the Treasury of Insurance Corporation obligations in an amount equal to the amount of capital stock previously retired. The Home Loan Bank Board considers the provisions of section 6 of the proposed amendment to be more adequate than, and greatly preferable to, the provisions of section 3 of the bill as passed by the House.

Section 7 of the proposed amendment is a new provision which does not appear in H. R. 2799 as passed by the House. It relates to the termination of the insured status of institutions whose accounts are insured by the Federal Savings and Loan Insurance Corporation. And I might add, Senator, that this is a provision which was worked out with the industry, through the legislative coordinating committee that we have.

Under existing law, when an institution insured by the Federal Savings and Loan Insurance Corporation voluntary terminates insurance the accounts of individual investors immediately cease to be insured, but the institution must pay premiums for 3 years thereafter; where termination is involuntary, payment of premiums and insurance of accounts continue for 5 years. Section 7 of the proposed amendment changes the existing law so as to place voluntary and involuntary terminations of insurance on the same basis. In either type of termination the insurance of existing accounts, less any later withdrawals below the insured amounts, would continue for 2 years and the insured institution would be required to pay as a final premium an amount equal to twice the last annual premium paid by it.

The provisions of the existing law require an institution upon voluntary termination of insurance to continue payment of premiums for 3 years without any benefit to individual investors or to the institution. Furthermore, the continuance of insurance of existing accounts for 5 years after the Corporation finds cause for withdrawal of insurance delays the final termination of insurance in such cases for too long a time, and is detrimental to the best interests of the Corporation. On the other hand, section 7 of the proposed amendment provides reciprocal and equitable provisions for termination of

insurance.

I might add there, Senator, that ample provision is made for notice to the shareholders in the savings and loan associations, so that they know if insurance is terminated and have ample time to change their accounts to an insured institution if they so wish.

Section 8 of the proposed amendment would provide that shares, deposits, certificates, and accounts which are insured by the Federal Savings and Loan Insurance Corporation shall be lawful investments, and may be accepted as security, for fiduciary, trust, and public funds the investment or deposit of which is under the authority or control of the United States or of any officer, officers, agency, or agencies thereof. This section does not appear in H. R. 2799 as passed by the House.

The insurance which is provided by the Government through the Insurance Corporation, and the examinations of insured institutions and other safeguards for which provision is made through title IV of the National Housing Act, make these investments safe and desirable securities for fiduciary, trust, and public funds.

Section 9 of the proposed amendment is the usual separability provision.

The Home Loan Bank Board urgently recommends that H. R. 2799 be amended by the adoption of the suggested substitute and that, as so amended, it be enacted into law. Although there has not been sufficient time to permit clearance of this statement with the Bureau of the Budget, I am authorized to state that if H. R. 2799 were amended in accordance with the foregoing suggested provisions its enactment would be in accord with the program of the President. Senator CAIN. That simply means that this statement was discussed with the Bureau of the Budget?

Mr. DIVERS. Yes.

I now wish to comment on section 4 of the bill as passed by the House. This is the insurance provision.

This section, which has been omitted from the proposed amendment, would reduce the premium rate of the Federal Savings and Loan Insurance Corporation from one-eighth of 1 percent to one-twelfth of 1 percent of the accounts of insured members and creditor obligations: of the insured institution. The existing authority of the Insurance Corporation to assess additional premiums would be retained, but the rate would be similarly reduced. Institutions which had paid premiums at a higher rate for any period after June 30, 1946, would be entitled to credit on future premiums for the excess so paid.

A similar provision for reduction of the Insurance Corporation's premium rate was embodied in H. R. 4428, Seventy-ninth Congress, which was the subject of a pocket veto by the President, who signed a memorandum of disapproval with respect to that bill. I am advised by the Bureau of the Budget that a reduction of the premium. rate as proposed by section 4 of H. R. 2799 as passed by the House would not be in accord with the program of the President.

The Home Loan Bank Board appreciates that the record to date may lend some weight to an argument for such reduction. The loss: experience of the Corporation has been most favorable when viewed: in the light of Corporation income. During 13 and a half years of operations, the Corporation has paid losses which, after deduction of estimated recoveries, are approximately $5,212,000. Gross income of the Corporation during the same period aggregated $97,000,000, which approximately one-half consisted of insurance premiums. However, the Board feels that there are reasons why such a reduction should not be made at the present time.

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In the first place, the entire experience of the Corporation has occurred in a period of business recovery followed by prosperity. There are at the present time strong inflationary tendencies in the real-estate field which cast doubt on the exact nature of the mortgageloan risk. It is the feeling of the Board that the proposed premium reduction should not be made while these inflationary tendencies persist.

A second reason why such a reduction should not now be made is the unseasoned nature of the current loan portfolio of the insured. institutions as a whole. During the 2 years ending December 31,. 1947, insured institutions have made estimated total loans of $5,664,-000,000 which is roughly equivalent to 86 percent of the estimated net first mortgages held on December 31, 1947. These figures indicate that the current portfolio of insured institutions, as is true of all other types of lending institutions, lacks seasoning, thus increasing the

uncertainty of the present mortgage risk involved. The loans, other than GI and Federal Housing Administration loans, which have been made during the last year or so average only about 59 percent of the sales price, and there is the further protection of insurance or guaranty under the National Housing Act or the Servicemen's Readjustment Act of 1944 on approximately 30 percent of the loan portfolio, but even so it should be recognized that it is difficult to evaluate the character of the over-all risk.

Senator CAIN. Do you think the day is going to come when your Board is going to recommend that we reduce the premium?

Mr. DIVERS. I think so.

The suggested amendment to H. R. 2799 contains a provision for Treasury support of the Insurance Corporation through loans by the Secretary of the Treasury where the Board determines that the Corporation needs funds for insurance purposes. The Board would not seek such legislation unless it was desirous of providing for emergencies, and it would be inconsistent to ask for this Treasury support unless the Board was doing everything it could to protect against emergencies.

Finally, H. R. 2799, both as passed by the House and as it would be amended if the suggested amendment were adopted, would provide for the retirement of the Insurance Corporation's capital stock. A premium reduction at this time would retard any program for such retirement. Assuming a current effective premium income of $8,700,000, the Corporation would lose through such a premium reduction, without receiving any net benefit, nearly $3,000,000 of income annually which would otherwise be available for retirement of capital stock if such retirement should be legislatively authorized.

For these reasons the Home Loan Bank Board feels that section 4 of H. R. 2799 should not be enacted into law at the present time. Senator CAIN. Mr. Divers, I think your statement leaves little room at this time for questions. We appreciate your having come. Thank you.

Mr. DIVERS. Thank you, sir.

Senator CAIN. Mr. B. T. Fitzpatrick, general counsel, Housing and Home Finance Agency, we shall be most pleased to hear, if he cares to make any observations.

Mr. FITZPATRICK. I have no statement, Senator.

Senator CAIN. We should like to call now Mr. Carl H. Ellingson, chairman of the committee on legislation, National Savings and Loan League.

Good morning, Mr. Ellingson. Please proceed as you see fit.

STATEMENT OF CARL H. ELLINGSON, CHAIRMAN, COMMITTEE ON LEGISLATION, NATIONAL SAVINGS AND LOAN LEAGUE Mr. ELLINGSON. Thank you. My name is Carl H. Ellingson. I am chairman of the committee on Federal legislation of the National Savings and Loan League. I am also president of the First Federal Savings and Loan Association of Washington, the largest federally insured savings and loan association in the Nation's Capital.

The National Savings and Loan League has 500 member savings and loan associations located in 37 States and the District of Columbia. Their gross assets exceed $2,000,000,000. They are all members of

the Home Loan Bank System and most of them have their accounts insured by the Federal Savings and Loan Insurance Corporation. In addition there are 18 regional, State, and local savings and loan leagues which are affiliated with the national league.

On behalf of the National Savings and Loan League I wish to express deep appreciation of the time which this committee has taken during the Eightieth Congress to consider legislation to strengthen the savings and loan associations of the country. We are particularly appreciative of the promise given us by the chairman of this committee just before Congress adjourned last year that savings and loan bills would be taken up immediately after certain particularly urgent legislation was disposed of. We are glad you are now in a position to consider and dispose of these matters which are of importance to our institutions and, therefore, to their many millions of members. and to the general public.

Savings and loan associations have for a long time played an important part in the financing of homes for the people of America. Last year they made approximately a third of the loans on homes. Savings and loans associations took the lead in cooperating with the Government program of aiding veterans to obtain homes.

In 1932 the Congress recognized the importance of savings and loan associations to our economy and to the welfare of our people. At that time there was created the Federal Home Loan Bank System to facilitate the flow of mortgage credit into areas where it was most needed. The success of the Bank System is well recognized in financial circles. With the aid of the facilities of the Federal home loan banks the thrift and home financing institutions of the country have been able to render a far greater and a more satisfactory service to their respective communities. The 3,705 member institutions have assets aggregating 111⁄2 billion dollars.

Again in 1933 Congress recognized the importance of savings and loan associations by providing for the chartering of Federal associations of which there are now some 1,500 located throughout the country; in every State, I believe. Their assets alone are more than 5%1⁄2 billion dollars. They have encouraged more than 34 million persons to save nearly $5,000,000,000. Most of these funds are employed in the financing of homes.

In 1934 when Congress authorized the establishment of the Federal Savings and Loan Insurance Corporation to insure the accounts of savings and loan associations, it not only recognized again the importance of these institutions to the country but provided by this act for increased confidence in these thrift institutions. The very favorable experience of the Insurance Corporation in carrying on this insurance program and the success of the program itself is evidence of the wisdom of Congress in taking this action in 1934.

But since 1934 there has been very little legislation passed by the Congress for the benefit of the savings and loan associations of the country. The lack of legislation pertaining to the savings and loan business in the decade following 1934 was due in part to difference of opinion between the savings and loan business, on the one hand, and the Government, on the other hand. Another reason was the differences of opinion that developed from time to time on specific legislative proposals within the savings and loan business itself.

Senator CAIN. I think that bill which was passed yesterday is: evidence of what you have in mind.

Mr. ELLINGSON. That is right.

Senator CAIN. I remember months ago that this committee said, in support of conversion from State to Federal and back again, that as soon as the industry itself was in agreement within itself no time would be lost in taking positive action.

Mr. ELLINGSON. I remember very distinctly that occasion. I think you were the Senator who made that statement.

Senator CAIN. I think there is recognition of how important it is. and how much of your valuable time it saves when your industry comes before this or any other committee in the interest of what it thinks is good for the industry, which leaves Congress to judge the merits without reference to conflicting opinions. I think it is a splendid thing, and I just want you to know of my own compliments to you, sir.

Mr. ELLINGSON. Thank you.

During hearings held last year on savings and loan bills, the suggestion was offered by members of the Senate Banking and Currency Committee that an effort be made to obtain an agreement within the savings and loan business and between the business and the Government in regard to legislative proposals so as to relieve the Members of Congress of the burden of trying to reconcile these differences in committee consideration of bills. As a result of this excellent suggestion, the Federal Savings and Loan Advisory Council, a statutory body, organized a Coordinating Committee made up of two representatives. of the Council, two representatives of the presidents of the Federal home-loan banks, and two representatives of each of the two Nation-wide trade organizations serving the savings and loan business. The Coordinating Committee has worked hard and successfully to bring about an understanding and agreement on legislation.

As a result of the work of the Coordinating Committee there were recently introduced, with the bipartisan sponsorship of Senators. Tobey, Bricker, and McGrath, several bills. Let me take this opportunity to thank the committee for its action yesterday in approving two of these bills; namely, S. 2415, to authorize the conversion of Federal associations to State charter, and S. 2416, to improve the services and facilities of the Home Loan Bank Board.

S. 2417, introduced by the same three gentlemen, to adjust the premium charge of the Federal Savings and Loan Insurance Corporation, is now pending before this committee. I should like to speak briefly in support of this bill. Before doing so, however, and because it is partly related to this bill, I wish to mention another matter which is also pending before this committee.

One of the most important undertakings of the Coordinating Committee, which I mentioned, was the preparation of an omnibus bill designed to strengthen the Federal home-loan banks and the Federal Savings and Loan Insurance Corporation. In this connection it should be noted that the savings and loan associations of the country are nearly twice as large as they were when the Federal Home Loan Bank System and the Federal Savings and Loan Insurance Corporation were created. Changing times and increased needs of the publicclearly indicate the need for changes in the Federal Home Loan Bank