Upholding the Status Quo

As James J. Saxon, until recently Comptroller of the Currency, saw it, "Enclaves of monopoly and stagnant, unprogressive banks should not be safeguarded." Implementing that peppery philosophy during his five controversial years in office, Saxon approved 3,806 new national-bank branches, many of which were in direct competition with state-chartered banks. Fighting back, state banks in nine states so far have sued to close some of Saxon's federal branches. Last week the Supreme Court decided that Saxon had stretched his powers too far.

Ruling unanimously on two cases involving Utah banks, the court held that national banks are wholly bound by state laws restricting branches for state-chartered banks. In adopting the 1927 and 1933 banking laws, said Justice Tom C. Clark, Congress clearly intended to provide "competitive equality" in branching between the two kinds of banks. Utah law forbids banks to set up branches outside Salt Lake City, except by acquiring an existing bank that has been operating at least five years. Even so, Saxon in 1962 approved a new branch in Logan for First National Bank of Logan and in 1963 one in Ogden for First Security Bank of Utah, partly on the ground that Utah's restriction on branching "method" did not apply to national banks. That approval, ruled Justice Clark, amounted to "a strange argument that permits one to pick and choose what portion of the law binds him."

The decision, upholding what most bankers have long considered to be the status quo, will re-stabilize bank competition in the 22 states (including Utah) that limit bank branching in various ways. Sixteen other states prohibit all branch banks. Only twelve states allow unlimited branches.

At the minimum, the decision will have a significant effect on a dozen pending lawsuits over branching, notably in Michigan; yet the comptroller's office professed at week's end to have no notion how many more of Saxon's controversial branch approvals might now be subject to attack. Many bankers seemed to agree with President Jack T. Conn of the American Bankers Association, who called the ruling "wonderful." But not Saxon, who became co-chairman of the American Fletcher Na tional Bank & Trust Co. of Indianapolis after his term as comptroller expired last month. Saxon scoffed at Clark's opinion as "superficial," forecast a new wave of litigation over branching laws, criticized the way the Government had defended his position. "The original brief prepared in our office was masterly," he said, "but it was emasculated by the Solicitor General's office. This case went down by default."

Jn Logan, First National Bank promised to keep battling too. For a start, the bank said that it will sue to test the constitutionality of Utah's restrictive branching law.

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