In Re Direction to VIRGINIA NATIONAL BANK AS TRUSTEE Concerning Voting of Stock of WTAR Radio-TV Corp.,
and Peninsula Radio Corp.
FEDERAL COMMUNICATIONS COMMISSION
21 F.C.C.2d 675;
January 22, 1970
[*675] On January 22, 1970, the Commission released a letter to WTAR Radio-TV Corp., licensee of station WTAR AM-FM-TV, Norfolk, Va. (21 F.C.C. 2d 338), with Commissioners Burch (Chairman), Robert E. Lee, Cox, and Wells voting in favor thereof and Commissioners Bartley, Johnson, and H. Rex Lee dissenting, Commissioner Johnson has now issued the following statement:
DISSENTING OPINION OF COMMISSIONER NICHOLAS JOHNSON
Banks and Broadcasting
(Letter to WTAR Radio-TV Corp., Norfolk, Va.)
In its letter to the licensee of WTAR-TV-AM-FM, Norfolk, Va., the Commission in effect finds the public interest served by interlocking relationships that link the Virginia National Bank with 13 radio stations, nine television stations, several CATV systems, and at least 17 newspapers. I feel that the involvement of this bank in so many media properties raises several problems which warrant investigation and consideration. A majority of my colleagues do not agree. Accordingly, I dissent from the Commission's action.
I. FACTUAL BACKGROUND
The Virginia National Bank has over 80 offices in 42 Virginia cities and towns. In 1968 it had $700 million in total deposits, produced $44 million in operating revenues, and had profits of $6.2 million. Its trust holdings rank third in Virginia; in 1967 the $306 million in assets in the bank's trust department constituted 12 percent of the trust assets in the State.
Virginia National is engaged in a policy of aggressive acquisitions, having acquired an average of three banks a year since 1963. More acquisitions are planned. But one of its most recent mergers in the Hampton area was blocked by the Justice Department on the grounds that another acquisition in the Tidewater market would give Virginia National an excessive concentration of banking power in the area. In August 1969, this acquisition was called off by the bank, but it went forward with the others planned. Virginia National [*676] is the owner of vast non-banking properties as well, and seems bent on increasing its holdings in these fields. It is, in short, an important and integral part of the business community of Virginia.
The Virginia National Bank, through its trust department, holds a substantial amount of the stock of two TV-AM-FM combinations with overlapping signals: WTAR-TV-AM-FM, Norfolk, Va., and WVEC-TV-AM-FM, Hampton, Va. -- both powerful, VHF, network-affiliated stations in the Tidewater area. Through the board of directors and ownership of the bank, these broadcast licensees have additional interlocking relationships. And the Virginia National Bank, with its associated bank, Mercantile Safe Deposit & Trust Co. of Baltimore, recently financed the sale of WDBJ-TV, Roanoke, Va., through a loan of $6 million to the purchaser. A cursory study of relations to the bank through stock holdings of various bank and broadcast shareholders reveals that the Virginia National Bank is at the center of an interrelated group which controls, directly or indirectly, at least 13 radio stations, nine television stations, and 17 newspapers.
WTAR-TV-AM-FM. -- The licensee of WTAR-TV-AM-FM is WTAR Radio-TV Corp., a wholly owned subsidiary of Landmark Communications, Inc. Landmark Communications, in turn, has 66.67 percent of its voting stock and 60 percent of its nonvoting stock owned by Landmark Securities, Inc. The Landmark complex includes several newspapers, and broadcast and CATV facilities. Among the minority shareholders of Landmark Communications, Inc., are: Virginia National Bank, Trustee u/i/w Louis Isaac Jaffe, Jr. (1.25 percent of the voting stock; 1.13 percent of the nonvoting stock); Virginia National Bank, Trustee u/w/o Edward Keville Glennan, deceased (1.98 percent; 1.78 percent); and Virginia National Bank, Trustee u/w/o William S. Glennan, deceased (4.37 percent; 3.93 percent). The bank is also an owner of stock in Landmark Securities, Inc., the two-thirds stockholder of the licensee's parent corporation. These holdings are: Virginia National Bank and Frank Batten, Trustees u/w/o Fay M. Slover, deceased (27.3 percent of the voting stock; 23.95 percent of the nonvoting stock); Virginia National Bank, Trustee u/i/w Frank Batten f/b/o Frank Batten, Jr. (0.41 percent of the nonvoting stock); Virginia National Bank, Trustee u/i/w Frank Batten f/b/o Mary Elizabeth Batten (0.41 percent of the nonvoting stock); and Virginia National Bank, Trustee u/i/w Frank Batten f/b/o Dorothy Neal Batten (0.41 percent of the nonvoting stock). In total, the Virginia National Bank has a trust interest in 7.6 percent of the voting stock and 6.84 percent of the nonvoting stock of Landmark Communications, Inc., the immediate owner of the licensee. Even more significant, it holds 27.3 percent of the voting stock and 25.58 percent of the nonvoting stock of Landmark Securities, Inc., the ultimate parent corporation of the licensee. This gives the bank, in effect, approximately a 25 percent interest in the licensee.
Frank Batten, chairman of the boards of the licensee corporation, WTAR Radio-TV Corp., and Landmark Communications, Inc., and [*677] president and director of Landmark Securities, Inc., owns 33.6 percent of the voting stock and 31.9 percent of the nonvoting stock of Landmark Securities, Inc. He presently serves on the board of directors of the Virginia National Bank.
Several other of the Landmark Securities, Inc. directors and shareholders -- including P. S. Huber, Jr., vice-president and director of Landmark Securities, Inc. and president of Landmark Communications, Inc. -- own substantial stock in a corporation called Media General. Media General has broadcast and newspaper interests in Richmond, Va. (WRNL-AM-FM), and Tampa, Fla. (WFLA-TV-AM-FM), and recently announced its intention to buy two more newspapers in New Jersey.
Landmark Securities, Inc. is also related to A. S. Abell Co., through the stock ownership in Landmark by two of the Abell principals. A. S. Abell Co. is the parent corporation of two of the major newspapers in Baltimore, the morning and evening Sun, and of the powerful CBS affiliate in that city, WMAR-TV. (A. S. Abell also owns WMAR-FM in Baltimore, and WBOC-TV-AM-FM in nearby Salisbury, Md.)
In addition to the Abell-Landmark interlocking stock interest, the Mercantile Safe Deposit & Trust Co., associated with the Virginia National Bank in the recent financing of WDBJ-TV, Roanoke, Va., holds 61.7 percent of A. S. Abell Co. stock, with sole voting rights in 27 percent and partial voting rights in another 23.4 percent. Not surprisingly, Mercantile Safe Deposit & Trust has three interlocking directors with A. S. Abell Co.
WVEC-TV-AM-FM. -- Peninsula Radio Corp., licensee of stations WVEC (AM) and WVEC-FM, and Peninsula Broadcasting Corp., licensee of station WVEC-TV (all licensed to Hampton, Va., a community bordering on Norfolk), have identical directors and, with the exception of their second vice-presidents, identical officers. Certain of the Peninsula Radio Corp. stockholders own 100 percent of the stock of Peninsula Broadcasting Corp. Approximately 1.9 percent of the voting stock of each of the Peninsula corporations is held in trust by the Virginia National Bank under the estate of Kenneth McDonald.
In addition four of the seven directors of the Peninsula corporations are also directors of the Hampton branch of the Virginia National Bank. H. Clyde Smith, a local director of the Virginia National Bank of Hampton, is a director and shareholder of Peninsula. Thomas P. Chisman, president, director, and shareholder of the Peninsula corporations, is a director of the Hampton branch. J. W. W. Chisman, secretary-treasurer, director, and shareholder of Peninsula, is a director of the bank and owns 360 shares of the bank's stock. Lucien H. von Schilling, a director and shareholder of Peninsula, is the senior vice-president and director of the Hampton branch and holds 12,500 shares of the bank beneficially.
Peninsula Broadcasting owns several CATV systems in its own name and through Peninsula Cable Corp. Its partner in the Peninsula Cable Corp. is Unicom Inc., a wholly owned subsidiary of the Katy Agency, Inc. The Katy Agency, Inc. is a sales representative for several broadcasters, and its principals have large holdings in broadcast [*678] corporations including WKY Television System, Inc., licensee of five television stations.
WDBJ-TV. -- On October 29, 1969, the Commission approved the sale of station WDBJ-TV, Roanoke, Va., from Times-World Corp. to WDBJ Television, Inc., a wholly owned subsidiary of the South Bend (Ind.) Tribune. FCC Public Notice 39710, report No. 8586 (Oct. 26, 1969). The South Bend Tribune has other holdings in both newspaper and broadcast properties. The total purchase price for the station was $8.2 million. The Virginia National Bank, together with its associated bank, Mercantile Safe Deposit & Trust Co., put up $6.3 million of the purchase money -- about 77 percent of the total purchase price.
Unlike the signals of WTAR-TV and WVEC-TV, WDBJ-TV's signal does not technically overlap with the others. But Roanoke is only 150 miles from the Norfolk-Hampton area, the signals are close, and it is difficult to divide neatly the area in between into "markets." The Norfolk-Hampton area is the Nation's 53d largest television market; Roanoke ranks 62d. When we are dealing with metropolitan areas of this size and proximity to each other it is most meaningful to talk of regional markets.
II. THE DANGERS OF BANK INTERESTS in BROADCAST LICENSEES
The FCC recently instituted a rulemaking proceeding concerning the involvement of banks with broadcast licensees. Multiple Ownership of Standard, FM and Television broadcast Stations, 34 F.R. 19032 (Nov. 29, 1969). The proposed rules were mainly directed toward the problem of bank ownership of a broadcaster's stock, but two other problem areas were raised to be answered by an American Bankers Association survey: (a) director interlocks between banks and broadcast licensees, and (b) loans by banks to licensees. Hopefully, we will soon be able to consider these problems in a formal proceeding, but I do not believe that, in the meantime, we should ignore individual cases presenting these problems as they come before us. As I have just set out, the involvement of the Virginia National Bank with several broadcast licensees presents all three of these problem areas. We are obligated to resolve transgressions against the public interest whenever they are presented to us rather than waiting for the termination of a lengthy rulemaking proceeding.
Stock ownership. -- Sections 73.35, 73.240, and 73.636 of the Commission's rules (47 C.F.R. (1969)) provide that no license for a broadcast station shall be granted -- or renewed -- if the applicant directly or indirectly owns (at least 1 percent of the stock), operates, or controls one or more stations of that same service and the grant would result in any overlap of certain specified contours of the existing and proposed stations. These rules also provide that a license should not be granted if "any party or any of its shareholders, officers, or directors * * * have a direct or indirect interest in, or (are) stockholders, officers, or directors" of more than seven AM, seven FM, or seven TV stations.
[*679] The Commission's long-standing policy, promulgated under these rules, has been to proscribe any degree of cross-interest, direct or indirect, in two or more stations in the same broadcast service serving substantially the same area. Similarly any degree of ownership, or other interest, which is in excess of the 7-7-7 limitation has been proscribed. Our action today, while still articulating this policy, seems to me inconsistent with the cross-interest and multiple ownership rules.
The increasing influence of bank ownership of stock upon our economy, and the dangers from the continuation of the present trend, have been described in great detail by Congressman Wright Patman of Texas. A staff report prepared for his Subcommittee on Domestic Finance of the House Committee on Banking and Currency entitled, "Commercial Banks and Their Trust Activities: Emerging influence on the American Economy" (90th Cong., 2d sess., July 1968), is an excellent study of the current status of bank power and control over American business. The subcommittee surveyed approximately 3,125 commercial banks to determine the size and type of holdings in bank trust departments. A detailed study was made of 49 commercial banks in 10 major metropolitan areas to develop an in-depth picture of the involvement of certain banking institutions with other corporations through stock ownership in trust accounts and interlocking directorates.
A primary thesis of the staff report is that the stockholdings of trust departments of banks are increasing at a rapid pace and that such holdings have a significant effect on the policies of the non-bank corporation: directly, because of voting power, and indirectly, through interlocking directorates and creditor influence. The conclusions of the report emphasize the great size of bank trust department holdings -- more than $250 billion in 1967. About two-thirds of this total is invested in equity; the rest in bonds.
The concentration of the holdings is also emphasized; 30 of the 49 banks studied in detail were found to have a total of more than $125 billion in trust holdings, and one (Morgan Guaranty Trust Co. of New York) had $16.8 billion -- more than all of the California banks reporting combined. The 10 largest banks held 36.8 percent of all bank trust assets. There is no reason to assume that these findings regarding the hazards to the economy in general are inapplicable to the broadcasting industry in particular. In fact the staff report expressly stated: "An area which should be of special concern because of its impact on public knowledge and opinion is the news and information media business. Several newspapers and magazine publishers have large blocks of stock held by commercial banks covered in the subcommittee's survey. This includes 18 companies publishing 31 newspapers and 17 magazines, as well as operating 17 radio and TV stations." (Staff report at 503.)
Presented with this congressional evidence and interest in a growing problem, and the existence of facts seemingly in violation of our rules, what is the Commission's response? The majority allows the bank to file a statement that it does not vote the Landmark Securities, Inc., stock held under a joint trusteeship with Frank Batten and will not [*680] vote the 7.6 percent of the Landmark Communications, Inc., stock held in trust. Without regard to the policy of our cross-interest rules, the Commission allows a declaration of nonvoting to erase all past and future problems with this potentially dangerous situation. The basis for the majority's decision is a statement in a 1968 rulemaking opinion, Multiple Ownership of AM, FM, and TV Stations, 13 F.C.C. 2d 357, 362-63 (1968). To formulate a simple general rule, the Commission there said it would attribute ownership of stock held in trust to the person having the power to vote the stock.
I object to today's decision by the Commission on several grounds. First, the statement in our 1968 rulemaking order was designed to provide a general rule to be followed. But there seems to be a recognition in that opinion that in certain cases ownership would be determined in other ways. Due to the bank's massive holdings in broadcast stock, and its involvement with another licensee as a creditor, I feel that this case deserves special consideration. Second, I am not convinced as to the wisdom of the policy enunciated in that rulemaking. I concurred at that time to the document as a whole, but I am troubled by this and other minor statements which I feel do not conform to either wise policy or business reality. Third, a I discussed in Colgreene Broadcasting Co., -- F.C.C. 2d --, F.C.C. 69-1409 (Jan. 7, 1970), I feel that a rule based upon power to vote is artificial and useless unless it takes into account changing corporate practice. In most modern corporations, a single shareholder (even a major shareholder) may have less voice in management than an informed creditor or customer.
A fourth objection I have to the majority's decision is its assumption that a large shareholder somehow has significantly less power if the right to vote is stripped from his shares of stock. This objection is particularly relevant to this case where the bank holds a large amount of nonvoting stock in trust -- 6.84 percent of Landmark Communications, Inc. and 25.58 percent of Landmark Securities, Inc. Certainly a shareholder of this magnitude is going to be listened to by the management of the corporation regardless of his power to vote. The large shareholder possesses far more subtle power over management than the annual choice of voting for the current management or waging a long and costly proxy struggle. For example, the large shareholder has the power to sell his block of stock. Were he to do so it might well seriously depress the value of the remaining stock -- with all the ramifications for management stock options. Or it might permit entry into the corporation by a less cooperative shareholder. In short, a major shareholder usually has substantially more power than his formal power of the ballot. The Patman staff report recognized this modern corporate reality when it said: "The subcommittee * * * determined that in general a stockholding of 5 percent or more of any class of stock in a single corporation was a significant factor in judging the extent to which a bank might have substantial influence or control over a corporation." (Staff report, conclusions at 2, italics supplied.) Certainly an owner of a broadcast licensee's stock should not be allowed to escape the carefully constructed rigors of our rules by the simple expedient of setting up a nonvoting class of stock, or promising when caught not to vote the voting stock he has.
[*681] A final objection that I have to the majority's action is its treatment of the licensees' past violation of our rules. Not only is a simple escape route provided for the future, but a blatant past violation is excused. From June 1968 until September 1969, the Virginia National Bank owned -- and voted -- the stock of two broadcast licensees with overlapping signals. Yet we take no punitive action against the licensees charged with the duty of informing us about the ownership of their stock. The majority of the Commission seems to say that a violation of our rules is permissible for as long as it can be kept from the FCC. What is more, the Commission has today set for a comparative hearing the applications of WTAR-TV and a new applicant. WTAR Radio-TV Corporation, F.C.C.2d , F.C.C. 70-97 (Jan. 21, 1970). Even if it can be determined that a 15-month violation of our rules does not compel some punitive action -- such as a monetary forfeiture -- it would seem to me that we should specify WTAR's operation in violation of our rules as an issue for the hearing examiner to consider in his appraisal of its broadcast record.
Director interlocks. -- As common, and as potentially troublesome, as interlocking stock ownership, is the problem of interlocking directorates. The same sections of our rules that prohibit excessive concentrations of broadcast stock ownership prohibit interlocking directorates. In its dicta the Commission has consistently spoken of prohibiting any degree of cross-interest, and this statement of principle has usually been followed in Commission opinions. In Shenandoah Life Insurance Co., 19 P. & F. R.R. 1 (1959), the Commission forbade the Shenandoah Life Insurance Co., licensee of a TV-AM-FM combination in Roanoke, Va., from adding Mr. Stuart T. Saunders to its board of directors. Mr. Sanunders at the time was also a director of the First National Exchange Bank of Roanoke, which bank in its trust department held a majority of the stock of the Times-World Corp., at that time the licensee of Roanoke stations WDBJ-TV-AM-FM. This precedent was weakened somewhat by King Broadcasting Co., 20 P. & F. R.R. 1069 (1960-61). In that case, the president and majority stockholder of KING-TV-AM-FM, Seattle, Wash., was a director of a bank which was trustee of a minority stock interest in the licensee of KIRO-TV-AM-FM, also in Seattle. The licenses were renewed upon the condition that the bank dispose of its stock interest in the licensee of the KIRO stations, but on reconsideration the condition was deleted. Since there was no opinion written at the time of reconsideration, it is not possible to know the grounds for the Commission action. Because of the compelling policy reasons against the allowance of interlocking directorates, and because of the lack of any reasoning to the contrary, I think the Shenandoah decision still stands as the relevant precedent.
The House subcommittee staff report deals in depth with the problems created by interlocking directorates between banks and other companies. In examining the director interlocks between the major American industrial companies and the 49 banks studied in detail, the study compared the stock holdings in the bank's trust departments with the "Fortune Directory" of the 500 largest industrial companies. These 500 companies accounted for just under 60 percent of all industrial company sales in the United States during 1966, as well as 70.5 percent [*682] of all industrial company profits during that year. The study showed 176 separate instances involving 147 different companies in which these 49 banks held 5 percent or more of the stock of these non-banking companies. And the director interlocks between the 49 banks and these giant companies were even greater. In 1967 the banks held a total of 768 interlocking directorates with 286 of the 500 largest industrial corporations. Perhaps an even more meaningful figure to show the domination by banks of some companies is that the bank directorates average almost three on each corporate board in which bank representation is found. Comparable interlocking stock and director relationships can be found between this small group of banks and the 50 largest merchandising, transportation, utility, and life insurance companies. When considering interlocking relationships between the 49 banks and all corporations -- not just the 500 largest -- the results of the survey are staggering. When studied in 1967 these 49 banks in 10 cities reported a total of 8,019 director interlocks with 6,591 companies, an average of 164 director interlocks with an average of 135 companies per bank. These banks also reported the names of 5,270 companies in which they held 5 percent or more of the outstanding shares of one or more classes of stock -- an average of 108 companies per bank.
In the case before us, the director interlocks are slightly different than those surveyed by the staff report. Mr. Frank Batten, the chief officer and major stockholder of the Landmark companies, is a director of the Virginia National Bank. Four of the principals of the licensee of WVEC-TV-AM-FM are also directors of the bank -- although they are associated with its Hampton branch. The Commission majority's letter dealing with this matter does not specifically address this problem of the principals of two separate licensees serving as directors in a common third corporation. They recognize that a problem exists so long as the bank votes the Landmark stock while it also votes the Peninsula stock or while a majority of the Peninsula corporations' directors are also directors of the bank. Since our rules proscribe the existence of overlapping directorates, as well as stockholdings, I fail to see how the majority can forbid the bank from voting the Landmark stock without also forbidding Mr. Batten from serving as a director of the bank.
Apparently the majority bases its decision upon the fact that the association of broadcast principals in a relationship not directly involving their stations is permissible. But in considering the application for sale of station WSJM, St. Josephs, Mich., the Commission disallowed a situation where the principals of competing broadcast stations in one city were to become joint owners of a station in another city. FCC Public Notice 67081, report No. 3293 (Dec. 10, 1958). Of course in that situation the joint venture involved a broadcast enterprise, rather than another broadcast station. But I do not feel that such a distinction should be controlling. It is difficult to separate broadcast-related ventures from non-broadcast enterprises. For example, I am not sure whether the majority of the Commission would prohibit competing broadcasters from going together in a cable-TV enterprise, a microwave operation, a joint advertising agency, or other peripherally related businesses. Certainly, a ready source of financing [*683] through control of a bank may be no less beneficial to conspiring competitors than a joint advertising operation or a joint buying enterprise. The Supreme Court has recognized the potential for price fixing, market division, or other anticompetitive practices if competitors are allowed to get together in a joint venture -- even if unrelated to their basic businesses. U.S. v. Penn-Olin Chemical Co., 378 U.S. 158 (1964). Certainly if the Supreme Court recognizes a danger in joint ventures to the economy as a whole, we should be no less wary of the danger to the industry we are directed to oversee.
Loans by banks to corporations. -- In a previous opinion, Colgreene Broadcasting Co., FCC 2d , F.C.C. 69-1409 (Jan. 7, 1970), I discussed my concern with the problem of control being exerted over broadcast licensees by large financial lenders. As mentioned there, I feel that this Commission is naive to corporate practice if it assumes that only voting shareholders have control over a company. Quite often a large lender, whose business is the protection of its loan, will be much more aware of corporate problems and more likely to use its power to save its investment than the voting shareholders. In fact, I imagine that more often than not the major trust indentures -- the formal documents evidencing large loans -- give creditors greater potential control over the operations of a company than all but the largest stockholders. In 1953, when we established new rules dealing with minority ownership, we warned against generalizing about control over a corporation:
While the holder of a small interest in many instances may have slight influence on the operation of the station in question, it is also true such a person can exert a considerable influence * * *. Several factors should be noted here: (1) there may not be a correlation between the size of the minority holding and the extent of the influence wielded; * * * and (3) in the case of the holder who has interested himself in numerous stations, there is a good probability that because he is so actively engaged in the broadcast field, his influence will tend to be a positive or substantial one. ( Multiple Ownership of AM, FM, and TV Stations, 18 F.C.C. 288, 293 (1953).)
The same admonishments which were true about minority stock interests are equally true about nonvoting stock interests or creditor interests. Whether it is done through a rulemaking proceeding, or by adjudication, it is time for this Commission to update its concept of corporate control.
I do not know the terms of the loan from the Virginia National Bank to the purchaser of WDBJ-TV. The bank may have retained no control over the management of the broadcast licensee. Or it could be an integral part of all major management decisions. I suspect that its influence falls somewhere in between. But until I know more about the involvement of financial institutions as lenders in the affairs of broadcast corporations, I cannot vote to allow this situation to continue.
The impact of bank involvement with broadcasters upon the quality of performance of the mass media is among the most crucial issues for this Commission to consider. There is no greater prerequisite for a free society, one that depends on the informed participation of its [*684] citizens, than that its sources of information be truly independent, and free from all restraints which might distort the flow of that information. Ownership of the mass media in America, and the implications of that ownership, are receiving increasing attention throughout our society by private citizens and public officials, most of whom are concerned that no unnecessary risks be taken with the indispensable critical and informative journalistic functions of the mass media.
The press -- including radio and television -- has traditionally been the public watchdogs. Theirs has been the great role of warning the public of corruption and misfeasance -- both in government and private industry. When the press becomes increasingly owned by those very interests it has always carefully scrutinized, we must begin to inquire into the consequences. We are all, to some extent, the creatures of the institutional pressures that play upon us. Bankers are no exception. They, too, have certain interests, predilections, instincts, desires, prejudices, and cautions. The question to be answered by this Commission is whether banking and broadcasting mix. It is no more a criticism of either banking or broadcasting to conclude that they do not go well together than it is a criticism of either drinking or driving to conclude that they do not go well together. We, as citizens, must ask: Is there a risk that the freedom of inquiry, the dedication to truth, the burning drive to serve the public interest (traits associated with the media in a free country), may be chilled by the knowledge that the truth -- which often hurts -- will hurt those immediately and financially involved in the very investigation and dissemination of that truth? If so, it can be a risk for which we all may pay a very high price indeed.
One of our concerns on this Commission must be with the possible domination of the mass media by self-serving economic interests. This domination can take the form of economic plundering of broadcast properties, the maintenance of the broadcast station as a public relations arm of the corporate owner, or the occasional distortion of the news to conform to the larger corporate interests of the owner. It is not difficult to suggest the kinds of abuses that can occur through bank involvement with broadcast licensees. The ownership link between the bank and a broadcast outlet may produce a dangerous concentration of power. The ownership of the sole local broadcaster by the local bank might result in a domination of the local community with tragic economic and political results. It is possible that bank ownership might produce an increase in the distortion of media content. The number of local subjects which concern a bank's economic well-being might lead it to influence the news coverage and editorial stand of its broadcaster. Bank involvement with broadcasters may produce an unfair competitive advantage for either the bank or the broadcaster over its competitors. For example, it is possible that a local broadcaster, competing with a bank/owned broadcaster, might find it harder to get the capital needed to make it viable. There are several other problems with bank ownership of broadcast stations which are merely part of the largest problem of broadcaster ownership by conglomerates. And the problem of bank control over the [*685] economy may even be interrelated with the conglomerate movement. Congressman Emanuel Celler, in his subcommittee on antitrust investigation of conglomerates, has tentatively concluded that the banks aid, to a major degree, in the conglomerates' acquisitions. "Business Week," January 17, 1970, at 35. I am hopeful that we will know more about these problems as our inquiry into conglomerate ownership continues. See Inquiry Into the Ownership of Broadcast Stations by Persons or Entities With Other Business Interests, 34 F.R. 2151 (Feb. 13, 1969).
The conclusions of the House staff report on bank trust department activities give me some reasons to assume that bank ownership of broadcast facilities may even be potentially more dangerous than ownership of broadcasters by non-banking conglomerates. The staff report concluded:
What this all adds up to is that the major banking institutions in this country are emerging as the single most important force in the economy, both through the huge overall financial resources at their command and through the concentration of these resources and other interrelationships with a large part of the non-banking business community in the country.
* * *
When the power of these financial institutions, in the combination which appears to be evolving, is examined in connection with their power -- both existing and potential -- over a large part of the non-financial sectors of our economy, the picture is complete. The kind of snowballing economic power described in this study, with its literally thousands of interlocking relationships, is a situation which can only be ignored at great peril. (Staff report conclusions at 5.)
Despite this significant attempt to analyze the power and influence of bank trust departments in the United States, we still do not know all the ramifications of banks' power over the non-banking sectors of the economy. We know even less about the ramifications of their influence in the broadcasting industry. We do know that banks have their tentacles deep into the economic community through interlocking stock holdings and directorates, and loans with strict conditions. We suspect that some of these relationships with non-banking concerns are used to benefit the bank at the expense of the other business. Until this Commission learns more about influence and control of banks over the broadcasting industry, I feel compelled to dissent from any action which allows a bank to increase its influence over a licensee. In particular I dissent to the Commission's allowing the Virginia National Bank to maintain its close relationship with at least three separate licensees. I urge the majority to get on with the conglomerate inquiry, and to determine in the process just how pervasive the power of commercial banks and their trust departments may be in the field of broadcasting.