The Antitrust Aspects of Bank Mergers: Introduction

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The subject matter of this Conference-Banking and the Antitrust Laws-has received insufficient attention in the legal literature. This is in curious contrast to the quantity of federal statutes that treat the subject: principally, we have the standard antitrust laws led by the Sherman and clayton Antitrust Acts; the Bank Merger Act of 1960; and section 2 of the Bank Holding Company Act of 1956. These establish similar, but not identical, antitrust standards for the bank transactions to which they apply.

Furthermore, there has been no shortage of bank mergers and acquisitions since September 29, 1994, the date on which the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Riegle-Neal") was enacted. I highlight that event because it marked a definitive change in American bank philosophy from the attitude that existed before Riegle-Neal-the best banks are the small banks-to the postRiegle-Neal dominant position that big banks are all right, too. As the date of Riegle-Neal indicates, the preference for small banks existed for some two hundred years of our history, going back to the agrarian views of Thomas Jefferson whose gift with words did not extend to economics.

Before September 1994, national banks were absolutely prohibited from branching interstate, thereby ensuring their small size. State banks could branch interstate, but only if their home and host states consented. Banks could spread by the acquisition of other banks through a holding company system, but this was awkward and required the specific statutory approval of the host states. Admittedly, by 1994 a not inconsequential interstate bank holding company system had developed, although growth had been gradual since 1954 and largely contrary to public sentiment.

The major contribution of Riegle-Neal was that it allowed banks-national and state-to merge on an interstate basis without restriction, except for the antitrust laws already in force and for some lesser qualifications not relevant here. Large bank mergers became the order of the day. The mammoth bank agglomerations spanning many states rapidly came into existence.

Each bank merger had to satisfy the antitrust laws. The regulatory approvals that were required before a merger could go forward regularly referred to those laws and their effects upon the various transactions at issue. …