FEDERAL HOME LOAN BANK AMENDMENTS MONDAY, MAY 24, 1948 UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE The subcommittee met, pursuant to call, at 9 a. m., in room 301, Senate Office Building, Senator Harry P. Cain (chairman of the subcommittee) presiding. Present: Senators Cain, Bricker, and Sparkman. Also present: Mr. McKenna, Mr. Thomas, and Mr. Eckler. Senator CAIN. We will call the committee to order, please, for the purpose of conducting a hearing on several bills pertaining to savings and loan and mutual savings bank legislation. The following bills, S. 2415, S. 2416, and H. R. 2798, will be considered in addition to those already before the committee: (The bills are as follows:) [S. 2415, 80th Cong., 2d sess.] A BILL To amend section 5 of the Home Owners' Loan Act of 1933, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (i) of section 5 of the Home Owners' Loan Act of 1933, as amended, is hereby amended by adding the following provision at the end thereof: 66 'Any Federal savings and loan association may convert itself into a savings and loan type of institution organized pursuant to the laws of the State, district, or Territory (hereinafter referred to in this section as the State) in which the principal office of such Federal association is located: Provided, (1) That the State permits the conversion of any savings and loan type of institution of such State into a Federal savings and loan association; (2) that such conversion of a Federal savings and loan association into such a State institution is determined upon the vote in favor of such conversion cast in person or by proxy at a special meeting of members called to consider such action, specified by the law of the State in which the home office of the Federal association is located, as required by such law for a State-chartered institution to convert itself into a Federal association, but in no event upon a vote of less than 51 per centum of all the votes cast at such meeting, and upon compliance with other requirements reciprocally equivalent to the requirements of such State law for the conversion of a State-chartered institution into a Federal association; (3) notice of the meeting to vote on conversion shall be given as herein provided and no other notice thereof shall be necessary; the notice shall expressly state that such meeting is called to vote thereon, as well as the time and place thereof, and such notice shall be mailed, postage prepaid, at least twenty and not more than thirty days prior to the date of the meeting, to each member of record of the Federal association at his last address as shown on the books of the Federal association and to the General Manager of the Federal Savings and Loan Insurance Corporation, Washington, District of Columbia; (4) that, upon the effective date of the conversion, the association has repurchased the total amount invested in its shares by the Secretary of the Treasury; and (5) that if, upon the effective date of conversion, the Home Owners' Loan Corporation will hold of record shares of the association, 39 its approval of the conversion has been obtained; (6) that, in the event of dissolution after conversion, the members or shareholders of the association will share on a mutual basis in the assets of the association in exact proportion to their relative share or account credits; (7) that such conversion shall be effective upon the date that all the provisions of this Act shall have been fully complied with and upon the issuance of a new charter by the State wherein the association is located; it being provided that its act of converting into a State-chartered institution shall constitute an agreement to be bound by all the requirements that the Federal Savings and Loan Insurance Corporation may legally impose under section 403 of title IV of the National Housing Act, as now or hereafter amended, and the association shall upon conversion and thereafter be authorized to issue securities in any form currently approved at the time of issue by the Federal Savings and Loan Insurance Corporation for issuance by similar insured institutions in such State, District, or Territory. "In addition to the foregoing provision for conversion upon a vote of the members only any association chartered as a Federal savings and loan association, including any having outstanding shares held by the Secretary of the Treasury or Home Owners' Loan Corporation, may convert itself into a State institution upon an equitable basis, subject to approval, by regulations or otherwise, by the Home Loan Bank Board and by the Federal Savings and Loan Insurance Corporation: Provided, That if the insurance of accounts is terminated in connection with such conversion, the notice and other action shall be taken as provided by law and regulations for the termination of insurance of accounts." [S. 2416, 80th Cong., 2d sess.] A BILL To amend section 19 of the Federal Home Loan Bank Act and subsection (c) of section 402 of the National Housing Act Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 19 of the Federal Home Loan Bank Act, as amended, and subsection (c) of section 402 of the National Housing Act, as amenced, are hereby each amended by adding thereto at the end thereof the following new sentence: "All necessary expenses in connection with the making of supervisory or other examinations (except examinations of Federal home loan banks), including the provision of services and facilities therefor, shall be considered as nonadministrative expenses." [H. R. 2798, 80th Cong., 2d sess., Rept. No. 1392] [Strike out all after the enacting clause and insert the part printed in italic] AN ACT To amend section 5, Home Owners' Loan Act of 1933, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, [That subsection (i) of section 5 of Home Owners' Loan Act of 1933, as amended, is hereby amended by striking out the period at the end thereof and inserting a colon and the addition of the following: "Provided, however, That said conversion shall not be in contravention of the State law. Any association chartered as a Federal savings and loan association may convert itself into a savings and loan, building and loan, or homestead association, or a cooperative bank, incorporated under the laws of the State, District, or Territory in which the principal office of such association is located (hereinafter referred to as the State institution), upon the vote required for such conversion, cast at a meeting called and held for such purpose in accordance with the law of such State, District, or Territory due notice of such meeting to be given to all the shareholders of such association, but in no event upon the vote of less than 51 percentum of all the votes cast, voting in person or by proxy at such meeting: Provided further, That legal titles to all real estate shall be passed by proper conveyances. If none of the outstanding shares of the converting Federal association are held by the Secretary of the Treasury or the Home Owners' Loan Corporation, and if such conversion is to a State institution, which is mutual in character and of a type which has been insured by the Federal Savings and Loan Insurance Corporation, no approval of such conversion by the Federal Home Loan Bank Board or the Federal Home Loan Bank Administration shall be required and such converted institution shall continue to be an insured institution and bound under all of the agreements contained in the original application for insurance of accounts, and by such conversion shall accept and be bound by all agreements required by section 403 of title IV of the National Housing Act and such insured institution shall upon such conversion and thereafter be authorized to issue securities in the form theretofore approved by Federal Savings and Loan Insurance Corporation for issuance by similar insured institutions in such State, District, or Territory. Such conversion shall be effective upon approval by the duly constituted authorities of the State, District, or Territory which have supervision over such institutions where such institution is located, and the filing of a certified copy of the resolution authorizing such conversion and the approval of such State, District, or Territory authority with the Federal Home Loan Bank Administration or the Federal Home Loan Bank Board. ["In addition to the foregoing provision for conversion upon a vote of the members only, any association chartered as a Federal savings and loan association, including any having outstanding shares held by the Secretary of the Treasury or Home Owners' Loan Corporation, may convert itself into a State institution upon an equitable basis, subject to approval by the Federal Home Loan Bank Board or the Federal Home Loan Bank Administration and by the Federal Savings and Loan Insurance Corporation: Provided, That if the insurance of accounts is terminated in connection with such conversion, the notice and other action shall be taken as provided by law and regulations for the termination of insurance of accounts."] That subsection (i) of section 5 of the Home Owners' Loan Act of 1933, as amended, is hereby amended by adding the following provision at the end thereof: "Any Federal savings and loan association may convert itself into a savings and loan type of institution or a mutual savings bank organized pursuant to the laws of the State, District, or Territory (hereinafter referred to in this section as the State) in which the principal office of such Federal association is located: Provided, (1) That the State permits the conversion of any savings and loan type of institution or (in the case of conversion to a mutual savings bank) any mutual savings bank of such State into a Federal savings and loan association; (2) that such conversion of a Federal savings and loan association into such a State institution is determined upon the vote in favor of such conversion cast in person or by proxy at a special meeting of members called to consider such action, specified by the law of the State in which the home office of the Federal association is located, as required by such law for a State-chartered institution to convert itself into a Federal association, but in no event upon a vote of less than 51 per centum of all the votes cast at such meeting, and upon compliance with other requirements reciprocally equivalent to the requirements of such State law for the conversion of a State-chartered institution into a Federal association; (3) notice of the meeting to vote on conversion shall be given as herein provide and no other notice thereof shall be necessary; the notice shall expressly state that such meeting is called to vote thereon, as well as the time and place thereof, and such notice shall be mailed, postage prepaid, at least twenty and not more than thirty days prior to the date of the meeting, to each member of record of the Federal association at his last address as shown on the books of the Federal association and to the General Manager of the Federal Savings and Loan Insurance Corporation, Washington, District of Columbia; (4) that, upon the effective date of the conversion, the association has repurchased the total amount invested in its shares by the Secretary of the Treasury; and (5) that if, upon the effective date of conversion, the Home Owners' Loan Corporation will hold of record shares of the association, its approval of the conversion has been obtained; (6) that, in the event of dissolution after conversion, the members or shareholders of the association or the depositors of the mutual savings bank, as the case may be, will share on a mutual basis in the assets of the association or bank in exact proportion to their relative share or account credits; (7) that such conversion shall be effective upon the date that all the provisions of this Act shall have been fully complied with and upon the issuance of a new charter by the State wherein the association is located; it being provided that, except with respect to institutions converted to mutual savings banks, its act of converting into a State-chartered institution shall constitute an agreement to be bound by all the requirements that the Federal Savings and Loan Insurance Corporation may legally impose under section 403 of title IV of the National Housing Act, as now or hereafter amended, and the association shall upon conversion and thereafter be authorized to issue securities in any form currently approved at the time of issue by the Federal Savings and Loan Insurance Corporation for issuance by similar insured institutions in such State, District, or Territory: Provided further, That in the case of conversion to a mutual savings bank such conversion shall not be effective unless and until the Federal Deposit Insurance Corporation has accepted the converting institution as an insured bank, and the Board of Directors of the Federal Deposit Insurance Corporation is hereby authorized to make such acceptance. "In addition to the foregoing provision for conversion upon a vote of the members only any association chartered as a Federal savings and loan association, including any having outstanding shares held by the Secretary of the Treasury or Home Owners' Loan Corporation, may convert itself into a State institution upon an equitable basis, subject to approval, by regulations or otherwise, by the Home Loan Bank Board and by the Federal Savings and Loan Insurance Corporation: Provided, That if the insurance of accounts is terminated in connection with such conversion, the notice and other action shall be taken as provided by law and regulations for the termination of insurance of accounts." Sec. 2. Section 19 of the Federal Home Loan Bank Act, as amended, and subsection (c) of section 402 of the National Housing Act, as amended, are hereby each amended by adding thereto at the end thereof the following new sentence: "All necessary expenses in connection with the making of supervisory or other examinations (except examinations of Federal home loan banks), including the provision of services and facilities therefor, shall be considered as nonadministrative expenses." Passed the House of Representatives June 2, 1947. Attest: JOHN ANDREWS, Clerk. Senator CAIN. The hearing will be conducted by a special subcommittee recently appointed by Mr. Tobey, chairman of the Senate Banking and Currency Committee. The subcommittee consists of Senators Bricker and Cain, Republicans; Fulbright, Democrat. I am going to suggest at the outset that everybody who has any conceivable interest in this legislation at all take seats where they are immediately available for questioning, for compromise, and for getting somewhere. I want the record clearly to indicate that time is pressing on this and every other committee, that the chairman of the subcommittee will be keenly disappointed if as a result of this hearing there are not conclusions reached which will result in sending to the floor immediately for passage in this session at least a substantial portion of the legislation which we are considering. I am not unmindful of the fact that there have been hearings on this legislation in the past at which apparently everybody was in agreement. For the reason that this committee respects the American Bankers Association, the hearings were continued in an open status to accept whatever reflections the American Bankers Association cared to make on the subject before us and to provide governmental agencies with an opportunity to apparently change their positions. The reasons for those changes, I am totally and completely unfamiliar with. The purpose of the hearing this morning is to arrive at an understanding on this legislation. We are extremely pleased at the outset, to have with us an official spokesman for the American Bankers Association, and we would ask him first if he would properly identify himself to the reporter and then proceed as he sees fit. STATEMENT OF WILLIAM A. RECKMAN, PRESIDENT, THE WESTERN BANK & TRUST CO., CINCINNATI, OHIO, REPRESENTING THE AMERICAN BANKERS ASSOCIATION; ACCOMPANIED BY D. J. NEEDHAM, GENERAL COUNSEL; J. R. DUNKERLEY, DEPUTY MANAGER; AND EUGENE M. MORTLOCK, ASSISTANT SECRETARY, SAVINGS DIVISION, AMERICAN BANKERS ASSOCIATION Mr. RECKMAN. Thank you. My name is William A. Reckman, president, the Western Bank & Trust Co., Cincinnati, Ohio. I appear before you this morning on behalf of the American Bankers Association in my capacity as chairman of the committee on Federal legislation, savings division. There are two sections of H. R. 2799 as amended which I should like to discuss with your committee, namely, sections 3 and 8. Section 3 has to do with the right of the Federal home loan bank to borrow from the Treasury of the United States not to exceed the sum of $1,000,000,000. I should like to read, if I may, into the record what we have construed to have been the intent of Congress in setting up the original legislation that provided for the Federal Savings and Loan Association. Congress authorized the organization of Federal savings and loan associations— In order to provide local mutual thrift institutions in which people may invest their funds in order to provide for the financing of homes. That is from section 5 (a) of the Home Loan Act, as amended. Mr. Chairman, our thinking is that if these local mutual thrift institutions were organized in accordance with the intent of Congress for the purpose of having people invest funds in local communities and that those funds in turn shall be reinvested or put out on financing of homes, those institutions are mutual in character and that the need for funds to meet further advances for loans would not be an emergency as prescribed, but there may be a situation where these institutions, these Federal savings and loan institutions, may be called upon to repurchase their shares in a national emergency, which might as a result of that national emergency make it desirable or advisable that they have recourse to the Federal home loan banks, which banks in turn may have recourse to the Treasury of the United States. We talk about a national emergency that arises out of a situation that may assist a Federal savings and loan association to be permitted or enabled to repurchase the shares of members. There is bothing in the bill as amended that we were able to decipher that defines what constitutes a national emergency, within what limitations may the Secretary of the Treasury recognize a national emergency, and how shall the Secretary of the Treasury proceed if such a national emergency may arise. To summarize, the Secretary of the Treasury in no way has any limitation or restriction or any indication at all from the Congress as to how he shall proceed, and it is our thought that if liquidity is the thinking of the Congress, and if the Federal Home Loan Bank System shall have the right to draw upon the National Treasury to the tune of $1,000,000,000, there should be an expression. of the Congress as to how the financing may be used, namely, for liquidity purpose or for further extension of loans and some guidance given to the Secretary of the Treasury in enabling him to determine the acuteness of the national situation or how the funds shall be administered by him. Insofar as section 8 Senator CAIN. The section to which you presently refer is section 3? Mr. RECKMAN. Section 3 is the one that has to do with what I have said. Senator CAIN. In support of the witnesses' contention, I have before me excerpts from a letter of May 13, 1948, from the FDIC to Senator Tobey, which opposed the inclusion of section 3 in the bill at this time. I want to raise a question with the staff if I am correctly |