bank crimes through the collection and analysis of bank crime statistics and the study and development of means of combating such crimes; and to assist banking institutions toward greater security against such crimes by undertaking such research projects as may be deemed advisable, including the requirements, from the security standpoint, of a model institution, and the testing and evaluating of security means and devices.

RESULTS.-The FDIC and FRB have advised they have made coordinated efforts, particularly in the area of external crimes, in the preparation of questionnaires and in the training of examiners. These agencies are coordinating their efforts in collecting and analyzing data concerning the physical security arrangements and controls against external crimes employed by insured banks. The FDIC also advised that it has held conferences with State bank supervisors, in which such subjects as external controls were discussed. The FHLBB advised that it is cooperating with other financial supervisory agencies for the purpose of undertaking a coordinated effort to lessen crimes against financial institutions, and that to this end members of the Board's staff participate in conferences with other supervisory agencies.

CRIME PREVENTION ADEQUACY REVIEW (Recommendation No. 6):

That the adequacy of the institution's crime prevention facilities and procedures be considered whenever a supervisory agency must act upon its application for charter, deposit insurance, branch offices, or any other application requiring agency approval.

RESULTS. The FDIC advised that before approving applications for deposit insurance or new branch offices, it investigates each application and considers statutory factors including the general character of the bank's management; that favorable finding is made only if the management is considered capable of operating a safe and sound bank; and that in evaluating management's character, it considers ability to safeguard the bank's assets and to provide adequate internal and external controls. While not believing that its approval of applications by State member banks should be made. contingent on a determination as to the adequacy of the bank's crime prevention facilities and procedures, the FRB feels that it is reasonable for examiners to impress upon management the desirability of considering safety against external and internal crimes when applications are being investigated, and examiners are instructed to urge management to consider safety in any building program, and to discuss inadequacies with the view of obtaining corrections. The FHLBB advised that while the adequacy of an institution's practices and procedures with respect to the prevention of internal crimes is a subject of each eligibility examination for insurance of accounts and of each succeeding examination and audit, and on applications for branch offices the Board considers the record of the past operations of the applicant association and whether or not it has any supervisory problems. These considerations apply only as affects internal, not external, crime controls.

DIRECTORS' RESPONSIBILITIES (Recommendation No. 7):

That the supervisory agencies impress on the directors of the institutions they supervise the collective and individual responsibilities of director for the adequate security of their institutions against losses from crimes.

RESULTS.-The FDIC has advised it is utilizing every opportunity to impress on bank directors their collective and individual responsibilities for the adequate security of their institutions against losses from crimes, through its report of examination, other official communications and in talks before banking groups. The Federal Reserve Board has advised that at the conclusion of each examination, System examiners customarily meet with top executive officers, who are also usually directors, or with the board of directors as a whole. Any inadequacies noted are discussed, and a copy of the examination report is always made available to directors, which they are urged to review with the view of effecting corrections.

In addition to similar action on the part of its examiners, the Comptroller of the Currency has advised that its recent publication, "Comptroller's Policy Guidelines for National Bank Directors, emphasizes directors' statutory and common law responsibility to protect the bank against internal fraud and external crimes; the examination report contains a section entitled, "Internal Controls," which serves as a basic tool in discharging this responsibility; and suggested guidelines for national bank directors in connection with their annual or semiannual audits have been published. The Federal Home Loan Bank Board has advised that the substance of this recommendation is being effectuated as to internal crimes. The Board has called to the attention of all member institutions its concern regarding the increase in external crimes together with the preventive measures recommended by law enforcement agencies, has forwarded a copy of the committee's report to all institutions, and a Board member, John deLaittre, in a speech at a savings and loan association convention, stressed the responsibility of management for adopting adequate security measures to combat internal and external crimes.

MANAGEMENT CHANGES (Recommendation No. 8):

That consideration be given to legislation which would permit the supervisory agencies to approve or disapprove major changes in management arising from changes in control or ownership of institutions they supervise, and to exclude underworld elements from becoming directors or employees of banking institutions.

RESULTS.-Public Law 88-593, sponsored by the FDIC, and enacted September 12, 1964, provides for notice of change in control of management of insured banks. Under this new act, the chief executive officer of any insured bank is required to report promptly to the appropriate Federal banking agency the facts about changes occurring in the outstanding voting stock of the bank which will result in a change in the control of the bank, loans which are secured by 25 percent or more of the shares of the voting stock of an insured bank, and when there has been a change in control, any changes or replace

ments in the chief executive officer or directors occurring in the next 12-month period, including in its report a statement of the past and current business and professional affiliations of the new chief executive officer or directors. The act does not apply to savings and loan associations. However, the Federal Home Loan Bank Board has advised that it is continuing its study of the advisability of legislation contemplated in the recommendation, and that it has directed that effective January 1, 1966. a monthly report be secured from each insured institution showing any changes in directorships, officerships, ownership of 10 percent or more of the permanent stock, or control of proxies representing 10 percent or more of the outstanding voting power.

The FDIC advised it is sponsoring additional legislative proposals which accord with the committee's recommendations. One would effectively penalize violators of Federal regulations which prescribe maximum interest rates payable by insured banks. According to FDIC, the financial condition of seven recently failed banks was brought about primarily through self-serving loans of the management with funds for this purpose obtained with the aid of money brokers rather than from the growth of deposits in the normal course of business. These funds were brought in with compensation in excess of the maximum permissible rate of interest which insured banks may pay on deposits under FDIC and FRB regulations. Other proposals under consideration would grant FDIC authority to issue prompt cease-and-desist orders and authority to suspend or remove any directors or officers of an insured bank who have committed any violation of law, rules, or regulations or of a cease-and-desist order; authorize FDIC to assist a solvent insured bank by loans and deposits for short corrective periods when the bank has inadequate capital funds but can be rehabilitated, thus protecting depositors and minimizing losses to FDIC; give the Federal banking agencies authority to require audits when deemed necessary because of inadequacies in the banks' records, their internal routines or controls, or for other sufficient reasons arising in the course of supervision; and amend section 1014 of title 18, United States Code, to make it a Federal crime for any person to make false statements or misrepresentations on loan or credit applications to any bank insured by FDIC.

The FHLBB advised that it strongly recommends legislation requiring prior written Board approval before any person could serve as a director, officer or employee of an insured institution who has been convicted of a criminal offense involving dishonesty or a breach of trust. Such proposed legislation has been introduced in the 89th Congress.

[H. Rept. No. 1640, 88th Cong., 2d sess.]

JUDGMENT COLLECTION PRACTICES AND POLICIES OF THE DEPARTMENT OF JUSTICE

Twenty-Second Report by the Committee on Government Operations (Submitted to the Speaker July 31, 1964)

The Department of Justice is the Federal agency through which most money claims of the United States are adjudicated. Annually,

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the Department institutes a tremendous volume of civil suits, criminal cases, and other litigation which result in judgments, fines, and other court determinations that moneys in adjudicated amounts are due the Government.

The Legal and Monetary Affairs Subcommittee undertook a study into the effectiveness of the Department's procedures and practices in collecting the moneys due the United States as a result of judgments, fines, penalties, and forfeitures. Among the findings and conclusions resulting from the study were these: The Department's inventories of judgments balances were largely inaccurate. U.S. attorneys who handle most of the litigation were not required to notify the Department of judgment balances they closed out as uncollectible. The Department, therefore, did not, at any time, know the exact total of judgments outstanding. When it sought precise information, it learned that of the $178 million the Department reported as outstanding, $50 million was deemed uncollectible by U.S. attorneys. The Department did not require any review of the determinations of U.S. attorneys that judgments were uncollectible. No division or branch of the Department exercised overall responsibility for judgment collections.

Although various officials of the Department had recognized there were "soft spots" in its collections system, practically nothing was done to improve it between 1918 and the subcommittee's study; and the General Accounting Office had made no studies of the Department's collections system, nor that of any U.S. attorney's office.

RECOMMENDATIONS

In order to improve its practices and procedures relating to the collection of money due the United States as the result of court actions, it was recommended that the Department of Justice:

CENTRALIZED RESPONSIBILITY (Recommendation No. 1(a)):

Assign to a single division or branch the overall responsibility for judgment collections activities, including the correlating of the collection activities of the divisions and of the U.S. attorneys.

RESULTS.-The Executive Office for U.S. Attorneys, a part of the Office of the Deputy Attorney General, has the responsibility for overseeing the collection activities of U.S. attorneys. Among its supervisory functions in collection matters are the developing and maintaining of accurate statistics on the collection activities of each U.S. attorney office; enforcing standards of currency with respect to the collection activities of the U.S. attorneys; insuring that the collections reporting system is as accurate as possible, and conducting field inspections of U.S. attorneys' offices to ascertain how the collection activities of those offices are being conducted and to suggest improvements where needed. Because the reporting system was extended to judgment collections only, this year, the executive office has not been able yet to carry out the aforementioned duties to the fullest possible extent, but substantial progress has been made.

Practically all of the collection items in which the Department is involved are in the following Divisions, each of which has established a centralized unit for handling its judgment collection activities:

(1) The Civil Division's Collection Unit has been increased from four attorneys to five, the Unit's personnel have been brought together into a contiguous group of officers for more effective operation, and the Division has promulgated to U.S. attorneys special instructions concerning the handling of collection activities.

(2) The Tax Division has centralized in its Litigation Control Unit the responsibility for supervising collections under its control. This Unit has established a monitoring system over Tax Division cases by which the U.S. attorneys report collection activity on each case to the Division.

(3) The Criminal Division has analyzed the criminal cases in which fines have been imposed and not collected, and has establisted a Unit with the responsibility of supervising the collection of criminal fines and forfeitures by the U.S. attorneys.

The Department's experience leads it to believe that the correlating of the collection activities of the Divisions and the U.S. attorneys can best be accomplished under the overall supervision of the Executive Office for U.S. attorneys. That responsibility has not yet been formally assigned to the Office, however, pending further experience. The Justice Department has advised the House Appropriations Committee that its collections have greatly improved as a result of the study made by the Legal and Monetary Affairs Subcommittee.

EXPANDED REPORTING (Recommendation No. 1(b)):

Give consideration to extending its IBM/mark-sense card reporting system to reflect postjudgment collection activities in individual cases.

RESULTS.-The Department has advised that an inventory has been taken of all outstanding judgments, fines, forfeitures, and penalties being handled by the U.S. attorneys. Forty-two thousand have been reported. Mark-sense cards have been forwarded to the U.S. attorneys' offices for use in reporting changes in status of these collection items. Regular reports are required of U.S. attorneys to show status changes in post-judgment collection matters. New judgments, fines, forfeitures, and penalties are incorporated into the system and kept current through the use of mark-sense cards. This project has been substantially completed but additional work will be necessary before the Department can say with assurance that it is functioning effectively and accurately.

COLLECTIONS SPECIALISTS (Recommendation No. 1 (c)):

Give consideration to enlarging the collection activities within the 92 Federal judicial districts by the employment,