_____ By 1972 A hand full of International Banks Highly Interlocked with the Oil and Defense Industries had Illegally Usurped Corporate Control of the Broadcast Industry____________________________________________________________ .

Following are excerpts from:

Document No. 93-62, 93rd Congress, 2nd Session

March 4, 1974

Document Title: Disclosure of Corporate Ownership

Prepared By: The Subcommittees on Intergovernmental Relations, and Budgeting, Management, And Expenditures

Copies of original document available from the government printing office.

Background Congressional committees, Federal Agencies and scholars are considering substantive issues created by the dominant role of institutional investors -- bank trust departments, insurance companies, pension funds and others, such as foundations and universities -- in major corporations. At least 32 institutions are known to manage investment portfolios in excess of $5 billion each (listed in previous table)

The role of institutional investors is of course not limited to the acquisition and sale of stock and the right in many cases, to vote it. Some institutional investors make loans to companies in which they invest, or provide insurance coverage. Their representatives often sit on the companies' boards of directors. Sometimes institutional investors help facilitate or block mergers.

FCC Ownership Rules

The FCC has several restrictions on ownership of broadcasting companies. One is the duopoly rule, which prohibits ownership of 2 FM, AM, or TV stations which serve the same area. Another rule permits an investor-- institutional or individual-- to own up to 21 stations -- 7 AM, 7 FM, and 7 TV, provided that no more than 5 of the latter are VHF stations. Beyond those liberal provisions, no individual or bank was permitted until last year to own more than 1% of the stock of other broadcast companies with 50 or more stockholders. (Mutual funds have been permitted to own up to 3% since 1968.)

In 1972 the commission raised the ownership limitations for banks from 1% to 5%. It raised the limit because so many banks were in violation of the Commissions 1% regulation that, to comply with it, 19 banks would have had to divest themselves of $976 million in stock in 25 companies.

Voting rights of New York Banks

The data in part III will show the substantial voting rights of a few New York Banks in networks and major broadcasting companies. This FCC data shows for example:

Chase Manhattan Bank has sole or partial voting rights to more than 14 % of the stock in CBS, 6.7% of ABC, as well as 4.5 % of the stock in the RCA corporation, parent of NBC;

Bankers Trust has the voting rights to more than 10% of the stock in ABC, and 9.8 % of the stock in Metromedia;

INADEQUATE OWNERSHIP REPORTS

The FCC did not know that the banks were in gross violation of regulations until the banks told the Commission about it. The data submitted by the banks were based on a survey conducted among the 19 largest banks in April, 1969. It took three years to get that material to and considered by the Commission. Then the Commission gave the banks three more years to reach compliance with the new, more lenient rules, which may have been relaxed further before then. The Commission has before it now requests from insurance companies to raise their allowable holdings from 1% to 5%, and requests from the mutual funds to raise their allowable holdings from 3% to 10%.

The problem at the FCC is inadequate and misleading corporate disclosure(s) to this\a Federal agency.

USE OF MULTIPLE NOMINEES

The example upon which we have elaborated is by no means uncommon.

The holdings of Institutional Investors, especially banks, are often hidden from view of regulators and the public by use of multiple nominees. - "Hemfar and Co.", "Lerche and Co", "Kane and Co., "Park and Co., "Pace and Co., and many more. In response to the federal regulators' request for these addresses of these "security holders" the companies report simply New York, NY.", Boston, Mass.,and or Pittsburgh, PA., occasionally adding a post office number. These nominee names are not in the city directory. They are not in the telephone book. Letters to some nominees whose post office box is listed have not been answered.

The consequence of this continuing use of nominees in ownership reports to federal regulators is a massive cover-up of the extent to which holdings of stock have become concentrated in the hands of very few institutional investors, especially banks.

Bankers use nominees most

Banks used nominees more frequently than other institutional investors. The only financial institutions not providing complete information routinely about the common stocks that they hold are the trust departments of the commercial banks.

The Top of the Pyramid

Were this report presented in geometric terms and was full data on bank ownership available the top of the pyramid might well be the final of Table 5, which shows the holdings of the eight above institutions in banks. As noted previously, the response from banks to the query regarding 30-top stockholders were poor; only nine of the 50 queried banks responded fully. The nine cooperating banks include two which are also among the 8 major institutional investors mentioned above.First National City Bank reported that Chase Manhattan 's trust department held 2.7 % and Morgan Guaranty's trust department held 2% of First National City Bank's Stock. Banker's Trust reported that Chase Manhattan held 2.4%, and state street of Boston 2.1% of Bankers Trust's Stock.

Inadequate Disclosure a Recurring Theme

Control of a small block of stock in a widely held company by a single or few like -minded financial institutions provides them with disproportionately large powers within the company. The House Banking and Currency subcommittee on Domestic Finance, in its 1968 study, Commercial Banks and Their Trust Activities: Emerging Influence on the American Economy, considered a 5% or larger holding of one class of stock significant in judging the potential influence of a bank trust department's stockholding in a particular corporation.The subcommittee emphasized that even "1 or 2% of stock in a publicly held corporation can gain tremendous influence over a companies policy and operations."

There are various alternatives for readjustment of corporate decision making power. They include limitations on stockholdings, anti-trust actions and Federal chartering of corporations providing disclosure and performance requirements within the charter.

Another alternative is modification of the "one share, one vote" rule in corporate voting. This rule has no basis in common law. Weighted voting, which reduces the voting power of large stockholders, was used in early American corporations and is still used in some foreign capitalistic countries today. Appendix G includes a discussion and bibliography on modification of "one share, one vote" by Julius Allen of the Congressional Research Service of the Library of Congress and the Cornell Law Review article on the subject by Prof. David L. Ratner, a consultant to the subcommittee on Budgeting, Management, and expenditures. They note Alexander Hamilton's prophetic warning to the Congress in his report on the National Bank.

A vote for each share renders a combination between a few principal stockholders, to monopolize the power and benefits of the bank....too easy.

James Madison espoused Federal chartering of corporations and Hamilton urged weighted voting in corporations. Consideration of these far-sighted proposals by two of the Founding Fathers is most appropriate. (as we approach the Bicentennial.) __________________________________ . 32 INSTITUTIONAL INVESTORS WITH ASSETS UNDER MANAGEMENT OF $5 BILLION AND OVER, END OF 1972

(* figures in billions)

1. Morgan Guaranty Trust Company $27.4

2. Bankers Trust Company 19.9

3. Prudential Insurance Company of America 18.3

4. First National City Bank, New York 17.2

5. U.S. Trust Company of New York 17.0

6. Metropolitan Life Insurance Company 16.5

7. Equitable Life Assurance Society 16.4

8. Chase Manhattan Bank 16.2

9. Travelers Corporation 13.1

10. New York Life Insurance Company 11.5

11. Manufacturers Hanover Trust Company 10.9

12. Mellon National Bank and Trust Company 10.5

13. Investors Diversified Services 9.7

14. First National Bank of Chicago 8.4

15. Continental Illinois National Bank and Trust Company 8.2

16. Aetna Life and Casualty Group 8.2

17. Scudder, Stevens and Clark 7.2

18. Bank of America 7.1

19. Harris Trust and Savings Bank 7.0

20. Wilmington Trust Company 7.0

21. First National Bank Of Boston 6.8

22. Northern Trust Company, Chicago 6.7

23. Chemical Bank, New York 6.5

24. National Bank of Detroit 6.5

25. Loomis, Sayles and Company 6.3

26. Northwestern Mutual Life Insurance Company 6.1

 27. Lionel D. Edie and Company 6.1

28. Wells Fargo Bank 5.5

30. Girard Bank, Philadelphia 5.2

31. Crocker Citizens National Bank 5.0

32. Security Pacific National Bank 5.0

Sources:

BusinessWeek, June 2, 1973

Fortune, July, 1973

1973 Money Market

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(Radio & Television Network-192 affiliated stations)

______________company____________

_____________________________________TV___________AM______________FM__

Location:

Boston, MA========================= WEEI WEEI

Chicago, IL+++++++++++++++++++++++++ WBBM   WBBM WBBM

Los Angeles, CA===================== KNXT KNX KNX

New York, NY+++++++++++++++++++++ WCBS WCBS WCBS

Philadelphia,PA===================== WCAU WCAU WCAU

St. Louis, MO+++++++++++++++++++++ KMOX KMOX KMOX

San Francisco,CA==================== CBS CBS

___________________________________

Number % of

of shares held total shares

__________________________________________________________________________ BANQUES HOLDING STOCK (11)

Morgan Guaranty Trust 494,115 ** 1.8

Chase Manhattan 3,897,908 ** 14.1

Bankers Trust 1,587,824 5.7

United States Trust 315,324 1.1

First National City 576,151 2.1

Mellon Bank and Trust 264,895 1.0

First National Bank of Chicago 700,507 2.5

Continental Illinois National 1,140,735 4.1

Bank of New York 914,013 3.3

Old Colony Trust-Boston 171,800 .6

Fidelity Bank-Philidelphia 467,037 1.7

___________________________________________________________________________ Total 10,530,0003 38.1



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