INDIAN-AMERICAN FOUNDATION

Following a subcommittee suggestion aimed at utilizing the vast accumulation of U.S.-owned Indian rupees-slightly more than $1 billion worth-State Department and AID officials have carried on negotiations with the Government of India to establish a binational foundation. The foundation would serve as a source for providing new initiatives in education and science and for the creation and support of individual and institutional efforts to supplement existing programs, public and private. Excess currencies would be used to support development of centers of academic excellence, scholarships for higher education, teacher training schools, projects in literacy and adult education, English language training, books and library programs, and other related programs in the fields of education and science.

TRAVEL

Based on a subcommittee investigation and a GAO study it was found that approximately $1.2 million was unnecessarily being expended annually to buy official air travel tickets to or from seven countries where the United States owned an excess of foreign currencies. Despite country agreements permitting the use of these currencies for travel, U.S. agencies had not taken advantage of the opportunity to use the foreign currencies as a substitute for dollar expenditures.

Prodding by the subcommittee resulted in the issuance of State Department Foreign Currency Bulletin No. 1, dated December 7, 1964, to heads of executive departments and other appropriate officials which provides guidelines to assist agencies in using excess foreign currencies for travel, transportation, per diem and related costs. The bulletin reflected the coordinated efforts of State, AID, Bureau of the Budget, Treasury and other pertinent agencies. Similar directives and regulations have been issued by these agencies to their overseas missions, resulting in an increased use of foreign currencies in lieu of dollars for travel purposes.

SALES OF LOCAL CURRENCIES ΤΟ U.S. VOLUNTARY NONPROFIT

ORGANIZATIONS

On July 7, 1964, the Treasury Department supplemented Treasury Department Circular 830, first revision, dated December 17, 1953, by adding a subparagraph which has the effect of making available the sales of foreign currencies, in excess to U.S. needs, to voluntary nonprofit organizations. The proposal was discussed at length during subcommittee hearings in the 88th Congress.

In response to a subcommittee followup both the Treasury Department and the Department of State have given evidence that positive efforts are being made to implement the Treasury Department circular.

As a result of the subcommittee investigation there was an amendment to the Foreign Assistance Act of 1964-section 612(c)-the purpose of which was to encourage the use of excess foreiga currencies by authorizing the direct appropriations of such currencies to carry

out programs under any act for U.S. operations abroad. The amendment also urged the President to take all appropriate steps to assure that, to the maximum extent possible, U.S. owned excess foreign currencies be utilized in lieu of dollars.

As a followup to this section, the subcommittee requested all appropriate agencies and departments to inform the subcommittee as to what action has been taken or is planned to implement this provision of law. In addition, appropriate officials were requested to inform the subcommittee about specific plans to seek congressional appropriations of U.S.-owned foreign currencies. Responses to this request are being evaluated.

LEGAL AND MONETARY AFFAIRS SUBCOMMITTEE

[H. Rept. No. 429, 88th Cong., 1st sess.]

COMMON TRUST FUNDS-OVERLAPPING RESPONSIBIL-
ITY AND CONFLICT IN REGULATIONS

Fifth Report by the Committee on Government Operations
(Submitted to the Speaker June 19, 1963)

This report resulted from a study of the effect that overlapping of authority and duplication of regulations over the same subject matter by several agencies can have on the efficiency and economy of administrative functions. What amounted to a public conflict arose when the Comptroller of the Currency issued revised regulations which would permit the trust departments of national banks to invest collectively in common trust funds moneys received by them for managing agency accounts and Smathers-Keogh retirement plans. The Comptroller contended these were proper trust functions and therefore subject only to regulations by his Office. The Securities and Exchange Commission, however, claimed such accounts bore such similarity to mutual funds and to securities as to make them amenable to the requirements of the Federal securities accounts administered by the SEC.

The committee found that regulation by both the SEC and the Comptroller would impose hardships on banks through the necessity of complying with separate registration, reporting, and other requirements and would greatly increase the costs involved; and that inasmuch as the Congress had exempted bank securities and common trust funds, generally, from the operation of the securities accounts, similar exemption should be made as to the collective investments here involved, thus eliminating the expenses of costly litigation, duplication of regulation, and the prospective costs (up to $250,000 per year), of SEC supervision.

RECOMMENDATION

In order to eliminate the problems created by overlapping authority and duplicate regulation, the committee recommended:

To the Interstate and Foreign Commerce Committee of the House of Representatives that it direct its attention to the consideration of legislation which would specifically exempt common trust funds of managing agency accounts and Smathers-Keogh plans maintained by national banks from the Federal securities laws, and provide for such protections for investors therein as may be deemed necessary.

RESULTS. In June 1964, a subcommittee of the House Interstate. and Foreign Commerce Committee held hearings on H.R. 9410, a

bill to accomplish the recommendation of the committee, which had been introduced by Congressman Dante B. Fascell, chairman of the Legal and Monetary Affairs Subcommittee, and on H.R. 8499, which had been introduced by Congressman John B. Anderson, a member of that subcommittee. Officials of the Federal banking agencies and of the SEC testified, as did public witnesses, including officials of associations representing the mutual funds industries. The 88th Congress adjourned without any further action being taken on the bills. Proposed legislation is pending in the 89th Congress. The SEC, recently, on application filed by the First National City Bank of New York, has granted such exemptions from compliance with requirements of the Federal securities laws that, if sustained by the courts, the necessity for legislation to avoid duplicate regulation, may no longer exist.

[H. Rept. No. 919, 88th Cong., 1st sess.]

FEDERAL DEPOSIT INSURANCE CORPORATION-ASSUMPTION OF EMPLOYEE BENEFITS COSTS AND CHANGE IN AUDIT DATES

Fifteenth Report by the Committee on Government Operations (Submitted to the Speaker November 22, 1963)

This report results from study of recommendations made by the Comptroller General that the Federal Deposit Insurance Corporation pay its share of the cost for Federal retirement, disability, and employment compensation costs provided to its employees. The committee found about $5 million should be reimbursed to the civil service fund by FDIC, to which the agency agreed. However, it could not do so in the absence of a change in the FDIC Act for that purpose.

The Comptroller General had also recommended change in the GAO dates of audits of the FDIC, which also required changes in existing laws. The committee found that the present requirement of the Federal Deposit Insurance Act that General Accounting Office audits of FDIC be made on a fiscal year basis as of June 30 each year results in confusion, unnecessary duplication of effort, and

waste.

RECOMMENDATIONS

It is recommended to the Banking and Currency Committee of the House of Representatives that it direct its attention to the consideration of legislation which would amend the Federal Deposit Insurance Act so as to:

1. Require the Federal Deposit Insurance Corporation

to

(a) Pay into the civil service retirement and disability fund the Government's cost of providing retirement and disability benefits for the Corporation's employees from the inception of FDIC, June 16, 1933, through June 30, 1957, plus interest at the rate of 2 percent to date of payment;

(b) Pay into the Federal employees' compensation fund the total amount of benefits paid to FDIC employees from June 16, 1933, to the effective date of such amendment, plus interest at 2 percent; and to assume full responsibility for the subsequent costs of the Corporation's employee compensation benefits;

(c) Pay into the Treasury as miscellaneous receipts a fair portion of the costs of administering the civil service retirement system and the employees' compensation fund from June 16, 1933; and

2. Require that the General Accounting Office make its audits and reports of audits of the Federal Deposit Insurance Corporation on a calendar year basis instead of the fiscal year basis now provided.

RESULTS. The committee's recommendations were transmitted to the chairman of the House Banking and Currency Committee. In acknowledging the receipt thereof, the chairman of that committee stated that, "You may be sure that we will give the committee's report and its recommendations most careful consideration." In a communication dated March 31, 1966, the FDIC advised that it remains favorably disposed to the committee's recommendations.

[H. Rept. No. 920, 88th Cong., 1st sess.]

"WINDOW DRESSING" IN BANK REPORTS

Sixteenth Report of the Committee on Government Operations (Submitted to the Speaker November 22, 1963)

All federally insured banks are called upon to report their condition four times a year to the Federal banking agency under whose supervision they operate. These "call" reports disclose the conditions of banks as of dates selected jointly by the heads of the Federal Deposit Insurance Corporation, and the Federal Reserve System, and the Comptroller of the Currency, or a majority of them. The committee concluded that some banks, particularly some large banks, "window dressed" their call reports and other statements of condition; i.e., they used temporary nonbusiness purpose transactions so as to be able to show more favorable financial conditions on a particular date than would normally be the case. The practice is not illegal. However, it is deceptive. It is motivated by the desire of particular banks to appear larger than they really are. The bank supervisory agencies knew the practice existed; however, they did not know its full extent, nor had they joined in coordinated efforts to eliminate it. In order to eliminate window dressing, while at the same time preserving the statistical and supervisory value of call reports the committee made the following recommendations: