The Genesis of Chase: In the Beginning There was Oil
After securing a virtual monopoly of the oil industry in the 1870s, John D. Rockefeller Sr. needed a vehicle for investing and managing the enormous profits accumulated by his oil companies....
...What is clear is that the major bankers are actively, though quietly, pursuing this goal...
...Chase's expansion in both areas coincided with a major effort by the nation's largest banks to circumvent the bank reform legislation of the 1930s...
...When, in the midst of the bank's continued poor performance in 1972, David fired Chase president Herbert Patterson, Business Week judged it ". . . a stunning move by Rockefeller - indeed a brutal one by the standards of big business...
...The highlights of this monopolization process were the 1930 merger of Equitable Trust and Chase National Bank and the 1955 merger of Chase National with the Bank of Manhattan to form the Chase Manhattan Bank...
...As of January 1, 1976, statewide branching has been allowed in New York...
...DIVERSIFICATION OF ACTIVITIES One reform embodied in the Banking Act of 1933 (the Glass-Steagall Act) established the principle of the separation of the "suppliers of money" (banks) from the "users of money" (commerce...
...banks' nationwide expansion and monopolization will take remains to be seen...
...o Chase plans to be one of the 50...
...Outside of foreign expansion (discussed separately in this issue) there are two main avenues of expansion which the bank has followed: diversification of activities and domestic geographic expansion...
...The law allowed holding companies to own banks in all nine banking districts but prohibited individual banks from branching outside their home districts...
...4 In 1969 Chase, for example, created the Chase Manhattan Corp., a one bank holding company, which holds all the stock in the bank...
...These reforms were enacted to eliminate several of the more glaring abuses of banking power which contributed to the stock market crash of 1929, the subsequent bank collapse, and the Depression...
...108-9...
...The 1930 merger alone combined banks which had previously brought together the assets of 42 formerly existing banks...
...Anticipating this legislation, Chase (as well as Citicorp, Citibank's holding company) had acquired existing banks or had established new ones in each of the eight banking districts outside the city, thus becoming a multibank - instead of a one bank - holding company.** When the law went into effect * A factoring company purchases accounts receivable from businesses at a discount and undertakes the collection of the accounts...
...2 Reflecting the general feeling of the financial community, one Wall Street veteran observed: "Somebody had to take the rap and it wasn't going to be the guy who owns the bank...
...banks, not 15,000...
...Banks were barred from holding stock in corporations and were required to give up their securities underwriting and brokerage affiliates...
...David Rockefeller is the bank's chairman and largest single stockholder and when his shares are added to the other Rockefeller family holdings, those of the family's close allies, and the shares held by Chase's management-controlled profit-sharing plan, they give the family firm control over the direction of the bank...
...Chase's Housing Investment Corp...
...itself served as a bank and coordinating center for his financial power...
...GEOGRAPHIC EXPANSION In the second area of expansion - geographic -- the banks were confronted by laws barring national branching...
...Business Week, October 21, 1972, p. 65...
...bought into one of Chase's predecessor banks, the Rockefellers still play a dominant role in the bank...
...4. For more on the recent changes in banking and the one bank holding company, see Stanley W. Black et al., The Banking System (Public Interest Economics Center, Washington, D.C., 1975...
...In return, the small banks get access to major bank resources and bank services (such as computerized data processing...
...Among the purposes of the law was the protection of smaller upstate bankers from being swallowed by their big city competitors and to help prevent upstate financial resources from being drained to serve the needs of the big New York banks' clients - mainly large corporations...
...Branching is an easier and more effective way of coordinating activities in different locations...
...The bankers' expectations were recently capsulized by the financial editor of the San Francisco Chronicle after meeting with William S. Ogden, a Chase executive vice president and a member of its seven man management committee: ". . . the day may come, he suspects, when there'll be maybe 50 U.S...
...7. See Chase's 10K report, its current telephone directory, and NYT, February 21, 1976...
...Under intense lobbying by big banks, Congress and federal regulatory authorities in the 1960s handed down a series of regulations and rulings which opened broad new areas for bank expansion...
...3. See ibid., pp...
...Nevertheless, the major New York banks, through their corporate lending, credit cards and non-banking holdings, already participate in domestic markets outside their state...
...According to the authors of a recent bestseller on the family, The Rockefellers...
...is increasingly the cornerstone of the family's financial power and influence...
...In addition, the bank has made a major effort to expand its retail banking services to small depositors and borrowers - an expansion from its original emphasis on wholesale, or corporate lending and financial services...
...The holding companies then embarked on acquisitions drives into the field of bankingrelated financial services...
...8. NYT, February 15, 1976 10...
...These regulations culminated in the amendments to the Bank Holding Company Act in 1970 and the subsequent Federal Reserve Board rulings interpreting this legislation...
...But he had to contend with other powerful interests in City Bank...
...This may start out as branching into adjacent states...
...I In te Bwinini Thee Ws Ol 0404 The bank's headquarters at One Chase Manhattan Plaza...
...Already Citibank operates 50 computer terminals across the New Jersey state line which clear checks and authorize credit.s National branching, however, is still far from realization...
...Thus, in 1911, he acquired a controlling interest in Equitable Trust Co., a predecessor of today's Chase Manhattan Bank, to build a center of financial power in which he would have a more dominant voice...
...Arthur M. Johnson, Winthrop Aldrich (Boston: Harvard University, 1968), pp...
...In order to take advantage of the new possibilities, most large banks reorganized in the late 1960s to become subsidiaries of one bank holding companies...
...Ibid...
...48 and 82...
...I The Rockefellers' development of their Equitable Trust holding into today's giant Chase Manhattan Corp., through mergers and acquisitions, provides a clear case study of the growth of finance capital...
...the bank...
...San Francisco Chronicle, May 31, 1974...
...Originally the Standard Oil Co...
...Exactly what form the big U.S...
...Thus, in addition to its 182 branches in New York City's five boroughs, and its 40-odd branches in the adjacent Westchester and Nassau counties, the bank today operates 38 branches throughout the rest of the state, with many more expected...
...However, the big New York City banks' lobby, after an intense behind-the-scenes struggle with the upstate bankers' lobby, also managed to have this law modified...
...In addition, New York state legislation dating from the 1930s limited a bank's branching to its home city banking district...
...Then in the 1890s Rockefeller turned to the City Bank (predecessor of today's Citibank) to invest his surplus and gain control of corporations in other industries...
...Correspondent banking provides the big city banks, particularly those in New York, with deposits from smaller country banks...
...The bank-managed Chase Manhattan Mortgage and Realty Trust - though currently a major loser for the bank - lends to real estate projects throughout the country...
...13 References GENESIS OF CHASE 1. Victor Perlo, The Empire of High Finance (NY: International Publishers, 1957), p. 155...
...The 400-fold expansion in assets from $98 million in 1912 to some $42 billion today was accomplished primarily through the conglomeration of over 100 other banks and bank-related companies...
...In addition, Chase has extensive nationwide banking contacts through its strong correspondent banking network...
...7 The next major geographical barrier the big banks will try to break is nationwide branching...
...The Chase holding company then began acquiring companies, most notably in the following areas: mortgage banking, computer time sharing, and factoring.* The holding company failed in its initial bids to acquire a large consumer finance company and a leasing company, though it intends to pursue similar acquisitions in the future...
...2. Johnson, pp...
...48 and 82...
...3 Once the possibility for mergers among the New York City banks had been virtually exhausted in the early 1960s, Chase and the other major banks began looking for other ways to expand...
...The smaller banks also use their correspondent banks to finance local loans too large for the small banks to handle...
...Chase converted these banks (along with their branches) into branches...
...Today, 65 years after John D. Rockefeller, Sr...
...Peter Collier and David Horowitz, "To Be Young, Rich and Unhappy in America,"Esquire, February 1976, p. 122...
...A testament to their influence is the fact that David Rockefeller remains as Chairman of the bank despite being widely considered a poor manager and despite the fact that under his six year leadership Chase has suffered significantly in comparison to its chief rival, Citibank...
...subsidiary in Florida, for example, gives it a mortgage banking presence in the country's fastest growing state...
Vol. 10 • April 1976 • No. 4
