even more prosperous than the past. Your enterprise is perhaps the safest of all for it rests on the widest, as well as the most careful generalizations of experience. Unless the Nation fails there is no reason why you should not succeed. And that which makes the Nation great and prosperous, the self-reliance, the industry, the integrity, and the prudence of our people find a fitting record in your progress. "I read the other day, or rather re-read, what was stated in a book written by a distinguished Frenchman about 30 years ago with respect to the United States in the twentieth century. He mentioned, as one of the qualities which had brought our people to their great degree of prosperity, their tireless energy. He suggested the fear that this energy might to some degree be lost, because the returns would not be as great with a settled country and after the development of natural resources. We have had 30 years and still the dominant quality in American life is tireless energy, and that quality you manifest perhaps as fully as it is exhibited in any undertaking.

“I like to think of the spirit of life insurance, for it is the spirit of achievement. "It is said that Americans work for money, that Americans work for fame. What they really work for is achievement, the satisfaction of accomplishment through wise use of ability.

"You have the spirit of achievement but you also have, and you are to be envied for having in your work the spirit of service, so that your tireless energy, your achievements count predominantly, not for yourselves, but for the America: people."

In passing it may be observed that no one has been able to locate any such statement, by Mr. Hughes or by the Armstrong committee, as that cited by Mr. Celler. In fact, it is interesting to note that the assets of each of the three largest companies in 1906 were in excess of $250,000,000; so the statement was probably never made at all by Mr. Hughes or the Armstrong committee.

II

A colloquy beginning on page 1050 and ending on page 1052 had to do with the list of superintendents of insurance of the States of New York and New · Jersey which the chairman said he had procured from the Library of Congress. This list referred to alleged subsequent insurance company affiliations of the! individuals who had held such offices. Mr. Lincoln would like to add a further statement at the bottom of page 1052, immediately after the following: "Mr. LINCOLN. I am going to put that in the record."

The additional statement reads:

"Mr. LINCOLN. The implication and statement by the chairman is utterly unwarranted by the facts. Since 1906 no commissioner of banking and insurance in New Jersey left that office to become associated with an insurance company. During the past 43 years there have been 12 superintendents of insurance (besides a few temporary appointees) in New York State. Investigation discloses that one became, for a few years, a vice president of a life-insurance company some time after retiring from the insurance superintendent's office, and two became associated with the management of an organization of casualty and surety companies when they left the State department. From this it is clear that, with these few exceptions, the insurance officials in New Jersey and New York who supervised insurance for many years back did not become affiliated with insurance companies when they left their official State positions."

III

At page 1044 there is a colloquy regarding the number of policyholders who are qualified to vote at an election of directors of the Metropolitan Life Insurance Co. In Mr. Lincoln's impromptu answer to the chairman, without having the elaborate provisions of section 198 of the New York insurance law before him, he did not give a complete description of the qualifications for such voting. In view of this, Mr. Lincoln would like to have incorporated at the bottom of page 1044, the following:

"Mr. LINCOLN. Each Metropolitan policyholder whose policy has been in force for 1 year at the date of election of directors is entitled to vote for the directors. The word 'policyholder' is specifically defined in the New York insurance law, and in the case of group insurance or group annuities, the policyholder is the employer or person in whose name the group policy is issued rather than the certificate holders. In the case of insurance which has been applied for on the life of a minor under age 15 by the parent, such parent is considered to be the

policyholder. The eligible policyholders include those insured under accident and health, as well as life-insurance policies."

As the chairman then asked how many can qualify for voting in elections for directors, there should also be incorporated the following answer:

"Mr. LINCOLN. About 26,000,000; it is estimated that there were about 29,000,000 Metropolitan policyholders on April 12, 1949, whose policies had been in force for 1 year or more. The number who were eligible to vote for directors at the last election would be less than 29,000,000 by the number representing persons who were insured before age 15 nearest birthday and whose parent, who ad applied for the insurance, was otherwise entitled to vote because of Metropolitan insurance on his own life. It is estimated that there are about 3,000,000 ases of this kind."

IV

A number of references were made by the chairman to supposed findings or onclusions of the Temporary National Economic Committee during the hearing of the Subcommittee on Monopoly Power on August 1, 1949. Some of these eferences follow:

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(a)" The CHAIRMAN (Mr. Celler). * * Now, have the TNEC findings that aterlocking directors exist or any subsequent information enabled you to arive at a clear understanding of the term 'interlocking directors?" (p. 1034, inutes).

(b) "The CHAIRMAN (Mr. Celler). Now, the TNEC made this conclusion, Mr. incoln, 'Indeed the relationship is so close-speaking of these allied corporalons where they have common directors—that it may be said that a single group f directors has a substantial voice in determining the policy of the two most owerful financial enterprises in the country, insurance and banking'" (p. 1040, inutes).

(e) "The CHAIRMAN (Mr. Celler). In that connection though the TNEC said hat-speaking of the insurance companies in general and not necessarily of ae Metropolitan-These companies are subject to control of a small group of elf-perpetuating directors who guide the policies of the companies, both in apital markets and elsewhere, and holding responsibility neither to the Governent nor policyholders. Four of the five largest mutual companies are governed y the New York State law,' and reference is made to TNEC Monograph No. 28, age 14, and then they go on to say: 'As a practical matter the election of directors f the companies is purely a formal gesture'" (p. 1045, minutes).

(d) The CHAIRMAN (Mr. Celler). Mr. Lincoln, in the TNEC investigation it eveloped-and this was after the reforms inaugurated by Chief Justice Hughesriticism was leveled at the Metropolitan Life Insurance Co. because it required t that time the names of 37,000 policyholders to put up an independent slate. hat is the testimony before the TNEC (p. 1048, minutes).

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"And that forced the TNEC to come to the conclusion that there could not be, or any practical purposes, an independent slate. Then, they went on to say he following with reference to the Metropolitan-if you will bear with me, and will just read a brief paragraph from the conclusions: The Metropolitan has dopted a unique procedure. Its effect is to stir up policyholder interest in the lection after it is certain that the administration ticket will be reelected' * *" (p. 1049, minutes).

The foregoing statements represent neither the findings nor the conclusions of he Temporary National Economic Committee, which may be found on pages 10. 41, 42, and 43 of the final report and recommendations of the Temporary National Economic Committee, Public Document No. 35. The statements reerred to by the chairman were made by investigators, members of a special secion of one of the Federal agencies, or witnesses produced by them. The life insurance companies were not allowed to challenge the accuracy of such statements by examining the investigators or witnesses, producing rebuttal witnesses on the stand to testify under oath, or even to have rebuttal material published in the same public documents which contain the foregoing statements. Yet, thousands of copies of these printed documents (not a part of the committee's report) were distributed throughout the country by Government agencies.

The Temporary National Economic Committee made it clear in the foreword of Monographs No. 2 and No. 28, which dealt with a study of legal reserve life insurance companies, that it was not responsible for the contents thereof. The following paragraph is taken from a foreword which appears in both and which is signed by the Honorable Joseph C. O'Mahoney, Chairman of the Temporary National Economic Committee:

"The status of the materials in this volume is precisely the same as that of other carefully prepared testimony when given by individual witnesses; it is information submitted for Committee deliberation. No matter what the official capacity of the witness or author may be, the publication of his testimony. report, or monograph by the Committee in no way signifies nor implies assent to, or approval of, any of the facts, opinions, or recommendations, nor acceptance thereof in whole or in part by the members of the Temporary National Economic Committee individually or collectively. Sole and undivided responsibility for every statement in such testimony, reports, or monographs rests entirely upon the respective authors."

"The CHAIRMAN (Mr. Celler).

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like to make a comment on State regulation, and I would like to go back to the TNEC, and I shall put into the record a statement with reference to the conclusions reached by the TNEC concerning the inadequacy of the regula tions in a number of the States.

"They drew attention, for example, that in a number of States there is an insufficient amount of appropriation so as to do an adequate job. In many instances, there is only a small skelton staff. In other instances, the superintendent of insurance not only holds that job, important as it is, but he holds many other jobs, and that his many chores make it impossible for him ade quately to regulate a number of the insurance companies that are located in the State or which do business in that State, and in general, they said-the TNEC recommendations-that the interests of the policyholders and the interests of the public were not properly conserved in many of these States" (pp. 1052, 1053, minutes).

This broad statement certainly is not supported by the facts. The conclusions of the TNEC fell into two groups, each of which was voted upon separately by the Committee. The first group of "recommendations which are respectfully made for the consideration of the several States * * *" contain those which Chairman Celler specifically referred to in discussing the adequacy of State supervision. It will be noted that none of these recommendations suggest that the life insurance companies throughout the country have failed to fulfill their contractual obligations to policyholders in good times and bad, or that policyholders are dissatisfied with the companies' services. Yet, Chairman Celler states that in general the TNEC found that "the interests of policyholders and the interests of the public were not properly conserved in many of these States." No such statement appears in this group of recommendations. Nor does such statement square, as we will see later, with public statements of the Honorable Joseph C. O'Mahoney, Chairman of the Temporary National Economie Committee.

Materis

There is nothing new about any of the first group of TNEC recommendations. They deal largely with State supervision and company operations. progress has been made over the years by the respective States and by the life insurance companies in many of these fields. The scope and effectiveness of State supervision of insurance has consistently increased and improved as insurance became more important in our economic life. Likewise, the manage ment of the life insurance companies has kept pace with the growing demandof the public by constantly broadening fields of service and increasing effective ness. There is no reason to assume that such progress will not continue in the future.

As local conditions naturally vary among the States the supervisory needs will also vary, and it follows that some of the TNEC recommendations necessarily have not, and will not, meet with favor in a number of States. It must be remembered that the members of State legislatures are close to their local constituents. It follows that these legislative members would be quick to act if policyholders interests were not properly conserved, or if the life insurance companies were not giving the service the policyholders desired. Under these circumstances some States may not see fit to incur expenses for supervision to the same degree as others, or to the extent that they consider such additional expense unnecessary in the light of local conditions.

The second group of recommendations which were approved by the TNEC relate to what the Committee said the Federal Government could do to strengthen State regulation "without interjecting the Federal Government into the general field of insurance regulation ***." Here the TNEC made four specific suggestions (three of which had to do with life insurance) which in its opinion,

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the Federal Government should adopt to offset the alleged handicaps resulting - from "* the interstate character of the life insurance business," and, "to prevent relaxation of regulatory standards in several States such as have - occurred in the past to the disadvantage of numerous policyholders, Generalizations of this broad character were obviously based on isolated cases, often some years old.

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The TNEC implemented the foregoing with specific recommendations for legislation which indicated more definitely what it had in mind. They included suggestions to prevent the sale of life insurance by companies not lawfully admitted to do business within a State, to enact certain changes in the Federal Bankruptcy Act, and to reiterate the highly fiduciary character of the work of life insurance officials, a fact which has not only been widely recognized by the States and the life insurance companies over the years but one which is fundamental to the success of their operating policies. The record of the institution of life insurance for safeguarding policyholders speaks for itself. It is ample proof of the sincere efforts of life insurance company officials to fulfill their trust faithfully and efficiently.

Apropos of the foregoing comments on the two groups of recommendations by the TNEC, the comments of the Honorable Joseph C. O'Mahoney, after all of the hearings by that Committee on life insurance were completed, were particularly significant. As Chairman of the TNEC Senator O'Mahoney was in a particularly good position to appraise the over-all findings of the Committee. For example, on October 10, 1940, the Honorable Joseph C. O'Mahoney, in an address before the American Life Convention in Chicago stated in part: "I am happy to compliment the life insurance institution of America. Life insurance is an American institution * *. On the whole, it is highly efficient and well managed. It may be regarded as a credit to American enterprise, and nothing that we developed indicated anything to the contrary. And so today, speaking as the Chairman of the TNEC, I am happy to be able to convey that message to this group of the Life Convention."

Previously newspapers throughout the United States carried stories of which the following editorial from a Lawrence, Mass., newspaper on March 2, 1940, is typical:

"It is very gratifying to find Senator O'Mahoney, chairman of the committee which has been investigating monopoly, giving the big insurance companies of the country a clean bill of health and a strong endorsement.

"In summarizing the investigation Senator O'Mahoney said: 'Nothing whatsoever was developed at the hearings to reflect upon the integrity and ability of the men who administer these huge organizations

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"The insurance companies play a big part in maintaining the financial balance of the country. They also are close to the present and future welfare of the great majority of individual families. We buy insurance for protection. That protection may be for the declining years of the holder or for the family after he or she has passed on. Insurance also covers a great variety of other risks. The statement from Washington makes no exceptions. It gives an unqualified endorsement of the management of the insurance companies that were investigated." On February 22, 1940, Senator O'Mahoney made the following statement before the United States Senate: "Let me say that the weeks of study which have been given to the institution of life insurance seem to me to contribute a testimonial to the efficiency and ability with which the companies have been operated and managed."

On February 29, 1940, Mr. Leon Henderson, in connection with the depression investment experience of the 26 largest life insurance companies, stated: "I think that it is an extraordinary record as far as the integrity of insurance assets are concerned."

The safety record of life insurance during the depression is solid testimony of the faithfulness and the efficiency with which the interests of policyholders have been protected. The over-all record of losses of assets, during the depression years of the thirties, of the legal reserve life insurance companies, proved to be less than one-half of 1 percent, and practically no loss was suffered by those policyholders whose policies were reinsured in another company. A number of factors were responsible for this record, and not the least important was the manner in which the life insurance companies were regulated by the respective States. In order to help one get a perspective of how the policyholders' interests are not only protected but how continual efforts are being made to improve services to them, there

follow certain excerpts from a brief which was submitted to the TNEC by 137 life-insurance companies (later increased to 178 companies):

SAFETY-THE RESULT OF SOUND SUPERVISION

"This record of safety is not a fortuitous circumstance. It is the result of the practical application of principles and methods of operation which have bee tested by a number of depressions and continually improved by private initiative and competition among life-insurance companies. Due credit also must be given to the several States for the way in which they have protected the public interest and encouraged sound life-insurance management.

"By the State legislatures.-The record of life insurance for safety is the cornerstone upon which the confidence of the American people in this institution is based. From the time of the adoption of the Constitution, insurance has been a matter exclusvely within the province of the respective States. As a life insurance contract is a local contract, our State insurance laws have been designed i to protect the public interest in the light of local conditions.

"Legislatures are alert for improvements and, year in and year out, are cortinually adjusting life insurance legislation to the economic and social needs of their respective localities. The various State legislatures and insurance commissioners act as checks and balances upon each other, particularly in connection with ill-advised insurance legislation or rulings. Furthermore, the States generally. are in position to observe experiments in a particular State before acting, and this tends toward fewer but sounder insurance laws.

"By the insurance commissioners.'--Every State has some insurance regulatory body whose function is to administer insurance laws in the public interest. These administrators, usually called insurance commissioners, have very real power through their authority to license or refuse to renew licenses to insuranes) companies, through their inquisitorial and investigatorial powers, their authority to publicize the results of the periodic examinations of the internal affairs of life-insurance companies by public auditors or examiners, and to request receiver ships for local companies.

"The commissioners act together through the National Association of Insurance Commissioners on matters of common interest. This organization serves as a clearinghouse for information, studies broad problems, and fosters uniform insurance legislation. The commissioners realize only too well that absolute uniformity is a vise which can restrict development, whereas uniformity in principle is flexible and permits of adjustment to local conditions in the respective States. To illustrate, the banks closed in 1933 and it was necessary to protect policyholders against runs upon the companies. The commissioners met and adopted principles dealing with moratoria. As a result, many of the States, upt the recommendations of their commissioners, adopted legislation which in principle conformed to the recommendations of the National Association of Insurance Commissioners. Other commissioners took no action, however, when local cond:-} tions in their States were of such a character that undue drains upon life-insur! ance reserves were not anticipated as a result of the bank holiday.

"In viewing the work of the commissioners, it should always be borne in min that the regulation of any one company is seldom exercised solely by one conmissioner, regardless of how efficient his department may be, but nearly always i by a substantial number of commissioners. As a result, most companies must operate under the supervision of a number of commissioners, each of whom has it mind the local situations in his particular State. This form of supervision has been one of the primary reasons for the success of the State supervisory system. "By private enterprise.-Probably one of the most salutary factors, ever present in helping to protect the public interest, is the competition which exists among life insurance companies. In a desire for public favor, agents are continually portraying to the public the advantages of their respective companies. When in compe tition, they are not slow to point out the strength of their companies. Day in and day out there is the continual education of the public by the agents on the im portance of safety in life insurance, and efforts by home office officials to find ways and means to improve further the safety structure of their respective companies."

1 For further information about some of the activities of the insurance commissioners see statement filed May 27, 1940, by 137 life insurance companies, for inclusion in the record of the Temporary National Economic Committee hearings.