New York city
banks 1873
Transcript of Proceedings held before the Hon. Robert C.
Zampano, United States District Judge for the District
of Connecticut, on February 26, 1973:
Appearances [2] 1376
Proceedings [3] - 1377
INDEX vii
P
Government Exhibits
Gx-1
GX-2 an
—— 1438
Gx-4 1456
ors 1457
Gx-6 —
GX-7 2
GX-8 —
G- 9 on
GX-10 ase
GX-11 ane
arse 1464
GX-13 7 —
GX-14 2 —
GX-15 po
GX-16 po
GX-17 po
GX-18 yn
GX-19 pin
—— 1474
G- 21 yo
GX-22 ten
GX-23 aaa
ae — 1478
GX-25 ae
GX-26 7 —
GX-28 a
GX-29 a
GXx-30 —
GX-31 —
GX-32 as
GX-33 —
OX — 1513
aos 1514
— 1515
GX-37 *
et 1517
GX 39 apo
ae 4p 1519
GX-41 a
Gx4s 1521
GX-43 —
GX-44 —
GX-45 —
GX-46 —
GX -47 iar
1527
6/22/78
77/16/78
9/12/78
10/11/78
2
RELEVANT DOCKET ENTRIES—Continued
Court trial continues.
Court trial continues.
Court trial continues.
Court trial continues.
Court trial continues.
Court trial continues. Intervenor rests at 11:20
A.M. Defendants rest at 11:27 A.M. with leave
to 1 Govt. rebuttal witness sworn and
testified. Plaintiff rests in rebuttal at 2:50 P.M.
All parties rest at 2:50 P.M.
Court trial continues. Oral Arguments.
Notice of Appeal to the Supreme Court of the
United States, filed by Plaintiff U.S.A.
Record on Appeal sent Supreme Court.
DXx-61
DX-70
DX-71
DX-72
DX-73
DX-74
DX-75
DX-76
——
DX-77 .
DXx-78
DX-79 ..
DX-80 .
DX-81
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NY.o28
——— —— 2
8282222222327 827242 88225 7 «
=
8
: 45 L 2
UNITED STATES DISTRICT COURT sa and
FOR THE DISTRICT OF CONNECTICUT NEW has an.
UNITED STATES OF AMERICA,
Plaintiff,
Civil Action No. 14583
= Filed:
THE CONNECTICUT NATIONAL BANK
— THE FIRST NEW HAVEN
NATIONAL BANK,
Defendants.
COMPLAINT
The United States of America, plaintiff, by its
attorneys, acting under the direction of the Attorney
General of the United States, brings this civil action
to obtain equitable relief against the above-named de-
fendants, and complains and alleges es follows:
1
JURISDICTION AND VENUE
1. This complaint is filed and this action is
instituted under Section 15 of the Act of Congress of
October 15, 1914, Cc. 323, 38 Stat. 736, as amended (15
U.S.C. § 25), commonly known as the Clayton Act, in order
to prevent and restrain violation by the defendants, as
hereinafter alleged, of Section 7 of the Clayton Act, 38
Stat, 731, as amended (15 U.S. c. § 18).
2. Each of the defendants has its principal place
of business, transacts business; and is fouhd within the
District of Connecticut.
11 5
THE DEFENDANTS
3. The Connecticut National Bank (hereinafter referred
to as “Connecticut National") is made a defendant herein.
Connecticut National is a banking association organized under
the laws of the United States of America and maintains its
principal place of business in Bridgeport, Fairfield County,
Connecticut, ö :
4. The First New Haven National Bank (hereinafter
referred to as "First New Haven") is made a defendant here-
in, First New Haven is a banking association organized under
the laws of the United States of America and maintains its
principal place of business in New Haven, New Haven County,
Connecticut. :
III
: TRADE AND COMMERCE
5. Commercial banks fill an essential and unique role
in the nation's economy, Their principal functions are the
acceptance of deposits for safekeeping and convenience in
making payments by check, the granting of loans or advances
of funds to individuals and business firms, and the creation
through demand deposits of net additions to the supply of
money. Most money paynents in the United States are made
through checks drawn against demand deposits, and the
creation and holding of such deposits is a function peculiar
to commercial banks and one which makes them to a great extent
the administrators of the nation's check paynent system,
Through the making of loans to individuals and businesses,
5
*
commercial banks supply a significant part of the credit
requirements of the nation's economy. Commercial banks
also accept time deposits from various. types of degpsitors
and provide a wide variety of other financial services,
including personal and corporate trust accounts, the
collection of drafts, bills, and other commercial instru-
ments, the acceptance of bills of exchange, the issuance
of letters of credit, the sale of cashier's checks and
drafts on correspondent banks, the purchase or sale of
securities for customers, the sale of foreign exchange, and
the renting of safety deposit boxes. This combination of
services is undupfiicated by other financial institutions.
6. Customers of Connecticut National and First New
Haven have regularly utilized interstate communications,
including the mails, telephone and telegraph, to carry on
their business with, apply for, and obtain the services
provided by these banks. Connecticut National and First
New Haven have regularly utilized interstate communications,
including the mails, telephone and telegraph, to conduct
business with customers and with other banks located in
states other than Connecticut. Connecticut National and
First New Haven are each engaged in interstate commerce.
7. Connecticut National is the fourth largest commer-
cial bank in Connecticut. It operates 48 banking offices,
including ten in Bridgeport, 29 in Fairfield County outside
of Bridgeport, eight in New Haven County, and one in Litch-
field County. On December 31, 1970, Connecticut National
held total assets of about $398 million, total deposits of
about $354 million (including IPC demand deposits of about
6
$154 million), and total loans and discounts of about $228
million, Connecticut National holds about 7 percent of the
deposits held by commercial banks in Connecticut.
8. First New Haven is the seventh largest commercial
bank in Connecticut, It operates a total of 21 offices,
all in New Haven County, including eight in New Haven City.
On December 31, 1970, First New Haven held total assets of
about $315 million, total deposits of about $261 million
(including IPC demand deposits of about $145 million), and
total loans and discounts of about $185 million. First
New Haven holds about 5 percent of the deposits held by
commercial banks in Connecticut. ; |
9. The State of Connecticut is Wendy industrialized,
with a large white collar population and relatively little
farming. Connecticut's population grew at a rate of 17.9.
percent during the 1960's, the highest rate of growth in
the northeast .section of the United States. The state ranks
first in the nation in per capita personal income and per
capita value added by manufacture, Bridgeport and New Haven
are the second and third largest cities in the state,
respectively. Bridgeport is the leading industrial center
in the state, and there is considerable manufacturing in
the New Haven area also. Population in the Bridgeport and
New Haven Standard Metropolitan Statistical Areas ("SMSAs")
increased by 15 percent and 11 percent, respectively, in the
1960's. Population in Fairfield and New Haven Counties
increased 21 percent and 13 percent, respectively, during
the same period.
7
10, The cities of Bridgeport and New Haven are about
20 miles apart, connected by good highvays. Several *
offices of both banks are located in the area between the
two cities, Among these offices are five offices of First
New Haven and three of Connecticut National located in
close proximity to each other in the towns of Orange,
Milford, Derby and Ansonia, Connecticut. National and First
New Haven are significant competitors of each other and of
other commercial banks within this four-town area. Commercial
banking in this area is highly concentrated, First New Haven
and Connecticut Nationalchold about 39 percent and 20 percent,
the first and second largest shares, respectively, of the
total deposits held by all commercial banking offices in
the area, If ‘the proposed consolidation between Connecticut
National and First New Haven is consummated, the resulting
bank would hold about 59 percent of the total commercial
bank deposits in this area and operate eight of the area's
16 commercial banking offices. ö
u. Commercial banking in New Haven County is also
highly concentrated. First New Haven is the second largest
bank headquartered in the county and holds the largest
share, about 24 percent, of alt deposits in New Haven County
banking offices, The four largest banks in the county
together hold about 68 percent of all such deposits.
Connecticut National's eight New Haven County offices hold
about 5 percent of ali deposits held in the county. If
the proposed consolidation between Connecticut National and
First New Haven is consummated, the resulting bank would hold
8
about 29 percent of all deposits in New Haven County bank-
ing offices, and the share of the four leading banks in
the county would increase from 68 percent to about 73 percent,
12. Commercial banking in the New Haven SMSA, consist~-
ing of New Haven and ten nearby towns, is also highly
concentrated, First New Haven holds the largest share,
about 40 percent, of commercial bank deposits in the SMSA.
The two leading banks hold about 69 percent of all such deposits,
Connecticut National's one office in Orange, which is within ;
the New Haven SMSA, holds about 1 percent of total SMSA deposits;
13, Connecticut banking law permits statewide de novo
branching into any city or town which is not the site of the
head office of another bank, Five New Haven County towns
in which First New Haven operates offices are presently open
to de novo entry by Connecticut National. Four of these five
towns are in the New Haven SMSA and three of the towns, East
Haven, West Haven and Branford, are adjacent or very close
to New Haven and would provide good locations fron which
Connecticut National could compete more effectively in the
New Haven area. |
14, Connecticut National has the capability and
incentive to expand further into the New Haven SMSA by |
de novo branching into those towns which are open to such
branching or by acquisition of one of the four small banks
which operate offices in towns adjacent to New Haven,
Connecticut National could also enter New Haven City by
forming a multi-bank holding company and chartering a
de novo bank there,
9
15, Commercial banking in the Bridgeport SMSA is
highly concentrated, Conriecticut National holds about
40 percent, the leading share, of total deposits in the
Bridgeport SMSA, The two leading banks hold about 77
percent of all such deposits. First New. Haven's three
offices in Milford, New Haven County (which is in the
aridgeport SMSA) hold about 6 percent of total deposits
in the Bridgeport SMSA,
16, Twelve towns in which Connecticut National
operates offices are presently open to de novo branching
by First New Haven, including all of the towns in the
Bridgeport SMSA except the City of Bridgeport. Most of |
these towns are adjacent or very close to Bridgeport and
would provide good locations from which First, New Haven
could compete more effectively in the Bridgeport area.
17. First New Haven has the capability and incentive
to expand further into the Bridgeport SMSA by de novo
branching. First New Haven could also enter Bridgeport
City by forming a multi-bank holding company and chartering
a de novo bank there.
- 18, Presently, 139 of Connecticut's 177 towns and
cities, containing a total population of about 1,550,000,
are open to de novo branching by outside banks. In recent
years, the larger banks in the state have begun to expand
into areas more distant from their home offices. . Given the
small size of the state and the ease of movement between
major urban centers, it can be expected that regional and
statewide banking systems will be established. Connecticut
10
National and First New Haven each hewe the capability and
incentive to independently expand into Such a system.
19. The proposed consolidation between Connecticut
National and First New Haven is part of a recent trend toward
mergers of leading banks in different parts of Connecticut,
The third largest bank in the state is the result of a
merger of leading banks in New Haven and Stamford, and the
seventh and 13th largest commercial banks in the state,
located in Bridgeport and Waterbury, respectively, recently
merged to form the sixth largest bank in the state,
w ö
20. Defendants Connecticut National and First New
Haven entered into an agreement on or about November 19,
1970, which will result in the consolidation of Connecticut
National and First New Haven under the charter of First
New Haven and with the title The First Connecticut National
Bank, The Comptroller of the Currency approved the proposed
consolidation on July 26, 1971.
21, The effect of the consolidation described in
paragraph 20 above may be substantially to lessen competi-
tion or tend to create a monopoly in violation of Section
7 of the Clayton Act jin the following ways, among others:
(a) actual and potential competition between
"Connecticut National and First New Haven
—
in the Bridgeport and New Haven SMSAs, in
New Haven County and in the Orange-Milford-
Derby-Ansonia area of Connecticut will be
()
(e)
(4)
(e)
11
permanently eliminated;
concentration in commercial hosking in the
Bridgeport and New Haven SMSAs, in New Haven
County and in the Orange-Milford-Derby~Ansonia
erea ot Connecticut will be significantly
Increased;
Connecticut National will be eliminated as
a potential substantial competitive factor
in the New Haven ‘area and in those parts of
New Haven County where it presently does not
operate commercial banking offices in competition
with those of First New Haven;
First New Haven will be eliminated as a
potential substantial competitive factor
in the Bridgeport area and in those parts
of Fairfield and New Haven Counties where
it presently does not operate ‘commercial
‘banking offices in competition with those
of Connecticut National;
the number of banks in Connecticut capable
of independently expanding into statewide
banking systems will be reduced;
(f)
both Connecticut National and First New
Haven will be entrenched in their dominant
positions in many local markets; and
mergers and consolidations between other
leading banks in Connecticut may be fostered,
resulting in the concentration of banking
12 .
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
UNITED STATES OF AMERICA,
Plaintiff, :
CIVIL ACTION
* No. 14583
THE CONNECTICUT NATIONAL BANK and
THE FIRST NEW HAVEN NATIONAL BANK, ANSWER
Defendants.
42 „4 „6
Defendants, THE CONNECTICUT NATIONAL BANK (“CONNECTICUT
NATIONAL") and THE FIRST NEW HAVEN NATIONAL BANK (“FIRST NEW
HAVEN"), by their attorneys, make the following answer to plain-
tiff's complaint:
1.
Defendants deny so much of Paragraph 1 as alleges
that their proposed consolidation would violate Section 7 of
the Clayton Act, 38 Stat. 731, as amended. Defendants are with-
out sufficient knowledge or information to form a belief as to
the truth of the remaining allegations of Paragraph 1.
2.
3.
4.
5
The allegations contained in Paragraph 2 are admitted,
The allegations contained in Paragraph 3 are admitted,
The allegations „ in Paragraph 4 are admitted,
Defendants admit so much of Paragraph 5 as alleges
the activities and services described constitute, in general,
activities and services of commercial banks, but deny (a) that
ter sectios
2 TA nett? :
4 je pee bane
Bars
13 *
ficient knowledge of information to
of the remaining allegations of Paragraph 5.
6. The allegations contained in Paragraph 6 are admitted.
7. In answer to Paragraph 7, defendants deny that defendant
Connecticut National is the fourth largest commercial bank in“
Connecticut. Further answering, defendants allege that there
are more than three commercial banks actively competing in“
Connecticut that are larger than Connecticut National and that
Connecticut National is the fourth largest commercial bank head-
quartered in Connecticut. Defendants admit the allegations stated
in the second and third sentences of Paragraph 7. Defendants
are without sufficient knowledge or information to form a belief
as to the truth of the allegatiorm stated in the fourth sentence
of Paragraph 7.
8. In answer to Paragraph 8, defendants deny that defendant
1
First New Haven is the seventh largest commercial bank Ain“ con-
necticut. Further answering, defendants allege that there are
more than six commercial banks actively competing "in" Connecti-
cut that are larger than First New Haven and that First New Haven
is the seventh largest commercial bank headquartered in Connecticut.
Defendants admit the allegations stated in the second and third
sentences of Paragraph 8. Defendants are without sufficient
knowledge or information to form a belief as to the truth of the
allegations stated in the fourth sentence of Paragraph 8.
14
9. Defendants are without sufficient knowledge or infor
tion to form a belief as to the truth of the allegations in
graph 9. ™
10. 1 answer to Paragraph 10, defendants admit that Bri
port and New Haven are about 20 miles apart, and that several
offices of both banks are located in the area between the two
cities. Defendants deny that the “four-town area" is a proper
or relevant area for the purposes of this case. Answering
defendants allege that they are not in significant competition
with each other in any section of the country. Defendants deny
each and every other remaining allegation in Paragraph 10.
11. Defendants deny so much of Paragraph 11 as alleges
First New Haven is the second largest bank headquartered in New
Haven County, and defendants deny that New Haven County is a p
or relevant area for the purposes of this case. Defendants are
without sufficient knowledge or information to form a belief as
to the truth of the remaining allegations in Paragraph 11,
that it is denied that First New Haven and Connecticut National
hold the alleged approximate percentage shares of all deposits
in New Haven County banking offices.
12. Defendants deny so much of Paragraph 12 as alleges that
the New Haven SMSA is a proper or relevant area for the purposes
of this case. Defendants are without sufficient knowledge or ir
formation to form a belief as to the truth of the remaining al-
legations in Paragraph 12, except that it is denied that First
New Haven and Connecticut National hold the alleged approximate
percentage shares of commercial bank deposits in the New Haven
-3
15
13. Defendants admit the allegations in the first sentence
of Paragraph 13 and, answering further, defendants allege that
de novo branching into a city or town in Connecticut which is
not the site of the head office of another bank is only permitted
by the appropriate state and federal bank regulatory authorities
upon a showing by the applicant bank that additional bank office
facilities are needed and would be supported by the local economy,
a showing that can not readily be made with respect to most of
the cities and towns in Connecticut where de novo branching is
not barred under Connecticut law. Defendants deny that any town
or city in Connecticut is open“ to de novo branching entry by
Connecticut National and deny each and every other remaining al-
legation in Paragraph 13. Answering further, defendants allege
that no city or town in Connecticut is open“ as a matter of
choice to de novo branching by Connecticut National which would
' ¢ace serious financial and regulatory obstacles in attempting to
enter by de novo branching into any town in which First New Haven
now operates an office.
14. Defendants deny each and every allegation in Paragraph 14.
15. Defendants deny So much of Paragraph 15 as alleges that
the Bridgeport SMSA is a proper or relevant area for the purposes
of this case. Defendants are without sufficient knowledge or in-
formation to form a belief as to che truth of the remaining al-
legations in Paragraph 1S, except that it is denied that Connecticut
National and First New Haven hold the alleged approximate percentage
shares of commercial bank deposits in the Bridgeport SMSA.
-4-
A 16
16. Defendants deny so much of Paragraph 16 as alleges that
any towns in which Connecticut National operates offices are
presently open“ to de novo branching by ros New Haven.
“ing further, defendants allege that any attempt by First New u
to enter by de novo branching into any towns in which Connecticut
National operates offices would face serious financial and regu-
latory obstacles. Defendants are without sufficient knowledge or
information to form a belief as to the truth of the remaining al-
legations of Paragraph 16.
17. Defendants deny each and every allegation in Paragraph 1)
18. Defendants are without sufficient knowledge or info
to form a belief as to the truth of the allegations in the first
sentence of Paragraph 18, except that it is denied that 139 of
Connecticut's 177 towns are open“ to de novo branching by outs
banks. Defendants are without sufficient knowledge or informa’
to form a belief as to the truth of the allegations in the second
sentence of Paragraph 18. Defendants deny each and every other
allegation in Paragraph 18.
19. Defendants deny so a of spend 19 as aileges that
the proposed consolidation is part of a recent trend 8 me
of leading banks in different parts of Connecticut. Defendants
are without sufficient knowledge or information to form a belief
as to the truth of the remaining allegations stated in Paragraph I
, except that defendants admit that the Federal Deposit Insurance
Corporation on June 12, 1969 approved the merger of The Fairfield
County Trust Company (headquartered in Stamford) and The Union ani
New Haven Trust Company (headquartered in New Haven) under the
17 a
charter of Union and New Haven Trust Company and with the title
*union Trust Company," that said merger created the third largest
commercial bank headquartered in Connecticut and that plaintiff
herein interposed no proceeding to enjoin that merger within the
x prescribed statutory period.
20. Defendants admit the allegations in Paragraph 20.
21. Defendants deny each and every allegation in Paragraph 21.
Affirmative Defense
As and for a separate defense, defendants state that the
anti-competitive effects which it is alleged may result from
their proposed consolidation are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the
‘eonvenience and needs of the community to be served.
The Defendant,
The First New Haven National Bank
a
Richard G. Beli
Tyler, Cooper, Grant, Bowerman & Keefe
205 Church Street
New Haven, Connecticut
Its Attorneys
The Defendant, 4
The Connecticut National Bank
Huntley Stone
’ . Pullman, Comley, Bradley & Reeves
855 Main Street
Bridgeport, Connecticut
Its Attorneys
Dated: September 11, 1971
18
ee ee «71 UNITED STATES DISTRICT COURT FILED ~~
T33 A POR THE DISEACT OP CONNECTICUT Cer 22 8 os in Tl
: U.S. die TAIT COURT
REY RAVEN. COUN,
UNITED STATES OF AMERICA, )
: N .
Plaintif®, )
v. ) Civil Action No. 14583
THE CONNECTICUT NATIONAL BANK )
and THE FIRST NEW HAVEN NATIONAL
BANK, .
Defendarts, )
QORDER
The Notice of Motion and Motion of William B. Camp, Comptroller
of the Currency, to Intervene as a Party to this action and for addi-
tional time having been filed with the Court, and the Court having
corsidered the same. |
IT IS HEREBY ORDERED that the Motion of the ler of the
Currency is granted pursuant to Rule 24(a) (1) of the Federal Rules
of Civil Procedure and the provisions of 8 1828 (c (7) (o) of
Title 12, United states Code, and thirty days additional time to
answer or otherwise proceed is granted.
ORDERED THIS 772 day of October 1971.
122 2 ta: 4 )
TED STAT er JUDGE |
19
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
*
UNITED STATES OF AMERICA, )
Plaintiff, ) .
v. ) Civil Action No. 14583
THE CONNECTICUT NATIONAL BANK )
and THE FIRST NEW HAVEN NATIONAL
BANK, )
Defendants, )
and )
WILLIAM B. CAMP, COMPTROLLER )
OF THE CURRENCY, )
Intervenor. )
INTERVENOR'S ANSWER
Intervenor, William B. Camp, Comptroller of the Currency,
‘by his attorney, answers the Complaint herein, as follows:
1. Intervenor admits that plaintiff purports to bring
this action under Section 15 of the Act of Congress of October 15,
1914, c. 323, 38 Stat. 736, as amended (15 U.S.C. §25); however,
Intervenor alleges and avers that the standards to be applied by
the Court in this case, are those set forth in 12 U.S.c. 81828 (c).
as amended by the Act of Congress of February 21, 1966, P. L. 89-
356, 80 Stat. 7, commonly known ab the Bank Merger Act of 1966.
2. Intervenor admits the a in paragraphs 2, 3
and 4 of the Complaint. |
3. Intervenor admits the allegations of paragraph 5 of
the Complaint to the effect that commercial banks fill a role in
the nation's economy and that some commercial banks perform the
functions outlined in paragraph 5, although not all, but denies
all other allegations in said paragraph and any implication
ee
20
22
therein that comercial banks are 21 in offering financial
services and denies any implication therein that commercial
banks are not in competition with other financial and lending
institutions.
4. Intervenor, with regard to paragraph 6 of the Complaint,
admits the allegations except that it denies every customer of
each bank regularly utilizes interstate communications, including
the * telephone and telegraph to carry on his business with
or to apply for and obtain the services of either bank.
5. Intervenor denies the allegation in paragraph 7 of the
Complaint that Connecticut National is the fourth largest commer-
cial bank “in Connecticut". Intervenor admits the allegations in
the second and third sentences of the paragraph and alleges it is
ö without sufficient information to form a belief as to the truth
of the last sentence in the paragraph. .
6. Intervenor denies the allegation in paragraph 8 of the
Complaint that defendant, First New Haven, is the seventh largest
commercial bank “in Connecticut". Intervenor admits the allega-
tions contained in the second and third sentences of the paragraph
and alleges it is without sufficient information to form a belief
as to the truth of the last sentence in the paragraph.
7. Intervenor is without eufflelent knowledge to form a
belief as to the truth of the allegations contained in paragraph
9 of the Complaint. . ö
8. Intervenor denies all the allegations contained in
paragraph 10 except that it admits that several offices of defendan
banks are located in the area between Bridgeport and New Haven and
21
-3-
that these two cities are about twenty miles apart. Intervenor
specifically denies Connecticut National and First New Haven
are significant competitors of each other in any section of the
country and specifically denies that combining of the four
separate and distinct towns of Derby, Ansonia, Milford and Orange
makes them a section of the country or relevant geographic market
area for this Section 7 case.
9. Intervenor denies the allegation in paragraph 11 of the
complaint that commercial banking in New Haven County is highly
concentrated and that First New Haven is the second largest commer-
cial bank headquartered in New Haven County. Intervenor denies
that New Haven County is the proper or relevant geographic area for
the purposes of this case, and denies that First New Haven and
Connecticut National hold the allegea percentage share of deposits
in New Haven County — offices. Intervenor is without suf fi-
cient knowledge to form a belief as to the truth of the remaining
allegations in the paragraph.
10. Intervenor denies the allegation in paragraph 12 of the
Complaint that benkipg in the New Haven SMSA is highly concentrated
and that the New Haven SMSA is a proper or relevant area for the
purposesof this case. 8 denies that First New Haven and
Connecticut National hold the alleged percentage share of deposits
in the New Haven SMSA. Intervenor is without sufficient knowledge
to form a belief as to the truth of the remaining allegations in
the paragraph.
11. Intervenor admits the allegation in paragraph 13 of the
Complaint that Connecticut law permits statewide de novo branching
22
244
into any city or town which is not the site of the head office
of another bank providing either state or federal bank regulatory
approval is first applied for and obtained. Intervenor further
avers that in the case of Connecticut National, being a national
bank, it must first apply to Intervenor and obtain approval from
Intervenor before each de novo branch office can legally be opened,
Intervenor denies that any city or town is open“ to de novo
branch entry by Connecticut National as well as every other
1
remaining allegation in the paragraph. 5
12. Intervenor denies the allegations in patagraph 14 of the
Complaint.
13. Intervenor denies the allegation in paragraph 15 of the
Complaint that banking in the Bridgeport SMSA is highly concentrate
and that the Bri dgeport SMSA is a proper or relevant area for the
purposes of this case, Intervenor denies that Connecticut National
and First New Haven hold the alleged percentage shares of deposits
in the Bridgeport SMSA. Intervenor is Ada sufficient informa-
tion to form a belief as to the truth of the remaining allegations
in the paragraph. |
14. Intervenor Genies the allegations in paragraph 16 of the
Complaint that there are any towns in which Connecticut National
operates an office that are open“ to de novo branching by First
New Haven. Intervenor avers that in the case of First New Haven,
being a national bank, it must first apply to Intervenor and ob
approval from Intervenor before any de novo branch office could be
legally opened in any town in Connecticut. Intervenor is without
sufficient knowledge to form a belief as to the truth of the rem
, allegations in the paragraph.
23
- 5 =
15. Intervenor denies the allegations in paragraph 17 of
the Complaint.
16. Intervenor denies the allegatio& in paragraph 18 of
the Complaint that 139 of Connecticut's 277 towns and cities
containing 1,550,000 people are open“ to de novo branching by
outside banks. Intervenor is without sufficient information to
form a belief as to the truth of the allegation contained in the
second sentence of the paragraph. Intervenor denies the remaining
allegations contained in the paragraph.
17. Intervenor denies the allegation in paragraph 19 of the
Complaint that this proposed consolidation is part of a recent trend
toward mergers of leading banks in different parts of Connecticut.
Intervenor is without sufficient knowledge to form a belief as to
the truth of the remaining allegations in the paragraph.
18. Intervenor admits the allegation contained in paragraph
20 of the complaint.
19. Intervenor denies each and every allegation contained in
paragraph 21 (a) through (g) of the Complaint.
AFFIRMATIVE DEFENSE
Intervenor alleges that the Bank Merger Act of 1966, 80 Stat.
7, 12 U.S.C. §1828(c), is an affirmative defense to this action.
Said Act provides an affirmative dafense in this case because any
anti-competitive effects resulting from the proposed consolidation
(the existence or substantiality of which is denied) are clearly
outweighed in the public interest by the probable effects of
. .
the transaction in meeting the convenience and needs of the
community to be served. Iz U.S.C. $1828(c) (5) (.
See
CHARLES H. McENERNEY, IN
Attorney for William B. 5
Comptroller of the Currency
Treasury Department ;
15th and Pennsylvania Ave.,
Washington, D. C. 20220
Area Code 202-964-2154
Dated: November 19, 1971
Interrogatory 18
With further respect to Paragraph 21 of the Complaint:
A. State the actual. .. competition between Connec-
tieut National and First New Haven . referred to in
subparagraph (a), describe the amount of such competi-
tion and state whether plaintiff contends that such “ac-
tual competition” is substantial.
B. State the “potential competition” referred to in sub-
h (a), state whether the amount of such com-
petition can be quantified and, if so, state such amount
and whether plaintiff contends that such “potential com-
petition” is substantial.
C. Describe in detail each market, submarket, or sec-
tion of the country in which plaintiff contends that “po-
tential competition . . will be permanently eliminated.”
D. Explain how “potential competition” between Conn-
ecticut National and First New Haven will be eliminated.
E. State whether plaintiff contends that the more rele-
vant market, submarket, or section of the country for
the purposes of this case is (1) the Bridgeport SMSA;
(2) the New Haven SMSA; (3) Fairfield County; (4)
New Haven County; (5) the City of Orange; (6) the
City of Milford; (7) the City of Derby; (8) the City of
Ansonia; (9) the City of Bridgeport; (10) the City of
New Haven; or (11) any combination of any of the
preceding. J 2
F. Define with particularity what plaintiff contends is
the “Orange-Milford-Derby-Ansonia area; (2) the “New
Haven area” and (3) the “Bridgeport area“.
G. State whether plaintiff contends that potential com-
petition in commercial banking between defendants will
be permanently eliminated in any section of the country
other than in New Haven County and in the City of New
Haven, in Fairfield County and in the City of Bridge-
port, and in the Bridgeport and New Haven SMSA’s.
If plaintiff does so contend, describe any such other sec-
tion of the country and state the facts upon which it is
contended that potential competition therein will be per-
manently eliminated.
H. State the manner in which (1) “Connecticut Na-
tional . . . [is] a potential substantial competitive factor
in the New Haven area and in those parts of New Haven
dunty where it presently does not operate commercial
banking offices in competition with those of First N
Haven”, and the manner in which (2) First New Ha
. .. [is] a potential substantial competitive factor in
Bridgeport area and in those parts of Fairfield and N.
Haven Counties where it presently does not operate com-
mercial banking offices in competition with those of Con-
“TWh semen ¢ the allegations in subparagraph (e)
. respect to ons in su e),
state what plaintiff means by substantial“, identify
“those parts of New Haven County where [Connecticut
National} does not operate commercial banking offices in
competition with those of First New Haven,” and state
whether “those parts” constitute a separate market, sub-
market, or section of the country.
J. With respect to the allegations of subparagraph
(d), state what plaintiff means by “substantial”, identify
“those of Fairfield and New Haven Counties where
{First New Haven] presently does not operate commercial
banking offices in competition with those of Connecticut
National”, and state whether “those parts” constitute a
separate market, submarket, or section of the country.
K. State whether the proposed consolidation will in-
crease competition (1) with any other bank or other fi-
nancial institution located in any market, submarket, or
section of the country relevant to this proceeding; or (2)
with any other bank of other financial institution now
serving customers in any market, submarket, or Section
of the country relevant to this proceeding from offices
located outside said market, submarket, or section of the
country.
L. With respect to the allegations in subparagraph
(e), state the number and identity of banks in Connec-
ticut presently capable of independently expanding into
statewide banking systems and state the number and
identity of banks in Connecticut capable of independently
expanding into statewide banking systems in the foresee
able future.
M. With respect to the allegations in subparagraph
(f), state what plaintiff means by (1) “entrenched” (2)
“dominant” positions and (3) identify each of the “many
local markets” in which Connecticut National and First
— Haven will be entrenched in their dominant posi-
ons
acquisitions between other
(which] may be fostered” by
te the amount of “concentra-
in the state” plaintiff contends
result, state the number of diverse “banking choices”
preserved in the state, and de-
t bank mergers promote
eading banks in local markets.”
contends is the minimum num-
oans and deposits for a bank inde-
d into a statewide banking system in
of concentration in commercial
of Bridgeport, New Haven, New Lon-
in the State of Connecticut and
the banks operating in such areas and the per-
of offices, assets, loans and deposits held by each
whether plaintiff contends that any of the de-
concentration described in P, above, will be in-
decreased as a result of the proposed consolida-
defendants and, if so, state what plaintiff
will be the resulting degree of concentration in
ties of Bridgeport, New Haven, New London and
Hartford and in the State of Connecticut.
R. State whether plaintiff contends that defendants or
either of them do not face significant competition from
banks located outside of the State of Connecticut.
Answer to Interrogatory 18
A. See answer to Interrogatory 5.
B. “Potential competition” refers to that competition
which éxists because of the potentiality that defendants
would establish offices in closer proximity to each other,
through establishment of de novo branches or banks or
merger with a smaller bank, and thereby come into actual
competition with each other. Such potentiality of entry
is based upon defendants’ capability to enter as a source
of significant new competition as indicated by defendants’
size, financial resources and demonstrated willingness to
expand by de novo branching and/or merger with smaller
banks, and incentive to enter as indi by the signifi-
cant economic growth of the markets involved, as well as
fn
the geographic proximity and economic similarity of these
markets. The effect of the elimination of this potential
competition would be to eliminate the present influence
which defendants’ ability to enter the relevant markets
they are not now serving has on the competitive behavig
of banks presently in these markets, and to eliminate ¢
fendants as a source of future deconcentration in th
markets.
Plaintiff contends that “potential competition” referred
to in subparagraph (a) is substantial. The “amount” of
such potential competition cannot be described by one
number, but potential competition can be identified and
VG
a
C. Potential competition will be eliminated in the follow-
— areas, which are described in answer to Interrogatory
1A:
New Haven SMSA, Bridgeport SMSA, Bristol SMSA,
Danbury SMSA, Hartford SMSA, Meriden SMSA, New
Britain SMSA, New London-Groton-Norwich SMSA, Nor-
walk SMSA, Stamford SMSA, Waterbury SMSA and the
State of Connecticut.
D. Connecticut National and First New Haven are po
tential entrants in parts of each relevant market identi-
fied in C, above, in which they do not operate offices. |
Thus potential competition exists between defendants in
such markets. This potential competition, which is de
— in B, above, would be eliminated by the consolida-
on.
E. Plaintiff makes no contentions regarding a “most
relevant market.” Each market described in answer to
. rang Mi is a relevant market.
ee Milford-Derby-Ansonia area” is described
in answer to Interrogatory 1A. The “New Haven area”
and the “Bridgeport area” refer to the respective SMSA’s,
which are also described in answer to Interrogatory 1A.
G. Yes. These sections of the country are described in
answer to C, above. Potential competition will be elimi-
nated between defendants for the reasons stated in an-
swer to B and D, above.
H. Defendants are potential entrants into the markets
described in answer to C, above, by establishing de novo
branches and banks or by merger with “foothold” banks,
I. Plaintiff used “substantial” as that
courts in interpreting Section 7 of the Clayton
as summarizing contentions in the complaint and answers
to these interrogatories which describe the effect on po-
tential competition resulting from the elimination of Con-
necticut National as a potential entrant.
“Those parts of New Haven County .. .” include the
New Haven SMSA, Waterbury SMSA and Meriden
SMSA, which are wholly or partly within New Haven
County, and which constitute separate markets and sec-
tions of the country.
J. Plaintiff used “substantial” as that term is used by
courts in interpreting Section 7 of the Clayton Act, and
as summarizing contentions in the complaint and answers
to these interrogatories which describe the effect on po-
tential competition resulting from the elimination of First
New Haven as a potential entrant.
“Those parts of Fairfield and New Haven Counties
.. include the Bridgeport SMSA, Norwalk SMSA,
Stamford SMSA, Waterbury SMSA and Meriden SMSA,
which are wholly or partly within those counties, and
which constitute separate markets and sections of the
country.
K. (1) No.
(2) No.
L. The eight banks and banking organizations capable
of independently expanding into statewide banking sys-
tems are City National Bank of Connecticut, Colonial
Bank & Trust Co., Connecticut National Bank, First
Connecticut Bancorporation, First New Haven National
Bank, State National Bank of Connecticut, Union Trust
Co. and Second National Bank of New Haven. Hartford
National Bank and Connecticut Bank & Trust Co., which
plaintiff considers to be statewide banks, are capable of
3 further within the state.
laintiff is unsure of what defendant means by fore-
seeable future,” but makes no contentions regarding this
time period.
M. (1) “Entrenched” means that barriers to entry will
be raised or maintained, defendants’ ability to maintain
or increase their dominant market positions will be en-
hanced and augmented, and competition will be lessened
or inhibited.
(2) “Dominant” refers to the fact that defendants
hold approximately 40% of deposits in the Bridgeport and
New Haven SMSA’s, the greatest market share of any
bank operating in those markets.
(3) Bridgeport SMSA, New Haven SMSA, Orange
Milford- Ansonia area.
N. Plaintiff contends that mergers and consolidations
between other leading banks in Connecticut may be fos-
tered, but does not contend that any particular
or acquisitions between specific named banks may be
fostered, or that any specific amount of concentration
may result. Plaintiff contends that since all the relevant
hie areas in this action are highly concentrated,
all the “diversity in banking choices” presently available
should be preserved and, in local markets, enhanced. Mer-
gers of leading in local markets would result in
a few very large in the state, each holding leading
positions in the several local markets in the state. These
— 1 oe onely ee
oligopolistie markets, will be encouraged to pursue parallel
practices in disregard of local competition conditions. Such
merger of leading banks in different markets would elimi-
nate potential competition in the several local markets in
the state, which effects, taken together, would have a sub-
stantially adverse effect on potential competition in the
State of Connecticut.
O. In answer to Interrogatory 15, plaintiff stated that
regional and statewide systems held $200 million or more
in deposits. Plaintiff makes no other contentions
Q. Plaintiff does not contend that concentration in
these cities will increase or decrease.
In the State of Connecticut as of December 31, 1971,
the share of total deposits held by the five largest banks
would increase from 61% to 66%, and by the ten largest
banking organizations from 83% to 85%.
R. Plaintiff contends that neither defendant faces sig-
nificant competition in the line of commerce of commer-
cial banking from banks located outside of Connecticut.
31
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
Civil Action No. 14,583
UNITED STATES OF AMERICA, PLAINTIFF
V.
THE CONNECTICUT NATIONAL BANK and THE First NRW
HAVEN NATIONAL BANK, DEFENDANTS
and
WILLIAM B. CAMP, COMPTROLLER OF THE CURRENCY,
INTERVENOR.
United States Court House
915 Lafayette Boulevard
Bridgeport, Connecticut
October 10th, 1972
Before:
Hon. ROBERT C. ZAMPANO, U.S.D.J.
Appearances:
UNITED STATES DEPARTMENT OF JUSTICE
Antitrust Division
Washington, D. C. ‘
By: JOHN W. CLARK, Trial Attorney
FRANK N. BENTKOVER, Trial Attorney
KELLEY V. REA, Trial Attorney
Messrs. CADWALADER, WICKERSHAM & TAFT
One Wall Street
New York, N. Y.
By: GEORGE D. REYCRAFT, Esq.
JOHN BOYER, Esa.
HAVEN ROOSEVELT, Esq.
+ PULLMAN, COMLEY, BRADLEY &
REEVES
855 Main Street
Bridgeport, Connecticut
By: HUNTLY STONE, Esq.
Messrs. TYLER, COOPER, GRANT, BOWERMAN &
KEEFE
205 Church Street
New Haven, Connecticut
By: RICHARD G. BELL, Esq.
UNITED STATES TREASURY DEPARTMENT
15th and Pennsylvania Avenue, N.W.
Washi 8
By: CHARLES H. McENERNEY, Jr., Esq.
FORD BARRETT, Esq.
{8] THE COURT: In the matter of United States of
America versus the Connecticut National Bank and the
First New Haven National Bank, Civil No. 14,583, are
the parties ready?
MR. REYCRAFT: Ready, your Honor.
MR. CLARK: Ready, your Honor.
THE COURT: The record should note that the Court
has met with counsel on several occasions, including a
formal pretrial, and certain matters have been agreed
upon, including the lead counsel for each side, and various
other trial housekeeping matters.
In addition, the Court has been informed that each
side wishes to present comprehensive trial briefs follow-
ing the trial with findings of fact and legal memoranda.
Also pending for business this morning is the petition
of George D. Reycraft to be admitted to the Bar in this
Court, and I will certainly grant that. So, therefore, the
petition of George to be admitted for ad-
is Court by the clerk. Pleasure
to welcome you to the of this Court, Mr. Reycraft.
[4] The Court has also been informed that the parties
have been meeting and have been agreeing upon certain
procedures, which the Court appreciates. However, there
is one stipulation that I believe should be read into the
record, and I will do so now. “It is hereby stipulated by
the parties that the attached documents marked as Plain-
tiff's Exhibit 1 through 115 for Identification, Defend-
ants’ Exhibits 1 through 52 for Identification, and Inter-
33
venor's Exhibits 1 and 2 for Identification may be ad-
mitted into evidence subject to objection as to relevancy
or materiality. The parties retain all rights to correct
mathematical or computational errors in their own ex-
hibits and to point out such errors in the opposing parties’
exhibits and retain all rights to attack the weight or char-
acterization of the opposing parties’ exhibits.”
Very well. I believe the government wishes to make an
opening statement. I’ll hear that at this time.
MR. CLARK: May it please the Court, plaintiff’s
case consists of more than 100 exhibits and i by
two expert witnesses. Our approach will be objective, di-
rected toward an analysis of market structure as defined
by generally accepted economic standards.
We deal in such relatively unexciting concepts [5] as
concentration ratios and merger trends. We so not neces-
sarily by choice, because the Supreme Court has told us
that this is the way that mergers must be analyzed under
the applicable statute. Dry and impersonal though the
numbers may be, they are the stuff of these cases. Thus,
though our case will not take a long time to introduce, it
is, indeed a substantial one.
Section 7 of the Clayton Act provides that a merger
or acquisition shall not be permitted, and I quote, “Where,
in any line of commerce, in any section of the country, the
effect of such acquisition may be substantially to lessen
competition or to tend to create a monopoly.”
This rather broad general language has been interpreted
many times by the Supreme Court and the general result
has been, not surprisingly, that the statute means what
it says. The unmistakeable message is that Section 7 does
not require certainty, it does not require exactitude, it
does require that a merger shall not be permitted if its
effect on competition, actual or potential, may be sub-
stantial.
As the Supreme Court said in Brownshoe, one of the
early cases under the statute, and I quote, “It is appar-
ent that a keystone in the erection of a barrier to what
Congress saw was the rising tide of economic [6] con-
centration was its provision of authority for arresting
mergers at a time when the trend to a lessening of com-
petition in a line of commerce was still in its incipiency,”
In hia National Bank, a
Section 6, at 374 U.S.—approxi
Court said: we must be alert to
ional intent by permitting
investigation. And so, in any
‘ the co
bodied in simplify the test
purts ou the interest of sound
competitive effects.
reme Court
consolida-
, “In any line of com-
„This implies that
case in 1963 and in the Phillips-
commerce.
In the Philadelphia
action decided recently
unique cluster of prod-
offered by [8] i
offered by commercial banks.
In Connecticut this is true of mutual savings banks.
There is some competition between commercial banks and
mutual savings banks as to these services. Just as there
was between mutual savings banks and commercial banks
in Philadelphia, and savings and loan associations and
commercial banks in Phillipsburg.
The Supreme Court expressly recognized this in Phil-
lipsburg, but held that because of the uniqueness of the
package of services, commercial banking was a line of
commerce. And so it is in Connecticut.
plaintiff has done so, it is well established, as noted by
the Supreme Court in Philadelphia and Phillipsburg, that
convenience is a significant factor in commercial banking.
Bank [9] customers, except for the very largest, tend not
to travel great distances for banking services. Thus, the
location of a bank’s offices determines to 2 large extent
the bank’s service area. But definition of a banking mar-
ket must also take into account bank customers, where
they live, where they work, or in the case of business,
where that place of business is. This is why plaintiff
contends that the standard metropolitan statistical areas,
or SMSAs, in Connecticut are appropriate sections of the
country.
We will show that in MSMA is a self-contained labor
market where the majority of its residents both live and
work. Given the significance of convenience in banking
and given the fact that the leading banks in the MSMAs,
86
including Bridgeport and New Haven, operate offices
throughout the MSMA—approximates a banking market.
The evidence will show that each defendant is the leading
bank in its own MSMA, it has more deposits in that
MSMA than any other commercial bank. These two
MSMAs, New Haven and Bridgeport, adjoin each other,
and where they join, defendants’ offices are close to each
other. Specifically in the Orange, Milford, Ansonia and
Derby area, offices of defendants’ are in direct competi-
tion with each other. This is where a competitive [10]
overlap exists.
This, too, is an appropriate section of the country con-
sistent with the Supreme Court’s holding in Philadelphia,
which said, “The proper question to be asked in this case
is not where the parties to the merger do business, or even
where they compete, but where within the area of competi-
tive overlap the effect of the merger on competition will
be direct and immediate.”
Finally, plaintiff urges, and defendants apparently
agree, that this Court consider the effect of this consoli-
dation on the state as a whole. One can hardly view this
p consolidation of two of the largest ten banks in
the state with branches where the distance between major
metropolitan areas are relatively short, without consider-
ing the ultimate effect on the state as a whole.
1111 How then, given this line of commerce and these
sections of the country are the effects of the consolidation
to be measured. Supreme Court decisions are clear by
an analysis of market structure and concentration or
share of total bank deposits in the market as the accepted
measure of market structure. Where existing present
competition is eliminated the decisions tell us that by com-
bining the market shares of the two merging partners,
one may gauge the effect of the merger. If this technique
is employed in the intervening area between the both
MSMA, where the two defendants compete we contend the
illegality of this consolidation manifests a sizeable in-
crease in concentration clearly a violation of law and
the evidence will so prove.
Where defendants are not competing substantially at
the present, the process of an analysis is difficult. There
the question is whether there is potential competition be-
87
tween defendants which will be eliminated. The question
here is whether the leading bank in Bridgeport and the
leading bank in New Haven, the fourth and eighth largest
banks in the state, headquartered only twenty-five miles
apart in two of the largest cities in the state and each
already operating one or a few offices in the other’s
MSMA at a time [12] when all of the large banks are
expanding geographically throughout the state, whether
there is potentially competition between these two banks.
The answer is practically forced upon us. By every ob-
jective standard the answer can only be: of course. There
is potential that Connecticut National Bank will enter the
New Haven SMSA and compete with First New Haven
which is the leading bank there. There is potential that
First New Haven will enter the Bridgeport SMSA and
compete with Connecticut National Bank which is the
leading bank there. Either effect by itself violates Sec-
tion 7. There is an added affect in these SMSA’s; result-
ing bank would be about twice as large as either bank
is now. Each already is the leading bank in its market.
At twice the size the resulting bank could entrench these
pading positions ; other smaller banks may be inhibited
enter other SMSA’s in the state where they are
Rating offices and oe with each other or
stakgbly towards state-wide banking by the larg-
in the state. How will this come [13] about?
solidations such as this. In short order the poten-
tial for increased competition in the several local markets
would be severely diminished. The state would be irre-
vocably locked into the highly concentrated market struc-
ture which now prevails. This is a pivotal case which has
ramifications for competition for banking throughout the
state. The public policy embodied in Section 7 of The
Clayton Act speaks loud and clear: Competition is of
paramount importance in the American economy. Where
the effect of a merger may be to substantially lessen
competition, that merger should not be permitted.
{14] MR. REYCRAFT: If your Honor please, this is,
I believe, the seventh time that the Antitrust Division has
attempted to proof in a District Court that the effect of
an acquisition would violate the Clayton Act because it
eliminates potential competition, These cases have been
in all cases—these attempts have been in all cases rejected
by the Supreme Courts. One of these cases is now on
appeal to the Supreme Court and will be argued on Oc-
tober 16th.
One of the cases which have been tried, First Na-
tional Bank of Jackson, Mississippi, acquisition of the
Bank of Greenwood, the District Court found that that
merger did not violate the antitrust laws on the govern-
ment’s potential competition theory.
Another case in Mississippi, the Deposit Guarantee Na-
tional Bank—case following the disposition of the Jack-
son case, of the First Mississippi case, that was settled
by consent between the Department of Justice and the de-
fendants and permitted the merger to take place.
A third case is the First National Bank of Maryland in
Baltimore, which acquired the First National Bank of
Hartford County. That case was tried in the District
Court and the Court found for the defendants in Janu-
ary of 1970, and the merger was consummated.
[15] The Department of Justice made no attempt to
appeal either of these cases.
In Idaho, the Idaho First National Bank of Boise ac-
quired Fidelity National Bank in Twin Falls. That case
was tried in the District Court and the District Court
found for the defendants and that merger has taken place
and the Department of Justice did not appeal.
In United Virginia Bank Shares in Richmond, Virginia
an acquisition of the People’s National Bank was tried
in the District Court. That case was tried in October of
1971, and the District Court has now held in favor of
the defendant banks.
The First National Bank Corporation of Denver, Colo-
rado applied to acquire the First National Bank of Gree-
ley, Colorado, the District Court rules in favor of the de-
fendants. And that case now—that is the one case which
is now on appeal to the Supreme Court,
~ 39
So that these issues are factual issues which the gov-
ernment is attempting to prove here, and so far uniform-
ly there facts have been found by the Supreme Courts
not to sustain the charges which were made.
One of these cases is on appeal to the Supreme [16]
Court and will be argued. So it isn’t enough for Mr.
Clark to read from the Supreme Court’s decision of the
Philadelphia bank case which did not involve potential
competition, it involved direct horizontal competition be-
tween two banks whose head offices were directly across
the street from each other.
Those banks, the Philadelphia National Bank and the
Girard Trust Company, had the right under Pennsyl-
vania law to merge or branch within a four county area,
Philadelphia and the three contiguous counties.
The Supreme Court found that that was the relevant
ic market within which to assess the effect of
that merger. Those banks would have had a combined
share after the merger of about 36% of the banking busi-
ness in this four-county area. That was direct head-on
competition. They were existing competitors with head
offices across the street from each other.
That case bears no resemblance to a case involving a
bank with a head office in Bridgeport and a bank with a
head office in New Haven where the state law prohibits
these banks from opening new offices in each other’s
markets.
As your Honor knows, the—there is head office pro-
tection under Connecticut banking law. The First [17]
New Haven National Bank cannot open an office in
Bridgeport, and the Connecticut National Bank cannot
open an office in New Haven under state law.
So that the distinction between the Philadephia Na-
tional Bank case and this case is like night and day.
Now, Mr. Clark has argued that there is a horizontal
effect from this merger in the four-town area which he
has carved out, Orange, Derby, Milford and Ansonia.
He has said that the two combined banks have a market
share in excess of that involved in Philadelphia National
Bank case.
Well, we deny that that four-town area is an economic
So that following the merger there will be more com-
petitors in this four-town area than before the merger.
Now, this is an effect which would not have taken
place but for this merger. And I don’t see how any
— can describe it as anything but pro competi-
ve.
We have offered, also, to make strenuous efforts in
the form of which we will submit more formally to the
Court to enter Hartford.
Now, as your Honor knows, there is home office protec-
tion in Hartford as well as in New Haven and Bridge-
port. So that, I believe—the only means of supply for
a bank outside that area is either by merger [19] or the
possibility which Mr. Clark has referred to, but which
no bank in Connecticut has yet pursued, of applying for
a new charter and making a holding company acquisi-
tion in that area:
Now, this is a route which has many legal complica-
Now, if there is one thing that seems clear to me in
terms of the competitive necessities of the banking struc-
ture in the State of Connecticut, it is that that the Hart-
ford area needs additional competition. These banks are
willing to provide that competition.
Neither one of them could do it alone. Neither one of
necticut National
Haven and go all
there is very little likelihood that it woul
merger, although you could make the same kind of argu-
ments about that merger that Mr. Clark makes about
this one. He says that First New Haven [21] and Con-
necticut National could each open offices all over the
state and compete with each other. Well, you could say
the same thing about Fairfield County and Union New
Haven Trust Company, but they didn’t sue on that merg-
er. One of the results has been that Union Trust Com-
pany has just entered the New London area, it is pro-
competition in the New London area, it did
ring a small bank, a 15 or 20 million dollar
bank. That acquisition has been approved and has now
taken place, so that that mer’—mergers are not all bad,
sometimes they can have pro-competitive consequences.
The Union Trust merger is one which has had such a
consequence in New London.
This merger, as I have already said, will have pro-
competitive consequences in Orange, Derby, Milford and
Ansonia. It will have pro-competitive consequences in
Hartford, and it will have pro-competitive consequences
in New London.
So Mr. Clark has the burden of showing that there’s
a reasonable probability of a substantial lessening of
competition.
Now, the Supreme Court has said that it requires proof
of a reasonable probability, not a mere possibility or con-
jecture that maybe at sometime in the future somebody
might do something. But he has the burden of [22] show-
ing that this merger is going to adversely affect competi-
tion in a—by reason—evidence which shows a reasonable
probability that such effects will occur. We don’t think
he’s going to be able to do that.
There have been other mergers in the Connecticut area
which the Department of Justice has not seen fit to at-
tack. Hartford National acquired a bank in Fairfield
County, Connecticut Bank and Trust Company acquired
a bank in New Haven. Hartford National’s in New Ha-
ven. So that I think even Mr. Clark would have to
concede that all mergers are not all bad and some of
them can have pro-competitive consequences.
1117
au
injunction. It didn’t do so on those Hartford bank
sitions, so it apparently has the view that they’re la
and so have pro-competitive consequences.
[28] Mr. Clark has also talked about the line of com-
merce being limited to commercial banking. Again, he
cites the Philadelphia National Bank case as his prin-
cipal authority for that proposition. The Philadelphia
National Bank case, as I said, involved two banks right
across the street from each other. And there are some
services which are available, at least in the best form
from a commercial bank, but savings banks in Connec-
ticut have powers beyond those that savings bank had
in Philadelphia, and we'll put on testimony which will
establish that beyond any doubt.
And we will also put on testimony which will estab-
lish that it is more than reasonably probable in the fore-
seeable future that savings banks will have checking
account privileges in. the State of Connecticut.
Now, that was the principal distinction that the Su-
preme Court relied upon to exclude savings banks from
the commercial bank line of commerce in the Philadel-
phia National Bank case.
The main—deposits and checking accounts—well, sav-
ings banks are going to have that in Connecticut, and
we will have witnesses who will testify to that effect.
Another—other competitive impacts on the [24] Con-
necticut market, generally are demonstrated in the report
of the special master filed with this Court which shows
that New York banks are competing in the Connecticut
market all the time. They had people combing this market
for banking business, they attract very substantial vol-
umes of loans from this area, they attract very substan-
tial deposits from the area, and so do the Boston banks.
ive Stockholders, they don’t pay the amount of fur,
that commercial banks do. So they compete.
All right—and Mr. Clark has conceded that, they com-
pete at a substantial advantage over the commercial
Now, Mr. Clark is going to ask your Honor to Con.
be ore bn, commercial bank in Bridgeport is going tp
dank in Merrie about the possibility that u nenn
markt, idee ieee Say ener the Bri
market, al it’s now prohibited law, than they
are about competition from Savings banks in
ble’s Savings Bank in Bridgeport is about twice as
big an the Connecticut National Bank. It makes [26]
morigage loans, it accepts savings deposits, it pays 3
45
rate on savings deposits than does the Connecticut
Bank.
whole theory is: forget about savings banks that’s
in the line of commerce, but I want to worry about
.
t Connecticut state law won't let First New
Honor, and I think that our witnesses will satisfy the
Court on that.
Just by way of conelusion, I have talked longer than
I mean to, this is— this is a question of facts that Mr.
Clark is—has to prove here. It is not enough for him to
come in and say: well, here are the numbers and here
is the standard metropolitan statistical area, and add
them up and this is what you get. He has the burden of
proof that there’s reasonably probably [27] anticompeti-
tive effects which result from this merger, and he has
to prove that by facts.
Now, on six other occasions the District Courts have
not agreed with the Antitrust Division. We don’t say
that—in an appropriate case that potential competition
shouldn’t be a violation of the antitrust laws, the elimina-
tion of it, but it is a question of fact. There have been
cases, the Penn Olin case that Mr. Clark referred to, the
El Paso case, where El Paso and Pacific Northwest were
directly competing with each other in pricing gas to the
California market. They weren't — Pacific Northwest
wasn’t in the market yet, but they were potential com-
petitors and there was real competition between them.
But there’s no case that the Supreme Court has de-
cided, either on a potential competition or in an area
involving direct horizontal competition, or anything like
the case that the government has here.
46
So in conclusion, we think that this merger will have
pro-competitive consequences in the Connecticut market
and not the anti-competitive consequences that Mr. Clark
contends.
MR. CLARK: May I respond, your Honor?
THE COURT: By all means.
MR. McENERNEY: I wonder if it would be appro-
priate [28] for me just to have a very, very short state-
ment.
THE COURT: I’m sorry, take your time.
McENERNEY: May it please the Court, plaintiff’s
case, as we view it, may be divided into two parts, name-
ly: the actual competition case, as well as the potential
competition case.
Now, as to each of these parts, the plaintiff has the
burden of proving that the effect of the proposed consol-
idation between Connecticut National Bank and First
New Haven in the words of Section 7 of the Clayton Act,
quote, “may be to substantially lessen competition or
tend to create a monopoly in any line of commerce in any
section of the country.”
For their line of commerce in both the actual and in
the potential case, they have chosen commercial bank-
ing, and for the section of the country as to the actual
competition, they have chosen the four-town area of An-
sonia, Derby, Milford and Orange.
For the section or sections of the country in their po-
tential competition case, they have chosen the State of
Connecticut and each of the nine SMSAs, standard metro-
politan statistical areas.
Now, it is our position, your Honor, may it please the
Court, that whatever significant SMSAs may have from
the Bureau of the Budget viewpoint or for labor [29]
studies or for census purposes or for housekeeping pur-
poses or whatever, we contend that they have little, if
any, or no relevance in this bank merger case for the very
simple reason that plaintiff will be unable to demonstrate
that each of the SMSAs is a banking market or a section
of the country.
It seems to us, your Honor, that in order to prove that
the SMSAs is a relevant geographic market, plaintiff
47
must demonstrate that a banking customer living in the
Town of Granby, for example, in the Hartford, SMSAs,
can and does turn to the Glastonbury—some 20 miles
away in the same SMSA—for his banking service.
Banking has been characterized by two Supreme Court
cases as essentially local in nature. That would be your
Phillipsburg case, as well as your Philadelphia case, and
it is submitted that each of the SMSAs is not local enough
in nature.
Further, since the Connecticut code governs whether
a town is open or closed to branch banking, perhaps if
the plaintiff could show that each of these towns is a
banking market, then each town could conceivably be a
section of the country. But inly the Connecticut code
does not speak of SMSAs.
No, as to the line of commerce, we claim that com-
mercial banks in Connecticut ive very fierce [30]
competition from savings banks for the savings dollar
and for loans and that the line of commerce should in-
clude them in analyzing the impact of this propsed con-
solidation.
Other courts cited in our brief at pages 15 to 17 have
also thought this.
Intervenor also alleges that any consideration of this
consolidation should inelude the formidable out of state
banks, particularly New Vork City which has been men-
tioned in the comptroller's opinion approving this pro-
posal and, of course, was the prime purpose of the spe-
cial master’s report.
Now, with respect to the actual competition case, we
don’t want to helabor the points already made by Mr.
Reycraft, except to say that the issue of the elimina-
tion of actual competition seems moot to us, and if de-
fendants are allowed by this Court to sell off these spe-
cified branches to the purchasers mentioned in their
pretrial brief, it would seem to us to have a very bene-
ficial effect on competition and would in fact be a pro-
competitive event as opposed to an anti-competitive event.
Now, concerning the potential competition case—
THE COURT: That wasn’t a condition imposed upon
the comptroller?
48
1311 MR. McENERNEY: It was mentioned, your
Honor, in our opinion, but we did not condition our ap-
proval on it.
THE COURT: I am just curious about that. Can
mergers be approved on such conditions? Is there prece-
dent for that?
MR. McENERNEY: I think the FICA has done it in
one instance, but I don’t believe our office has. I can’t
recall.
THE COURT: But has your office considered a promise
by merging banks to do A, B and C if merged?
MR. McENERNEY: Yes, we have. We have. We have.
And I think in a sense that is what we have done in
this case.
We have recognized that they would do this.
Now, concerning the potential competition case, it is
not enough, we submit, that plaintiff demonstrate that
it is possible that some day both Connecticut National
Bank and First New Haven will open an office in one
of the nine SMSAs or in some Connecticut town. Because
the SMSA or the town has projected growth, or in the
case of a town where one bank is already there, that
the other bank might possibly enter the town some day,
and that, therefore, this approach—consolidation elim-
inates this potential for competition.
[321 We submit that the plaintiffs must prove by pro-
ponderance of the evidence that but for this proposed con-
solidation, both banks are reasonably probable, not just
ible, but reasonably probable entrants, for anything
is possible, but they must be reasonably probably entrants
into towns where neither is now located or in the towns
where one bank is already there, that the other is reason-
ably probable entrant into that town, and that this is likely
to happen in the reasonably foreseeable future.
Unlike other industries, such as shoes, steel, liquid bleach
and the like, where entry into new markets is solely with-
in management’s discretion, entry into banking and into
banking markets or towns is governed by statute, which
are administered by bank regulatory agencies, and is not
up to the free will of the bank. It is the bank regulatory
authority, in this case the comptroller, who either allows
49
or disallows entry. Although we have contended, and still
contend, your Honor, that it is part of the plaintiff’s
proof to show that regulatory approval for branching into
various towns will be granted, we are prepared to put on
testimony which we believe will adequately demonstrate
that all or substantially all of the towns in Connecticut
are [83] adequately banked, and that permission for the
addition of one or two branches in them will not be
forthcoming.
And finally, your Honor, under the Bank Merger Act
of 1966, we say that assuming a violation of Section 7
could be found, that the convenience and needs of this pro-
posed merger will clearly outweight any anti-competitive
effect.
[84] THE COURT: Mr. Clark.
MR. CLARK: Your Honor, I want to respond at this
time to Mr. Reycraft’s detailed outline of his settlement
proposal which is exactly what it is and what it was. I
contend, Your Honor, that this is wholly irrelevant in this
case and I ask now that Your Honor rule that any evidence
or reference to it is inadmissable. The defendants appear
to be conceding one adverse effect of this merger and that
is the elimination of existing competition in the intervening
area between these two SMSA’s. He is making an offer
in settlement but this is not the time for consideration of
such a matter. We contend that if the merger is illegal
for any reason it should be permanently enjoined, and the
cases, the Supreme Court cases, the lower court cases, over-
whelmingly support that notion that in an anti-trust case
the relief where possible should be divestiture, total di-
vestiture, if the parties have already merged or if they
have not, permanent injunction.
This is really, Your Honor, rather a matter of relief,
not a matter to be considered during the trial on the matter.
Their agreement to sell off branches is not a part of the con-
solidation agreement. It was not entered into when these
banks made their agreement, [35] It is simply a way, it
appears, to take some of the sting out of this anti-competi-
tive effect. That is a matter of belief. If the elimination
of existing competition violates Section 7, then it is time
to consider what is to be done about it.
THE COURT: I don’t understand what you mean by
it’s a matter of relief. Relief from whom?
50
MR. CLARK: Well, relief from the anti-competitive
effect of this merger, the point being, Your Honor, that
it is the merger and only the merger which is or should be
under consideration here. That is the agreement that they
entered into and that is the agreement that should be tried.
THE COURT: Are you implying that there are cases
and perhaps research of course will disclose it later. But
from your experience and knowledge there are cases in
which the court—courts have said: Oh, I find that this
merger does have an anti-competitive eff and there-
fore I will allow the merger except that in towns of A,
B, C, and D the resulting banks shall divest themselves
of any and all interest, et cetera, in those towns. Is that
what you meant by relief?
MR. CLARK: Yes, Your Honor, and I contend that
there is a public policy against divestiture of banks or
bank’s assets because, Your Honor, it has been [36]
shown time and time again it doesn’t work. The intended
result from a divestiture of a bank or a portion of a bank
seldom is actually achieved. And in any event the proper
time for consideration of that is if there is a finding that
the merger violates Section 7, and not at this point. Mr.
Reycraft is trying to get—
THE COURT: Just go over that again. I am sorry
to keep interrupting but I just want to make sure I know
what lines and avenues are open to the Court without giv-
ing you any indication I have prejudiced anything, which
I have not. But is it your point that there is bifurcation
of some sort here?
MR. CLARK: Yes, sir.
THE COURT: That if the Court makes a ruling that
there is, or is not, violation and if it decides that there is,
then the parties can come in again and say: All right,
reserving all rights to have your decision considered by
another forum, we are now willing to concede for the sake
of argument that the Court is correct and therefore we
offer the following to—by way of relief, that is, divesti-
ture of the following banks in the following towns. Is that
what actually happens here?
MR. CLARK: Well, that is what actually happens
[37] in almost every anti-trust case. The usual procedure
viously the Court finds that merger to be illegal. Something
must be done to set things as closely as possible back to
the position that they were before the merger.
THE COURT: Do I understand the Government's po-
sition in this case is that we have two large banks wanting
to merge and the effect of that merger is of concern to the
Government in no other SMSA except the Orange-Ansonia-
Milford—
MR. CLARK: We are concerned of the effect of the
merger on all of the SMSA’s in the state, in the entire
state as a whole and in this four-town area where there
is this immediate overlap. We contend that there are
anti-competitive effects in all of these areas, so obviously
if we are right, the actions which defendants-are propos-
ing won’t alleviate that. But I saw, Your Honor, that it
is well nigh impossible and certainly hardly ever done that
a court should, while it is considering the legality of a
merger, to at the same time consider possible relief or
means of alleviating the [38] illegality which it has not
yet decided, whether there is any or not. It is customary
in anti-trust cases that there be a two-step process. First,
a decision on the merits; second, a decision on the appro-
priate relief. And—so we contend, Your Honor, that this
whole subject of divesture of offices, of the undertaking
by defendant should they be permitted to merge, to enter
other SMSA’s as a combined bank, these—this subject
is not a proper subject for consideration at this time be-
cause there has been no decision as to what the effect of the
merger will be. I note that Mr. Reycraft hasn’t sold these
offices. These offices have not been sold—they still are a
part of the bank and should the banks be permitted to
merge under the existing agreement between them, these
offices will all become offices of the combined bank.
THE COURT: With respect to the Government’s mo-
tion, I will reserve decision and perhaps in your brief you
gentlemen can call the Court’s attention to the reserva-
tion on the ruling and if it is indeed irrelevant, I will not
52
consider Mr. Reycraft’s statements. On the other hand,
of course, if I find the case law is such that it should be
considered in some aspect of the decision, I will so con-
sider it. So decision is reserved on that motion.
[39] MR. CLARK: Yes, Your Honor. Now, Mr. Rey-
craft alluded to some district court decisions which he
contends are relevant in your decision here. It is true
that they all dealt with the subject of potential eompet-
tion in banking. It is also true that they were all only
district court cases and there is one finally on appeal
to the Supreme Court. And so we can, of course, look
to the Supreme Court for some guidance in this area.
Mr. Reycraft has always pointed out that each case is
a question of fact and therefore it is obviously so that
each case is different. And there can be no denial that
in none of these previous cases was there anything like
what we have here. In none of these cases were there
two banks both leading banks in the state; in none of
these cases were there two banks headquartered only
a few miles apart in a state as small as Connecticut. It
is one thing to consider whether or not a bank in Jack-
son, Mississippi would expand into-a relatively small agri-
cultural area in Greenwood, Mississippi 95 miles away,
and it is something else to consider the situation which
we have here in Connecticut, a highly concentrated state
banking market, a highly unified, very small geograph-
ical area involved, and two big aggressive, leading banks.
This consolidation, your Honor, is much, much differ-
ent [40] than any which have been tried in the past where
potential competition was a factor. I note that defendants
are—well, they say on the one hand that entry into
Bridgeport and New Haven by outside banks is im-
possible, and, of course, we contend that that is not the
case, and that entry into other markets in the state is
impossible because of home office protection. They are
willing to undertake to do it should they merge. Our
contention is that both banks are quite capable of doing
it now and that there is every potential that they would
do it each separately if they had the opportunity. Poten-
tial competition, it has been held by the Supreme Court,
is to be considered objectively. Objective criteria are to
be used to assess whether or not the potential competition
exists. Defendants then would have us believe that the
inexorable growth of the largest banks in this state
phically will stop; that the explosive increase in
the number of branches operated by these largest banks,
which we have ee past fifteen years, will stop;
that the inexorable in in competition which we have
seen held by the ten largest banks in the state will stop.
In other words, that all of the objective critera which the
Government will point to as indications of the existence
of significant potential [41] competition mean nothing,
just because the defendants get on the stand and say
so. We say that the standards set down by the Supreme
Court assessments of potential competition require an
objective analysis and the objective analysis in this case
is overwhelming and leads to only one conclusion: that
there is elimination of both potential and existing com-
petition.
THE COURT: All right.
MR. REYCRAFT: I think Mr. McEnerney probably
recalls now that the Comptroller’s office did on one prior
occasion condition the approval of a merger on the di-
vestiture of branches in the Wells Fargo Bank in Cali-
fornia application to acquire First Western Bank and
Trust Company. The Comptroller of the Currency con-
ditioned his approval on the divestiture by Wells Fargo
of all of the northern branches of that bank in Cali-
fornia which were in competition with the Wells bank.
That included all the northern branches. Now, I must
add, in fairness, the Department of Justice didn’t like
that position. They filed a complaint and that is in liti-
gation, but the Comptroller of the Currency has done
that and there is one a That is that there is
no requirement that the proceed by any two-step
process. I don’t know of any case where this has happened
in a bank merger and there [42] is no necessity for it.
And it is our view that the court should view this merg-
er as it is going to take place, that is, what are the—
what are the net effects of this merger and these are not
idle statements that we are making about the divesture
of these branches. We will do it and we will do it in—
54
and satisfy the Court in whatever form is required. And
—show that it can be done, and it is our view that the
Court should view the merger in its net consequence,
not ignore what is a clear fact, that is, that we will do
this.
MR. McENERNEY: Nothing further, your Honor, ex-
cept I do recall now as Mr. Reycraft said, the first ques-
tion in the Wells Fargo case.
THE COURT: Call your first witness.
[48] FREDERICK GLANTZ, called as a witness, hav-
ing first been duly sworn by the Clerk of the Court, was
examined and testified as follows:
THE CLERK: Will you state your full name and ad-
dress for the record, please?
THE WITNESS: Frederick B. Glantz. 24 Stewart
Road, Newton Center, Massachusetts.
DIRECT EXAMINATION
BY MR. BENTKOVER:
Q Doctor Glantz, what is your profession?
A I’m a Regional Economist with the Federal Reserve
Bank of Boston. ;
Q Would you describe for the Court your educational
nd?
A I have a Bachelor's degree in mathematics from
the City College of New York, and a Doctor of Philosophy
in economics from Syracuse University with a specialty
in urban and regional economics.
Q What professional position did you hold prior to
your present position with the Federal Reserve Bank of
Boston?
A I was an instructor of economics at Temple Univer-
sity at Philadelphia.
Q What professional organization have you been af-
filiated with?
[44] A I’m a member of the American Economic As-
sociation, and the Regional Science Association.
Q Could you explain what that latter association is?
A The Regional Science Association is a—er—dis-
ciplinary group of scholars concerned with regional prob-
55
What is the nature of your work and responsibil-
36221... ng heey oy NS
A As a regional economist for the Boston Fed., I'm
concerned with monitoring regional economic conditions
in New England and conducting studies on economic con-
ditions in the New England region.
Q Have you written on the subject of regional eco-
nomics ;
A I have.
Q And what are your writings in that field?
A I have a publication forthcoming in Regional
Science Perspectives on evaluating—measures regional ac-
counts, and I just published a piece on the New England
—entitled the New England Economy, Recent Perform-
ance and Recent Prospects of the New England Indica-
tors.
Q What was the subject of your doctoral dissenta-
tion?
A The title of the thesis was the Determinates of
the Intermetropolitan Migration Patterns of the Econom-
ically Disadvantaged it was concerned with the move-
ment of labor, specifically unskilled labor, between metro-
politan area labor markets.
[45] MR BENTKOVER: Your Honor, I submit that
Doctor Glantz is eminently qualified to testify on the
subject of regional economics.
THE COURT: Well, why don’t you just proceed and
we'll see if you get any objection along those lines, and
at that time I'll hear them.
Q Doctor Glantz, would you briefly explain what the
field of regional economics involves?
A Regional economics essentially is a scaling down
of the entire discipline of economics to the subnational
level. We’re concerned with where economics takes place
in space, we're concerned with what gets produced, where
it gets produced and how it gets produced. Thus, we’re
concerned with subnational economies. What causes the
viability of these subnational economies, the interrelation-
ships between these subnational economies that make
for the economic well-being of an individual area.
56
Q What is a standard metropolitan statistical area,
or for short, an MSMA?
A Well, in regional economics, the region that ecno-
mists are most concerned with is a self-contained spatial
labor market. We're concerned with the fact that a city
or a town—or for that matter, you could exaggerate
and take it down to the individual city block level. You
can’t examine the 1200 block of Main Street, it wouldn’t
make very much sense. [46] Virtually all of the people
living on the 1200 block of Main Street would not work
on the 1200 block of Main Street, and vice versa.
Well, the same thing is true of an individual city or
town. The boundaries of cities and towns are largely
accidents of history, and bear little, if any, relationship
to the economic facts of life. So, as a consequence, econ-
omists have constructed the notion of a standard metro-
politan statistical area which is an aggregate of cities
and towns and counties, building up a cluster of cities
and towns and counties until we have a cluster in which
virtually all of the people living in that cluster of cities
and towns also work in that cluster of cities and towns,
and this becomes an SMSA or a self-contained spatial
labor market.
Q How do you a this motion of a self-contained
spatial labor market?
A The Office of Management and Budget uses the
county as the basic building block in constructing a metro-
politan area. Exhibit P-1 presents the detailed criteria
used by the Office of Management and Budget to con-
struct the MSMA.
Briefly, an MSMA is built around a central city, hav-
ing a population of 50,000 or greater, or a group of cities
within a 20 mile radius of one another having an aggre
gate population of at least 50,000.
[47] Then the county which contains the central city
or cities, then forms the central county of the MSMA.
To the central county we begin to cluster contiguous
counties. The basis for adding on a contiguous county
or excluding a contiguous county is based on the amount
of social and economic integration between the county
in question and the central county.
57
The OMB has set up specific criteria for determining
economic integration based upon commuting patterns. At
least 15% of those working—those living in the county
in question must come into the central county to work.
Or at least 25% of the labor force of the central county
must come out and work in the county in question.
Thus, we have very specific notions of commuting pat-
terns in determining what is and what is not included
into the SMSA. And then we add up county upon county
until we have exhausted all counties which have specific
economic integration with the central county.
It should be noted that the procedure is somewhat dif-
ferent in New England. In New England, the county is
too large to be a meaningful unit. Cities and towns are
much more meaningful. So the OMB when it constructs a
metropolitan area in the New England region builds up
using the individual cities and towns as the unit of
analysis, using the same criteria of commuting between
the central city and the individual towns in question.
[48] Q Are the Bridgéport and New Haven areas clas-
sified as SMSAs?
They are.
Would you describe which cities and towns—
Separate SMSA?
Yes, SMSAs?
Yes, they are.
What cities and towns are included in the Bridge-
OMB to be in the Bridgeport standard metropolitan area,
the City of Bridgeport, the Towns of Easton, Fairfield,
Monroe, Shelton, Stratford, Trumbull and Milford City.
Q What cities and towns are included in the New
Haven SMSA?
A Exhibit P-4 lists the cities and towns that OMB
classifies in the New Haven SMSA.
They include the central city of New Haven, the Towns
of Bethany, Branford, East Haven, Guilford, Hamden,
North Branford, North Haven, Orange, the City of West
Haven and the Town of Woodbridge.
58
Q Do you consider the Bridgeport and New Haven
SMSA to be a single integrated area, or two separate
and distinct areas?
A The Office of Management and Budget classifies
them as two separate and distinct areas, and I would
tend to agree [49] with them. Exhibit P-2 presents data
from the 19—census of population on commuting between
metropolitan areas in Connecticut.
We can see from this that there is very little, if any,
cross commuting between New Haven metropolitan area
and the Bridgeport metropolitan area. Only 3.6% of
Bridgeport’s resident labor force commutes to work into
the New Haven metropolitan area. While only 2.7% of
New Haven’s resident labor force commutes to work inte
the Bridgeport metropolitan area.
The two areas also meet the criteria of being relatively
self-contained labor markets. 87% of the New Haven
metropolitan area’s labor force actually works in the
New Haven metropolitan area.
Similarly for the Bridgeport metropolitan area, 83%
of Bridgeport’s labor force actually works in the Bridge-
port metropolitan area. So on the basis of our notion of
a self-contained labor market, these two areas appear to
be self-contained labor markets and there appears to be
very little, if any, economic integration between the two.
It should be noted, however, that because of the prox-
imity, the spatial proximity of the two areas, actually
bordering upon one another, the boundary between the
Bridgeport and New Haven metropolitan area cannot be
very sharply defined.
Unfortunately, there’s no public data available on the
50] cross commuting between individual towns in indi-
vidual metropolitan areas.
Had this been available, I would suspect that the out-
lying towns in each of the metropolitan areas would have
-Substantially more economic integration with one another
than the two individual metropolitan areas do.
These outlying areas take on increased importance
when we recognize that over the last several decades the
growth that has been taking place in the metropolitan
areas of this country has been taking place not in the
central city, but in the outside central city or suburban
areas.
Exhibit P-8 presents the population distribution for
the Bridgeport standard metropolitan statistical area in
1950, 60, and 70, and it shows that the City of Bridge-
port’s share of the metropolitan area population has been
steadily declining since 1950.
Exhibit P-4 presents similar data for the New Haven
SMSA and the same thing is true. The population of the
City of New Haven has been steadily declining over the
20-year period.
Actually, in 1970 the two metropolitan areas crossed
the bench mark in which more than 50% of the popula-
tion of the metropolitan areas now resided in the out-
side central city or suburban areas rather than in the
central city.
Exhibit P-5 shows quite clearly where the growth in
these two metropolitan areas has been taking place. Be-
tween [51] 1950 and 1970 the City of Bridgeport’s pop-
ulation declined slightly, declining by 1.4% over the 20-
year period. Whereas the outside central city, the sub-
urban portion of the metropolitan area, almost doubled in
population over the 20-year period increasing by some
98.5%.
Similarly for the New Haven metropolitan area, the
City of New Haven declined by almost 20%, 19.4% over
the 20-year period from 1950 to 1970, whereas the sub-
burban area, the outside central city area, doubled in
population, increasing by 100.6% over the 20-year period.
Does either the Bridgeport or New Haven SMSA
appear integrated with the New York area?
A I don’t think so. Exhibit P-6 presents commuting
patterns between selected standard metropolitan areas
in Connecticut into the New York State area in 1970.
It shows clearly that less than 1%, actually .95%, of the
Bridgeport area’s labor force commutes to work into the
New York City area. |
For the New Haven metropolitan area, less than 1/10
of 1/5 indicated by the day there being too small to re-
cord—works in the New York area.
On the other hand, workers coming into—coming from
New York into Connecticut also appear to be quite small
for the metropolitan areas in question.
60
Exhibit P-8 presents the residents of the New York
City [52] SMSA who worked in Connecticut in 1970
and we can see that the numbers are really insignificant,
in most cases being less than 1%.
THE COURT: Is that indicated by the dash?
THE WITNESS: Percent working in Connecticut,
dash, indicates that it is less than 1/10 of 1%.
THE COURT: Less than 1/10 of 1%?
THE WITNESS: Yes. But we have, for example,
Bronx County, .48%, is less than 1%. So that the
amounts of commuting between the New York metropoli-
tan area into the State of Connecticut appears rather
small, and actually it is concentrated in only two metro-
politan areas. The Stamford SMSA and the New York
SMSA. So from the census data from 1950 to 1970 census
data on population commuting, that appears to be very
little cross commuting or very little integration between
New York metropolitan area and either of the two
SMSAs, the Bridgeport area and the New Haven area.
A Exhibits P-7 and P-8 present similar data obtained
from the Connecticut Department of Labor from the
Nineteen Sixty—
Q Excuse me, Doctor Glantz. Were you referring to
Exhibit P-8, or P-9?
A Excuse me. P-7 and P-9—present data compiled
[53] by the Connecticut Department of Labor from a
1964 survey on commuting patterns, and they show es-
sentially the same results, that there is very little cross
commuting between the New York metropolitan area and
the individual labor markets in Connecticut that we are
concerned with, the Bridgeport area and the New Haven
area.
Q Doctor Glantz, now let’s turn to the amount of com-
muting with the Hartford and Boston SMSAs. Does the
Bridgeport SMSA appear integrated with the Hartford
or Boston standard metropolitan statistical area?
A Again, it doesn’t appear to be. Referring back to
Exhibit P-2, we can see that the amount of commuting
between the Bridgeport metropolitan area and the Hart-
ford metropolitan area, and similarly the Boston metro-
politan area, is too insignificant to be recorded on the
61
least of significant receivers of labor from the Bridgeport
metropolitan area, so I’d say that the Bridgeport area is
not significantly integrated with either the Hartford or
Boston areas.
Does the New Haven SMSA appear integrated with
the Hartford or Boston SMSAs?
A Well, again, from Exhibit P-2, this doesn’t appear
to be the case. The Boston metropolitan area does not
appear on the list of significant recipients of New Haven
labor in 1970. The Hartford metropolitan area does, but
the amount of commuting [54] from the New Haven
metropolitan area into the Hartford metropolitan area
appears to be rather insignificant, some 429 persons who
live in New Haven out a total labor force in New Haven
of 145,000 actually commute into the Hartford metro-
politan area.
So while there’s some commuting between New Haven
and Hartford, the numbers are really too insignificant to
indicate any economic integration between the areas.
THE COURT: Excuse me. Doctor Glantz, I have been
following you fairly well. These last points you have been
making. I haven’t been with you on the charts that you
have been referring to in P-2.
THE WITNESS: I’m on the page marked “New
Haven SMSA”.
THE COURT: All right. You said something on that
should reflect movement from New Haven to Hartford?
THE WITNESS: Okay. If you look on—
THE COURT: Where would that be?
THE WITNESS: If you look on the bottom of the list
of 20 places, the last two lines, Hartford City, Hartford
County and remainder of the Hartford SMSA, when we
sum up the 159 people who live in the New Haven metro-
politan area and work in the Hartford [55] City to the
270 who live in the New Haven metropolitan area and
commute into the rest of the Hartford SMSA, we get
429 out of a total labor force of 145,000. It appears to
me that this is rather insignificant.
THE COURT: And Boston is not listed?
THE WITNESS: Boston does not appear on the list of
significant recipients. Even if we were to include the
62
total places not recorded, not listed in 20 places, 3,796,
this is a percentage of 145,000—appears rather small.
Less than 1%. So I’d say that, you know, even if we
allocated everything that we don’t know to the Boston
area, it would still be insignificant.
THE COURT: I see. Thank you.
Maybe I should give the court reporter a short recess.
With all these statistics and the oral arguments, it is
quite a bit for him to take down. Give him a five-minute
recess.
(Recess taken.)
MR. CLARK: Your Honor, I neglected to do something
when we started today, and that was to move, as I said
I would, that Plaintiff’s Exhibits 1—Plaintiff’s Exhibits
for Identification, 1 through 115, be admitted subject to
motions to strike at a future time.
THE COURT: Yes. Motion is granted.
[56] Q Doctor Glantz, would you describe for the
Court the New England region?
A The New England region includes the States of
Vermont, New Hampshire, Maine, Massachusetts, Con-
necticut and Rhode Island. These six states—or the States
of New England—in actuality, the region may really
be subdivided into two separate regions, nothern New
England, which is essentially rural, Vermont and New
Hampshire and Maine, and the industrialized southern
states, Connecticut, Massachusetts and Rhode Island.
The vast majority of the population and employment
that goes on in New England takes place in the indus-
trialized south.
In 1970 81% of the population of New England re-
sided in the three southern states. In 1971, 83% of
employment in New England was concentrated in the
three southern states. In actuality, the population and
employment is even more concentrated than this data indi-
cates.
Most of the region’s population lies on an industrial
and commercial belt between New York and Boston.
Exhibit P-10, which lists the population of Connecticut
by counties in 1950, 60 and 70, indicates that the three
Connecticut counties which lie on this narrow band be-
tween Boston, Mass.—Massachusetts and New York City,
Fairfield County, Hartford County and New Haven
County, account for 34 [57] of the state’s population
in 1970.
In Massachusetts the three metropolitan areas which
lie on the belt, Boston, Springfield and Worcester, account
for nearly % of the state’s population. So, really, what
we have is two regions, a largely rural northern New
England with population scattered throughout, an in-
dustrialized southern New England with most of the
population and economic activity taking place on a nar-
row belt running between Boston and New York.
THE COURT: Excuse me, Doctor Glantz, I followed
your conclusions—I’m sorry, I have your conclusions, but
I didn’t quite follow how you arrived at those conclusions
in Exhibit 10. Would you just a little more slowly go
over that so I’ll be able to follow it?
THE WITNESS: If we look at the percents of Con-
necticut’s population in 1970 residing in the towns of—
in the counties of Fairfield, Hartford and New Haven,
the three counties that lie on this belt between New York
and Boston, we find that they accounted in 1970 for ap-
proximately 34 of the state’s population.
Now, on Exhibit 10 was the fact that in 1970, the
three Massachusetts metropolitan areas which lied on
the belt, the Boston SMSA, Springfield and Worcester
__SMSA, accounted for nearly % of that state’s popula-
tion, these two states being the two most populated states
1858] in New England, so really what we have is a vast
amount of concentration of population and economic ac-
tivity lying on this belt between Boston and New York.
THE COURT: Very well. Thank you.
Q Doctor Glantz, how would you characterize the pres-
ent state of the New England economy?
A Well, I think the New England economy is still
in a recession. In July of this year unemployment in
New England was 7.2% seasonally adjusted, compared to
a national rate of 5.5%. In that same month industrial
production in New England as measured by the Federal
64
Reserve Bank of Boston’s industrial production index in-
dicated that industrial production in New England was
4% below its 1967 level, and in the United States in that
same month, July of this year, industrial production was
13% above its 1967 level.
So we can see that the United States economy has begun
on the road to recovery some months back. Unemployment
is going down, industrial production is up, but the New
England region appears to be lagging somewhat in its
recovery behind the nation.
THE COURT: Were you looking at a chart—
THE WITNESS: No.
THE COURT: —for those conclusions?
[59] THE WITNESS: No.
Q Why is the economy of New England lagging be-
hind—rather, why is the recovery of the New England
recovery lagging behind that of the nation?
A Well, part of New England’s problem is its indus-
trial mix. Regions which tend to specialize in manufac-
turing, especially durable goods manufacturing, that is:
have a high proportion of their employment concentrated
in these industries, tend to be affected much more severely
in periods of recession than do other areas.
The New England region has more than the average
proportion in both durable goods manufacturing and man-
ufacturing as a whole. So you would anticipate a deeper
recession in New England, unemployment higher, indus-
trial production lower than in the country as a whole
solely on the basis of its industrial mix.
But as far as lagging in its recovery, coming out of
the recession, we have to take into consideration that New
England has many locational disadvantages for many
types of manufacturing. There are few raw materials in
the region, the region tends to be remote from national
markets, most of the population lies in other parts of
the country, making New England stuck in the north-
east portion of the country fairly remote from national
markets.
[60] Industrial fuel costs, as well as residential fuel
costs, are higher in New England than in other regions.
Wage rates for unskilled labor are somewhat higher
65
in New England than they are in other regions of the
country. When you add up the sum total of these loca-
tional disadvantages that translates into a cost disad-
vantage for a manufacturer producing a product in New
England trying to compete with similar manufacturers
in other regions of the country.
This isn’t a recent phenomenon, it’s been true for 30
or 40 or 50 years, perhaps even longer than that.
The outcome of this is that the new manufacturing
establishments that have come into being in recent decades
have tended to locate near regions where they wouldn’t
be hindered by the locational disadvantages that they
would find in New England. This translates into New
England having older plant and equipment which tends
to make it somewhat less effective than its competitors in
other parts of the country.
So when we couple this with the fact that manufactur-
ing takes it on the chin in recession—
MR. REYCRAFT: Your Honor, excuse me, may I ask
to what question this is in response? These are very
broad conclusions and factual statements, and with all
due regard to the witness’ expertise, when he talks about
cost disadvantages of New England [61] industry, I just
don’t know what the foundation for it is.
THE COURT: You mean the foundation for his con-
clusion?
MR. REYCRAFT: His knowledge, yes, sir, these are
factual conclusions.
THE COURT: If that is a challenge to his expertise,
you may cross examine him with respect to his expertise
before he expresses an opinion. If it just goes to weight,
of course, you will have an opportunity to cross ex-
amine. But in his—these are opinions he is expressing.
Now, I notice in some of the opinions he has ex-
pressed, he’s referred to charts prepared by various or-
ganizations and government agencies. The basis for these
latter conclusions, the last few opinions he’s expressed,
he has not referred to the foundation for those.
MR. REYCRAFT: That’s the point.
THE COURT: Well, there’s two things. One, that he’s
relying on his expert experience in the field, or, two, he’s
66
relying on some statistics obtained from a source he
hasn’t revealed.
In either event, you have two alternatives, Mr. [62]
Reycraft, if it is on the former, that is: on the basis
of his expertise, you may object and now at this point
challenge his expertise. If it is on the latter, that is:
—you admit he’s an expert, but you don’t know what
he’s deriving all this from, that would be based—that
could be challenged on cross examination.
MR. REYCRAFT: Yes, your Honor, I do not challenge
his qualifications as a regional economist which is what
he’s qualified for, so I’ll defer the cross examination.
THE COURT: Very well. But since we have had this
interruption, it gives me an opportunity to interject a
question without interrupting you. |
You haven’t mentioned the effect of imports from
other countries as affecting the manufacturing decline in
the New England states. I gather, so far from what
you have said, is that you are taking the United States
as a unit and you are saying: well, in other parts of
the United States, labor is a bit cheaper, new factories are
being started, and in New England, costs are higher,
which, of course, from what you say, if those statements
are true, that would account for your conclusions, But
how about imports from other [63] countries? :
THE WITNESS: Well, I was directing my answer to
New England’s locational disadvantages vis-a-vis other
regions of the country. Now, if a given industry was to
face serious competition from abroad, that industry would
suffer that competition regardless of its location in the
United States, and that wouldn’t be a factor causing New
England to be at a disadvantage when compared to other
regions.
THE COURT: In other words, they would all be at a
disadvantage throughout the United States?
THE WITNESS: They would all be at a disadvantage.
A Let me recap. I have left off, I believe, by stating
that the locational disadvantages in New England trans-
lated into older plant and equipment by virtue of new
establishments being located in other regions, this re-
sults in New England establishments being somewhat
67
less effective, having older capital stock, being neces-
sarily more labor intensive than their competitors in
other regions, as a result of this when recovery comes
and when manufacturing begins to retool, it is the more
effective establishments that are retooled first, that pick
up first, and these tend to be located in other regions
of the country. So we would anticipate a lag in New
England as far as recovery goes.
[64] Q Is this situation equally true for all of the
states of New England?
A Well, it is generally true of the region as a whole.
Each of the individual states in the region has a some-
what different mix of industries, and each of the indi-
vidual states would be affected to a greater or lesser ex-
tent from the region’s locational disadvantages, which
would translate into a somewhat different performance
among the states over the cycle, and this is true.
In July of this year while New England had an un-
employment rate of 7.2% seasonally adjusted, the range
of unemployment among the states in New England went
from 7.8% in Connecticut to 4.8% in New Hampshire.
Connecticut has an industrial mix with a lot of manu-
facturing. This would be expected. Whereas New Hamp-
shire has mostly rural—a rural economy. So that the
industrial mix alone would account for some variation
among the statés within the region and couple this with
the fact that each state is located somewhat differently
from each of the other states in the region, and then
would therefore suffer to a greater or lesser extent from
the locational disadvantages than the region as a whole,
and they would experience different economic perform-
ance over the long run, some states would grow faster
than others over 20, 30, 40-year period, their industrial
mix would translate into somewhat [65] different per-
formance over the cycle. I think this can be illustrated,
the different’ performance of the states, over a longer
period, by examining the Exhibits L-11 through P-14.
Exhibit P-11 presents the population of the United
States and New England—and each of the six New
England states, and what I’m focusing on now is the
percentage change between 1950 and 1969. New England
*
68
increased population by some 26%, somewhat less than
the nation as a whole, which increased by 33%. Among
the New England states, Maine grew at a rate of 8%,
of the New England rate, while Connecticut grew at
a rate of 49%, almost double the New England rate,
and some 14% faster than the nation as a whole.
In Exhibit P-12 we have similar data for employment.
Over the 1950 to 1969 period New England’s employment
increased by 33.5%. Among the states the range was
from 20.7% in Maine to a high of 53.2% for Connecticut.
Again, there’s a wide range of experience in growth of
employment among the New England states.
In P-13 we present similar data for personal income.
And again between 1950 and 1969 period we see that
New England increase personal income by 111%, some-
what less than the nation as a whole, which increased
by 120%, but among the New England states Maine in-
crease personal income by 84%, while Connecticut in-
personal income by 145%.
[66] | In Exhibit P-14 we present similar date for per
capita income, and here we see that the New England
experi over the 50 to 69 period has been compar-
able to that of the nation. New England growing by 67%
in per capita income to the nation’s 65%, while the in-
dividual states showed no great variation, I'd say the
rates of gro there were comparable among the New
England states.
But in terms of the individual state’s economy, we have
to recognize that while the rates of growth have been
comparable over this period, the different states started
from much different base periods. In 1950 per capita in-
come in Connecticut was $2,587.00, substantially higher
than the New England figure of $2,209.00 and higher
than the United States figure of $2,065. And even with
comparable rates of growth over the 1950 to 1969 period
we see that this initial advantage that Connecticut had
gets magnified, and by 1969 the gap had widened such
that Connecticut had per capita income in 1969 of
$4,239.00 as compared with New England’s 3,696 and
the United States’ 3,416. So what these four exhibits
show is that over the cycle, in the short run we would
expect somewhat different performance from the indi-
vidual states on the basis of differences in industrial mix,
and over the longer run, 20 years, the past 20 years,
we have seen that states which are more favorably sit-
uated within the region, such as Connecticut, which
doesn’t experience the severe locational [67] disadvant-
ages that the region as a whole does, performed some-
what better.
Connecticut is favorably located, as I indicated before,
between metropolitan New York and metropolitan Boston.
So while the region as a whole may not be growing very
rapidly, and these exhibits indicate it has been growing
somewhat more slowly than the nation as a whole be-
cause of its locational disadvantages, the intraregional
differences show up quite clearly that Connecticut is reap-
ing the benefits of a favorable location within the region,
it is getting spill-overs from other parts of the region.
Q Despite Connecticut’s favorable location, the state
still has recently high unemployment. How do you ac-
count for this?
A Well, as I said before, we would expect regions and
states which specialized in manufacturing and ially
durable goods manufacturing, to have a somewhat deeper
recession. This is definitely true of Connecticut. Connecti-
cut has substantially more manufacturing employment
on a proportional basis than does the United States or
even the entire New England region. In 1968, the last
year of full employment, 41% of Connecticut’s employ-
ment was in manufacturing, and 32% of its employment
was in durable goods manufacturing. Because of these
rather high concentrations in manufacturing, and ex-
pecially durable goods [68] manufacturing, we would ex-
‘pect Connecticut to have a much deeper recession and
perhaps a somewhat longer recession than the nation as
a whole. But if we look at Exhibit 17 and Exhibit 18—
that’s P-17 and P-18, your Honor—we can see that this
has been true historically, that in past recessions Con-
necticut has sustained a very high unemployment rate
during a recession, but it has always managed a com-
plete recovery.
In 1949 Connecticut’s unemployment rate was 8.7%
70
at the height of the recession, and three years later in
1952 it was down to 3.4%, and in the following year
it got down to 3.2%.
In 1958, in another recession, Connecticut had a high
unemployment rate of 8.4%, and by the mid-1960’s, when
the nation had peaked in its recovery, Connecticut had
also peaked and had gotten its unemployment rate down
to 3.2%. So I think that Connecticut’s very high unem-
ployment rate right now, despite what I would consider
a favorable location within the region, can be attributable
to its heavy concentration in manufacturing and durable
goods manufacturing, its industrial mix.
Exhibits 15 and 16, I think will bring out the im-
portance of industrial mix somewhat more clearly. Ex-
hibit 15 presents the distribution of employment in the
Bridgeport labor market area in selected years, and if
we look at the last year of full employment, 1968, we
see that the Bridgport area had [69] 48.6%, nearly half
of its nonagricultural employment, was in manufactur-
ing. In Exhibit 16, which presents the distribution of
employment for the New Haven area, again looking at
1968, we see that only 30. 5% of its nonagricultural em-
ployment was in manuf.
These two figures should be compared to a United
States figure in 1968 of 27% of nonagricultural employ-
ment in manufacturing. So in 1968 just before the reces-
sion the Bridgeport area had nearly twice as much of
its employment concentrated in manufacturing than the
nation as a whole, while the New Haven area had just
slightly more of its nonagricultural employment concen-
trated in manufacturing than did the nation as a whole.
When we look at the unemployment rates in the Bridge-
port area and the New Haven area in 1971 and com-
pare those to the United States figure, and we can see
this on Exhibit P-18, we see that in 1971 Bridgeport’s un-
employment rate on an annual average was 10.5% as
compared to a national figure of 6.0%, substantially
higher than the national figure, whereas New Haven
with only slightly more than the national proportion in
manufacturing had just slightly more than the national
‘ unemployment rate in 1971, 7.3%.
71
So this shows quite clearly that other things being
equal, areas that specialize in manufacturing which are
severely affected in recessions tend to have much higher
for recovery are very good.
The unemployment figures for the last couple of months
seem to indicate that Connecticut has begun a belated
recovery. In August of this year Connecticut’s unemploy-
ment rate was 7.4% seasonally adjusted, down from a
high of 9.5% in April.
The Bridgeport area’s unemployment rate in August
was 9.8%, down from a high of 12.1% in March, and
the New Haven area in August had an unemployment
rate of 6.6%, down from a high of 8.6% in March. So in
the last several months the unemployment situation in
Connecticut in the Bridgeport and New Haven areas has
improved substantially, and I think that these two areas
can look forward to a complete recovery as can the
state as a whole.
Q What are the growth prospects for Connecticut and
for the Bridgeport and New Haven SMSAs?
A I think the growth prospects for the state and these
-two areas within the state are quite good. In the future,
10, 20, 30 years, the state and these areas should ex-
hibit relatively good growth. Even though New England
as a whole will probably exhibit a growth rate slightly
below the national rate. I say [71] this because of Con-
necticut’s favorable situation, favorable location within
the New England region.
From a location in Connecticut and from a location
in Connecticut on the transportation network, the high-
way network that runs through the center of Connecticut,
linking the New York and Boston areas, a firm can serve
all of New England and, for that matter, all of the
northeast from a very good competitive position.
Also from a location in Connecticut, and especially on
the highway network through the center of Connecticut,
72
a firm can reap virtually all of the locational advantages
that would accure from a location in the metropolitan
New York or a metropolitan Boston since from its loca-
tion around the center, you would be an hour and a half
from the fringe of either of these areas, you can tap
the consultants.in these areas and the other business
resources that are available in these areas.
So I think that in terms of geography, Connecticut and
these two areas within Connecticut are quite favorably
situated.
In addition to that, I think the national trend away
from manufacturing as a source of employment will also
help Connecticut in competing in national markets. When
competing in national markets, Connecticut is somewhat
at a disadvantage [72] being in New England, being in
the northeast, but when we move away from manufac-
turing and into nonmanufacturing, we move into those
fields which are not seriously affected by location.
What they require is good communication and trans
portation networks. Two major metropolitan areas—and
I think that a location in Connecticut would afford a firm
a very good location in nonmanufacturing. I think that
the experience over the last several decades has indicated
that this is the case.
We have witnessed an exodus of business firms from
the New York metropolitan area into southern Connecti-
cut, into lower Fairfield County. I think that this trend
will probably continue into the future with more firms
leaving the New York metropolitan area and moving
further up into Connecticut.
In the last decade we have begun to see the same
sort of thing happening in metropolitan Boston. We have
seen an exodus of many firms going to the outlying areas
in the metropolitan area, some into southern New Hamp-
shire, and I think that this trend will continue, and as
firms move out of metropolitan Boston, if they’re going
to serve a national market, a northeastern market, as
opposed to a strictly metropolitan Boston market, then
Connecticut would become an ideal location for them.
So that I think that in the long run we can expect
favorable growth from the State of Connecticut and from
73
these two areas which are favorably situated within the
state.
[73] Q Could you be more specific as to the amounts
of growth which you expect for Connecticut and for the
two SMSAs in Connecticut, the Bridgeport and New
Haven SMSAs?
A Well, in order to quantify what growth we could
expect from these areas, we really have to quantify the
two major factors accounting for long run growth in
any region. These are the region’s industrial mix and
the locational factors that would affect each of the indus-
tries within this region, and to do this we look at the
industrial mix, we look at the distribution of industries
in a given region and we project each industry forward
into the future separately. We project forward trans-
portation equipment, we project forward electrical ma-
chinery and so on. We get down to the level of the indi-
vidual industry as far as we can rather than relying
on broad aggregate such as manufacturing and non-
manufacturing.
Having projected forward each of the industries in
the area, assuming that each industry in the area would
perform as well as that industry does nationally and
then summing up overall of the industries, we would get
the growth that would be expected from this region on the
basis of its industrial mix.
To this growth, due to industrial mix, we then modify
our projections on the basis of changing regional shares
of each individual industry’s employment growth that
would be attributable to regional factors. For example,
if we look at the textile [74] industry which has been
declining nationally for the last several decades, if a
region was to have textile employment, this would con-
stitute a drag on its growth, because the industry is not
growing rapidly nationally, it is declining, so its indus-
trial mix factor would be negative or very small. But
when we compare two regions, such as the south Atlantic
region, and the New England region and look at the
changing shares of the national employment in textiles,
we see that the south Atlantic region has been increas-
ing its share, while the New England region has been
—
74
decreasing its share. So if we were to make projections
for the south Atlantic region on an industry by industry
basis, using textiles as an example, textiles would con-
tribute a negative or a very small industrial mix factor,
but this would be offset somewhat by a favorable share
factor or regional mix factor.
On the other hand, in New England in textiles we
would get again a negative or a very small industrial
mix factor for textiles, and this would beceme com-
pounded by a declining share factor. So in this way we
quantify growth due to industrial mix and growth due
to locational factors. This gives us a projection of em-
ployment to some future bench mark year.
We then tie population figures and income figures to
our employment projections through the use of trends
and historic multiples. For example, an area might have
had, let’s say, 2.5 residents for each employed person
at some point in the [75] past. We would look at the
trend of this ratio, how many people was an individual
worker in a given area able to support. Then projecting
the trend in this population to employment multiple into
the future we would get a target figure for this multiple,
then applying the target figure for the multiple to our
employment estimate we would then get a population esti-
mate and we do the same thing for the income to em-
ployment multiple and get get an income estimate.
Well, using this methodology, Exhibit 19 presents pop-
ulation projections for Connecticut and Bridgeport and
New Haven areas as well as New England and the United
States for the 1970 to 1980 period. It shows that metro-
politan Connecticut is expected to grow somewhat more
rapidly than metropolitan New England and metropoli-
tan United States. Metropolitan Connecticut being ex-
pected to grow by some 20.6% as compared to metro-
politan New England’s 13.5% and metropolitan United
States’ 18.3% over the 1970-1980 period.
Metropolitan Bridgeport is expected to grow somewhat
more rapidly than metropolitan Connecticut, growing at
a rate of 22.1% over the ten-year period, and metropol-
itan New Haven being expected to grow slightly more
75
rapidly than metropolitan New England growing at a
rate of 16.5% over the ten-year period.
THE COURT: Would this be a convenient time to
break for lunch?
[76] MR. BENTKOVER: I think we are nearing the
end in perhaps another 10 or 15 minutes, at the most.
THE COURT: We'll break for lunch, then, until 2:15.
(Recess taken for lunch.)
[77] Afternoon Session
(2:15 p.m.)
THE COURT: Are the parties ready to proceed?
MR. BENTKOVER: Yes.
BY MR. BENTKOVER:
Q Dr. Glantz, when we adjourned I asked your views .
on the amount of economic growth which would occur in
Connecticut and in the Bridgeport and New Haven
SMSA, and I believe you were discussing Exhibit P-19
on resident population, had you finished with that exhibit?
A I had.
Q I direct your attention to Exhibit P-20, would you
examine that and tell the Court how that affects your
views on the amount of growth which you expect to oc-
cur?
A Exhibit P-20 presents employment projections for
employment for the United States, New England and
Connecticut between the years 1968 and 1980. It shows
that employment in metropolitan Connecticut is expected
to grow somewhat faster than in metropolitan New Eng-
land and at about the same rate as metropolitan United
States. Metropolitan Connecticut growing at a rate of
27.4 per cent over the 12 years as compared to metro-
politan New England’s 24.0 per cent over the 12 years,
metropolitan United States growing at the same rate as
metropolitan Connecticut, 27.4 per cent.
178] For the New Haven and Bridgeport areas the ex-
hibit shows that the New Haven area is expected to grow
at about the same rate as metropolitan New England;
metropolitant New Haven growing at a rate of 23.8 per
cent over the period as compared to metropolitan New
76
England’s 24.0 per cent over the period. The Bridgeport
area is expected to grow slightly less rapidly than metro-
politan New England, growing at a rate of 21.4 per cent
over the 1968 to 1980 period.
The employment projections and population projections
from Exhibit P-19 and P-20 are summarized in Exhibit
P-21 which presents the average annual rates of growth.
Since the periods are different by two years, this presents
a handy comparison and again shows the same things that
were shown in Exhibits P-19 and P-20.
Exhibit P-22 presents personal income projections for
the United States, New England and Connecticut for the
years 1968 through 1980. It shows that metropolitan
Connecticut is expected to grow somewhat more rapidly
than metropolitan New England, and again somewhat
more rapidly than metropolitan United States; metropoli-
tan Connecticut being expected to grow by 80.4 per cent
over the ’68 to ’80 period as compared to 73.2 for metro-
politan New England and 74.4 for metropolitan United
States.
The Bridgeport and New Haven area are projected to
[79] grow at about the same rate as metropolitan New
England and metropolitan United States over the 68 to
80 period; metropolitan Bridgeport being expected to
grow by some 76.4 per cent over the period and metro-
politan New Haven being expected to grow by 74.3 per
cent over the period.
THE COURT: What has been the growth from 1968
to 1972? Is it in line with the projection? I mean it
seems very high. Does that mean that economists project
a 76 per cent increase in Bridgeport in personal income?
THE WITNESS: Over the 12 year period?
THE COURT: Well, yes. We have already had at
least four of those years which have passed.
THE WITNESS: What we are doing when we make a
projection is to project the trend. There are going to be
some oscillations around the trend. Given the cycle, you
can’t anticipate a business cycle. What we have seen from
the 68 to 72 period has been a downswing in the cycle.
Now we are going to come back up and we are going to
continue to oscillate around the trendline.
a
77
What these trends—what these projections show is the
trendline rather than individual oscillations around the
trendline for the cycle.
[30] THE COURT: Well, to get a 76.4 increase or
change, in four of those 12 years there has been a de-
cline, then for the next eight years there is going to have
to be like an 85 per cent—
THE WITNESS: Yes.
THE COURT: —change to make up not only the
76.4, but also for the decline that you did not figure on,
I assume.
THE WITNESS: Right.
THE COURT: All right. Go ahead.
A (Continuing) Similar projections for a different
time period, 1969 through 1990, are presented in Exhibit
P-11 through P-14. P-11 presents population projections
through 1990, P-12 presents employment projections, P-
18 personal income and P-14 per capita income projec-
tions.
These projections are for the State of Connecticut,
New England and the United States, and when we ad-
just for the differences in time periods covered they are
quite comparable to the projections that we have just gone
over. What—
THE COURT: I just say this to inject a little bit of
humor, perhaps, in this complicated and very economic
thing. I hope someone tells Congress about these projec-
tions so they will be aware of Federal judges’ salaries in
the next eight years.
[81] A What these projections show in summary is
that by and large Connecticut is expected to grow more
rapidly than New England and, in many cases, more rap-
idly than the United States; and that the Bridgeport and
New Haven areas can be expected to share in Connecti-
cut’s growth.
Exhibits P-23 and P-24 present similar projections
made by local planning agencies for the greater Bridge-
port region and the New Haven metropolitan area, and
these projections are also in line with the projections that
we have just gone over.
Exhibit P-25 presents population projections for the
Bridgeport and New Haven telephone additions made by
78
Southern New England Telephone, and these projections
are also in line with the projections that we have just
gone over.
All of the projections seem to indicate that Connecticut
is expected to grow somewhat more rapidly than New
England and that the individual areas, Bridgeport and
New Haven, may be expected to share in this growth.
Q Dr. Glantz, you have discussed the exodus of firms
from Boston and New York into the Connecticut area,
does this exodus lead you to conclude that the Bridgeport
or New Haven SMSA will at some time become a part
of a metropolitan area which includes New York or
Boston?
A I don’t think so. There has been a substantial [82]
exodus of business firms from metropolitan New York
into Southern Connecticut and, if anything, this trend has
been accelerated, but the point that your question is di-
rected to, are these areas going to become sufficiently
integrated as to become one area, would necessitate com-
muting patterns between New York and Bridgeport or
Boston ahd Bridgeport, and past experience has shown
that when a firm relocates, it takes very few of its per-
sonnel with it and tends to pick up employees from the
local labor markets that it moves to. Thus we would have
very little commuting between the former location of the
firm and the new location of the firm.
I think that the 1970 census data on commuting bear
this out. Despite the large number of relocations from
metropolitan New York to southern Connecticut, there is
still an insignificant amount of commuting between the
two areas, and I think that this will continue into the
future; that firms relocate, but we don’t have commuting;
firms hire new employees at the new labor market and
we still maintain two separate and distinct labor markets.
MR. BENTKOVER: Thank you, Dr. Glantz. We have
no more questions.
BY THE COURT:
Q I notice in your chart that Connecticut residents
employed in New York—lI guess that is P-7, and perhaps
this [83] not the relevant chart for my question—but I
—
79
do not see a figure for the State of Connecticut. In other
words, the percentage of Connecticut residents that are
employed in New York. You have taken—I don’t know,
about a half a dozen or a dozen towns. I see, for example,
Greenwich is not listed, although Stamford is, and, of
course, it is quite high, it is 21.63. I just wondered why
Greenwich is not in there, or some of the other towns
that have the reputation of having many Connecticut resi-
dents who commute daily to New York.
A These figures that you are referring to as towns
are not really towns, these are labor market areas as
defined by the Connecticut Labor Department, and the
name represents the name of the labor market area, which
includes a small cluster of towns. So that Greenwich
would be included in one of these figures. .
Q The left hand column, “Labor Market Area,” and
then the next column, “Number of,” et cetera, includes
the entire State of Connecticut divided up into labor mar-
ket areas, is that it?
A That's correct.
THE COURT: All right. Thank you.
CROSS-EXAMINATION
BY MR. REYCRAFT: .
Q Dr. Glantz, I understand you are employed by the
[84] Federal Reserve Bank of Boston, is that correct?
A That's correct.
Q How long have you been employed in that capacity
by the Federal Reserve Bank of Boston?
A Since June of 1971.
3 During all of that time what have your duties
?
A My duties have been to, as I have said before, moni-
tor the economy of New England, keep track of econoniic
conditions in that area, to edit out publication, the New
England Economic Indicators, which is a monthly digest
of economic conditions in New England, and to conduct
studies and analyses of the New England economy, one of
which was published in the New England Economic In-
dicators this past year.
80
Q What was your employment prior to being with the
Federal Reserve Bank of Boston?
A I was an instructor of economics at Temple Uni-
versity.
Q And prior to that time you were—
A I was in graduate school.
Q Graduate school. Right. For what purposes are
the—is the information gathered that you gather in your
duties as an economist with the Federal Reserve Bank?
A We act as a—the Federal Reserve Bank of Boston
acts as a clearing house of regional economics, the statis-
tics. We perform this as sort of a public service. It is
not in our [85] mandate by our charter, but historically
the Federal Reserve Bank of Boston has taken an interest
in regional economic conditions going way back; and this
was heightened by economic conditions in the 1950s; but
virtually all of the Federal Reserve Banks maintain a
regional economic analysis unit.
Q Do any of your duties involve working on bank
ers?
A They do not.
Q Have you participated at any time as an employee
of the Federal Reserve Bank in the ne analysis
of any bank merger?
A No, I have not.
Q Do you have any background or experience which
you believe would qualify you as an expert in oe
markets?
A No, I do not.
Did you participate in any way in the preparation
of Definition of Standard Metropolitan Statistical Areas
contained in Exhibit P-1?
A No, I did not.
Q This is an excerpt from a pamphlet put out by the
Bureau of the Budget in 1967, isn’t that correct?
A That's correct.
Q And you accepted it literally, and you have ex-
plained very well what a standard metropolitan area is
in the view of [86] the Bureau of the Census, isn’t that
right?
A That's correct.
— a
81
Now, can you tell me the purposes for which the
Bureau of the Census has prepared this definition or uses
this concept? :
A As I have said, the purpose of defining a metro-
itan area is to provide a reasonable unit of analysis
when conducting area studies. The concept of a metro-
politan area pre-dates the Standard Metropolitan Area
and goes back to the old Standard Metropolitan Area.
The Bureau of the Census has for some time facilitated
in conducting economic research and the notion of a metro-
politan area is an outgrowth of that.
There is another concept known as the Standard
Metropolitan Area?
A This pre-dates the Standard Metropolitan Statis-
tical Area.
Q Is there now any other concept which is used by the
Bureau of the Census for regional analysis, economic
analysis, other than the Standard Metropolitan Statistical
Area?
A There is.
Q What is it?
A State Economic Area.
Q How are the State Economic Areas defined?
[87] A They are defined in terms of broad regional
trade patterns rather than economic labor markets.
Q So the Standard Metropolitan Statistical Area con-
cept is one that relates primarily to the attributes of the
county as a place of work, isn’t that right?
A Not the county as a place of work. A labor market
as an economy—I think—you know, perhaps it’s appropri-
ate at this time to compare what a metropolitan area is
as opposed to a state economic area.
A state economic area typically encompasses more than
one metropolitan area, and the criteria for these areas
to be included in the state economic area would be sub-
stantial inter-metropolitan or interarea trade relation-
ships. But this doesn’t mean that a state economic area
is a spatial economy in a meaningful sense. It is not a
self-contained labor market. Typically, it encompasses
more than one labor market. But what it does do is to
define definite trade relationships.
of it, relate primarily to the attributes of the county
place of work? That’s what the definition—that’s
of the definition under criteria of metropolitan char-
ee
A It does, it uses the county as a building block,
and as a criteria as a place of work we are interested in
counties [88] that are metropolitan in nature, that are
essentially urban rather than rural; and this notion of a
county as a place of work is defined in such a way that
we eliminate what are essentially rural counties in the
country that may have a sufficient number of its labor
force commuting into a central county and thus by the
rest of this definition would be included in the metro
politan area.
Q Well, is there a standard metropolitan area concept
applicable to New York, for example?
A There is.
Q What is it?
A It’s the New York Standard Metrepeitten Statisti-
cal Area.
ls there another concept applicable to the New York
Q What is it?
A The New York Standard Consolidated Area.
Q You have described—well, P-1 describes the criteria
followed in establishing a standard tan area,
what are the criteria followed to a regional
area, the regional area you have just referred to?
A There are two Standard Consolidated Areas in the
United States, they tend to be atypical, New York and
Chicago. [89] The reason for this is that the central city
of the Standard Consolidated Area is so large and 80
dominant that by notions of economi¢ integration we
would include more than we ought to include. It typically
—well, not typically, in the case of New York, and Car
cago, would necessitate the inclusion of several
tan areas in Northeastern New Jersey, which by other
definitions, by definition of a Standard Metropolitan Sta-
tistical Area — be classified as separate entities. They
do have separate economies. The Newark, New Jersey
Standard Metropolitan Area has an identity of its own.
The Jersey City Standard Metropolitan Area—Metro-
politan Statistical Area has an identity of its own. What
does exist is a substantial amount of economic integration
amongst these areas. Such that the census decided that
it had been best to create a unique classification for these
two areas.
Q Well, what counties are included in the New York
Consolidated Area?
A I don’t know offhand.
Q Is Fairfield County included?
A T don’t know offhand.
Q I believe you will find that it is, Doctor. What is
3 8 the New York Standard Metropolitan Statis-
tieal Area ? By the way, that’s a matter of public record,
is it not, as to what is included in the New York Con-
solidated Area?
190] A Yes, it is.
Q If Fairfield County was included in that area what
would that mean to you as an economist?
A I would say that Fairfield County had substantial
amounts of social and economic integration with the New
York City area.
Q . Glantz, did you participate in the prepara-
tion of Government’s Exhibit P-3?
A No, I did not.
Did you participate in the preparation of any of
the exhibits P-1 through P-26?
A Yes, I did.
Q Which ones?
A Exhibit P-12. Might I ask a question at this point?
THE COURT: Well, it is not customary. You are won-
dering what he means by “did you assist“?
THE WITNESS: Right.
THE COURT: If there is some problem you are hav-
ing in answering his question directly, you may so state.
What is on your mind?
THE WITNESS: While I did not actually gather the
data for many of these exhibits, by telephone conversa-
tion I indicated the types of data that I would like to
84
have gathered for me, and the members [91] of the
Justice Department so gathered that data.
Did you, for example, request that the data set
forth in Exhibit P-3 be put together?
A No, I did not.
Q Well, can you tell me which exhibits you did re
quest to be prepared?
A Exhibits 6, 7, 8, and 9 on commuting data, Ex-
hibit 2 on comuting data, Exhibits 11, 12, 13, 14, 15, 16,
19, 20, 21, 22, 23, 24 and 25.
But none of these exhibits were prepared by you,
isn’t that right?
A With the exception of Exhibit P-12,
Q All right. Do you know who prepared them, by
the way?
A No, I do not.
THE COURT: Before we go on to else,
there is some confusion in my mind. I better clear it up
as we go along. If Bridgeport is in Fairfield County,
which it is, and Bridgeport is its own SMSA, and if Mr.
Reycraft is correct that Fairfield County is in New
York’s SMSA—
THE WITNESS: It is not.
THE COURT: Oh, it is not?
MR. REYCRAFT: If I may volunteer at this point,
192] your Honor? There are two concepts. There is one
as the New York Standard Consolidated Area in which
more than one SMSA is included, if I understand it cor-
THE COURT: I see. And that is what you were re
ferring to?
MR. REYCRAFT: Yes, sir.
THE COURT: I did not pick up the difference in your
question.
THE WITNESS: May I bring out a point here?
THE COURT: Yes.
THE WITNESS: When we talk about economic in-
tegration, it is possible for one area to be economically
integrated with more than one area. The Office of Man-
agement and Budget would then place that area in the
SMSA of the area with which it has the greatest amount
politan area with which they have the greatest amount
‘\
Now, Fairfield County was placed not in the New York
City SMSA because it had more economic integration
with the Bridgeport SMSA. However, it is included in
a broader, more loosely defined notion of a Standard
Consolidated Area.
Q Well, you now recall, Doctor, that Fairfield County
is included in the New York Standard Consolidated Area?
A It is.
Q You didn’t recall that earlier?
A Well, I will accept your saying that it is. It is
public knowledge. I don’t think you would lie.
Q Dr. Glantz, do you know whether Fairfield County
is included in the Federal Reserve District which in-
cludes Boston?
A It is not in terms of our Federal Reserve District,
it is in terms of our economic research.
Q How are the Federal Reserve Districts divided be-
tween the First and the Second Districts?
A The Federal Reserve—First Federal Reserve Dis-
tret includes all of New England with the exception of
Fairfield County which is included in the Secofid Fed-
eral Reserve District, New York.
Q The Second Federal Reserve District includes Fair-
field County and New York and what else?
94] A It goes out to Buffalo; it does not include all
of New Jersey, it includes part of New Jersey.
Q How long has Fairfield County been included in
the Second Federal Reserve District?
A I don’t know.
Q Has it been included as long as you have had any
familiarity with the Federal Reserve Districts?
A It has.
Q Do you know who made the determination or who
reviews the determination as to what cities or counties
are included in the various Federal Reserve Districts?
A No, I do not.
Q. Presumably they are made in Washington at the
Federal Board?
A To the best of my knowledge, they were made once.
And they don’t change.
Q Do you have any knowledge. of the criteria em-
ployed to establish Federal Reserve Districts?
A No, I do not.
Q Do you have any knowledge as to whether the
Bridgeport Standard Metropolitan Statistical Area is a
meaningful economic market for the manufacture of
ordnance?
A What do you mean by “meaningful economic mar-
ket for the manufacture of ordnance?”
1951 Q Well, you are an economist and I am not, so
I have to ask you whether you—whether it means any-
thing to you?
A Economics don’t talk in terms of spatial markets
for specific products or the manufacture of specific prod-
ucts, they tend to talk about spatial economies in terms
of spatial labor markets rather than specific products
that are produced within those labor markets.
Q Right. When you begin talking about the produc-
tion of products or services, then you are not talking
in labor market terms, is that right?
A We do not typically talk in terms of products as-
sociated with labor markets other than noting and inter-
preting the fact that different labor markets tend to pro-
duce different products: This is the concept of the indus-
trial mix that I had gone over before.
Q Dr. Glantz, in Exhibit P-15, which you have testi-
with requests or instru-
attorneys, a
87
A I still don’t grasp what you mean by “meaningful
market for — produets.“
(96] Q Well, do you have any idea whether Bridge-
port is a market for ordnance?
A I still don’t understand what you mean by “market
for ordnance.” Ordnance is produced in Bridgeport.
Q Do you know where it is sold?
A Nationally.
Q What about the other products listed on P-157
A You can see by the figures that for each of the
products listed there is some employment in the Bridge-
port area in that product line. If that's what you mean,
yes, you can see that.
Q Well—but does it mean that for any of these prod-
ucts that Bridgeport is a meaningful market? You know
what a market is, don’t you?
A Oh yes, I know what you mean by a market, but
I am not certain I know what you mean by a market
for a specific product.
Well, isn’t a fact that all of these products have
markets broader than the Bridgeport Standard Metro-
politan Statistical Area? .
A Not necessarily.
Q Well, can you tell me any that you think is limited
to the Bridgeport Metropolitan Statistical Area?
[97] A What we would,have to do is to compare the
employment in each individual industrial category in
Bridgeport to that of some bench mark, either the state,
the region, the nation as a whole, and compare the pro-
portions of employment in each industry in the region in
question, Bridgeport, to the bench mark area.
If we assume that each of these areas have the same
per capita consumption patterns and employ essentially
the same technology, then we can say that if one of these
- areas—if the Bridgeport area employs proportionately
more of its labor force in the industry in question, then
it would be said to export a proportion of its employ-
ment or the product produced in proportion to the sur-
plus employment to the bench mark area.
Q Well, take electrical equipment, for example, you
\
88
can’t really draw any conclusions, can you, as to what
the market is for electrical equipment from Exhibit P-15?
A Not by P-15 alone, no.
Q Are there other exhibits between 1 and 26 which
you have covered that would allow you to draw such a
conclusion?
No, there are not.
Would the same thing be true of machinery?
Yes.
Fabricated metals?
Yes.
Primary metals?
[98] A It would be true of all these industries.
And that includes on the second page finance, in-
surance and real estate, doesn’t it?
A It does.
So—
THE COURT: Again, I’m sorry, gentlemen. A few
moments ago you were having difficulty communicating
with terms, now you two are communicating very well,
I’m lost a little bit. I’m not sure what's meant by look-
ing at Chart 15, and determining whether there’s a mar-
ket or there is no market, either way, in the Bridgeport
area. For example, I can see with—well, for example, if
Hershey, Pennsylvania has its own SMSA, we know
Hershey Candy is shipped all throughout the country, and
your question is: can he tell by looking at P-15 how much
is consumed just in Bridgeport alone without being ex-
ported out of Bridgeport—
MR. REYCRAFT: No, sir, well, if I may state—I’m
making an argument, really.
THE COURT: Yes.
MR. REYCRAFT: My argument is that the—and I
believe the witness’ testimony establishes the fact that—
the Bridgeport standard metropolitan statistical area is
an area within which labor markets—labor [99] forces
are analyzed, and I argue, and I believe it is a fact,
that that doesn’t mean anything as far as the Bridgeport
standard metropolitan statistical area being a possible
market for banking, which is why we are here, and I
believe that Mr. Clark is offering these exhibits for the
OS OO
purpose of showing that the Bridgeport standard metro-
politan statistical area is a relevant geographical market
and an economic market, and I believe that that—if I
understand the purpose of the witness’ testimony, it is
to establish that conclusion, and my position—and which
I believe will be borne out by further testimony, as well—
is that the standard metropolitan statistical area is really
meaningless as far as banking markets are concerned.
For example, the Connecticut National Bank has many
of its branches outside the Bridgeport standard metro-
politan statistical area, so that I think that these ex-
hibits—
THE COURT: Maybe what’s
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