Mr. LEE. The board may appoint a conservator or receiver where the business is conducted in an unauthorized, unlawful, or unsafe manner; another ground is if the institution is in an unsound or unsafe condition or has a management which is unsafe or unfit, or has persons in control or in a position to dominate it, who are unsafe or improper persons; if it cannot with safety and expediency continue in business; if it is impaired; if it is in imminent danger of becoming impaired; if it is pursuing a course which is jeopardizing or injurious to the interests of its members, creditors, or the public; if it has suspended payment of its obligations.

Senator TOWNSEND. Apparently that would give you the right to take charge of the institution if in your judgment you did not like the management or the persons who exercised the executive control and leadership of it?

Mr. LEE. No, sir; we have the right now to appoint a conservator or receiver.

Senator TOWNSEND. You have that right now?

Mr. LEE. Yes, sir.

Senator TOWNSEND. And this does not give you any additional power?

Mr. LEE. This does not give us the right to remove officers or directors; but if persons were in control who were improper to direct it, it would give us the right to appoint a conservator or a receiver, in order to protect or to preserve its assets or to liquidate it or to merge it or to consolidate it.

Under section 5 of the Home Owners' Loan Act the Board is authorized, under such rules and regulations as it may prescribe, to provide for the incorporation, operation, and regulation of associations to be known as Federal Savings and Loan Associations; and under 5 (d) the Board has full power to provide in the rules and regulations herein authorized for the reorganization, consolidation, merger, or liquidation of such associations, including the power to appoint a conservator or receiver.

The power is broad; and this gives merely the circumstances under which it might be exercised.

Under the present procedure, I think the Board could adopt regulations and include this in the regulations rather than to ask Congress to put it in the act.

Senator TOWNSEND. On page 13, lines 3 to 19, it permits the Board to legislate, as regards individual institutions, does it not?

Mr. LEE. What line is that?

Senator TOWNSEND. Page 13, lines 3 to 19, which reads as follows:

Provided, however, That the Board shall have power to make orders, rules, and regulations of general, limited, or special applicability, modifying, abrogating, restricting, or enlarging the rights, titles, powers, privileges, and duties herein otherwise provided for, or providing other rights, titles, powers, privileges, and duties, all or any one or more of which may be in addition to or in substitution for all or any one or more of the rights, titles, powers, privileges, and duties herein otherwise provided for. The provisions of this subsection (except the second sentence thereof) are, even as to the matters specifically dealt with in this subsection, cumulative and additional to, and not in limitation or derogation of, the powers now or hereafter otherwise vested in the Board, including without limitation those vested in it under section 26 of this Act and under subsection (d) of section 5 of the Home Owners' Loan Act of 1933, both as now or hereafter amended.

Mr. LEE. Under section 5 (d) the Board has full power to provide. regulations and to adopt rules and regulations with respect to a conservator and receiver. I do not believe that enlarges on the present language.

Senator TOWNSEND. You do not believe that is a special legislative power?

Mr. LEE. No, sir. That is merely with regard to our rules and regulations to enforce the act and the power derived under the act. Senator DANAHER. Mr. Fahey, when Mr. Eccles took this matter up before the House committee, he said this, in essence:

The proposed bill contains a number of far-reaching provisions, and in my opinion its enactment would tend to establish a separate and complete banking system which would compete on favored terms with savings banks and the savings departments of commercial banks.

Has that objective, as he then voiced it, been met in S. 4095?

Mr. FAHEY. We think so-fully, Senator. In the first place, I think Mr. Eccles did not have sufficient opportunity to study the measure as it was then proposed, or I do not think he would have gone quite so far in that statement.

The fact is that some of the people of the American Bankers Association and also of the National Association of Mutual Savings Banks did misunderstand and misinterpret some of the provisions of the bill of a year ago. Out of the hearings and out of subsequent discussions, I think their misapprehensions concerning some of these things were eliminated: not only that, but some of the original language of that measure conveyed an impression to him that we never intended at all and did not care anything about and were perfectly willing to eliminate.

Not only that, but their suggestion about limiting the bill was made because the original bill did not limit the right of the Secretary to purchase, in time of emergency. It was proposed by representatives of these interests or the other interests that some limitation be made there; and we do not have the slightest objection to that; there were other things of similar character; and as a result of their conferences of last year, as I have understood it, of the United States Building and Loan League, as represented by its officers and conference committee, and representatives of the American Bankers Association and the savings banks I think we have pretty much reached an agreement, and a good many of the former things have been eliminated. To the best of my knowledge, there is nothing here that would cause any disagreement.

Senator TOWNSEND. You feel, then, that there would be no objection from the American Bankers Association to the bill?

Mr. FAHEY. Not so far as I know.

Senator TOWNSEND. Do you feel there would be any objection from the Building and Loan organizations of the country?

Mr. FAHEY. No; they can speak for themselves. As I understand it, we checked all of this with them, and there seems to be no objection. Senator WAGNER. In connection with what you just asked, I was going to say that the American Bankers Association, through its representatives, has indicated to us that they did desire to present a statement to us.

Mr. FAHEY. This is new to me. Perhaps they intend to make specific reference to the tax exemption provision of the bill. That is

something that I do not know about. As it stands today, the dividends received by savers in Federal savings and loan associations are tax exempt. Now, it was proposed, and suggestion was made and criticism has been made, that that was an unfair discrimination in favor of that class of institutions, and that it ought to be removed or that the State-chartered association should be placed upon the same basis.

As the matter stands, the State-chartered associations are placed upon the same basis. My understanding is that there is objection to that.

Senator TOWNSEND. What is your judgment—that they should be placed on the same basis?

Mr. FAHEY. I think they ought to be on the basis of equality; that is my feeling.

Senator TOWNSEND. Well, that is my feeling: that all should be taxed or that none should be taxed.

Is that your feeling?

Mr. FAHEY. Yes.

Senator TOWNSEND. That is mine.

Mr. FAHEY. I am not informed as to any other objections, Senator. There may be some; I do not know.

Senator TOWNSEND. And you feel that, as the bill is now written, there is no objection from the Federal Reserve Board?

Mr. FAHEY. Not that I am aware of.

Senator TOWNSEND. Very well.

Mr. FAHEY. If there were, I am quite sure it would be under misapprehension; because there is no sound basis for it.

Senator WAGNER. I think the Federal Reserve Board desires to be heard. They do oppose certain features of this bill.

Mr. FAHEY. They do?

Senator WAGNER. Yes.

Mr. FAHEY. I did not know that.

Senator WAGNER. And the representatives of the American Bankers Association, I understood, want either to submit a memorandum or be heard in opposition to some features of the bill.

Is that correct?

Mr. NEEDHAM. Senator, Mr. Wiggins, who is chairman of our committee, will be here tomorrow, and I think he will prepare and have submitted to you a statement expressing the views of the American Bankers Association on this particular bill.

Senator BROWN. Mr. Fahey, I notice the provision removing the limitation as to amount, on page 34, and also removing the limitation as to the 50-mile limit. I realize that is merely a technical matter; but what is the reason for the change?

Mr. FAHEY. What line is that?

Senator BROWN. Perhaps I should say the bottom of page 33. You are removing the 50-mile limit-which is a limitation that loans shall not be made farther than 50 miles from the office involved. I presume that limitation was put in to localize this matter and to confine it to the immediate vicinity of the institution; and in section 8 you remove that 50-mile limitation.

Mr. LEE. That limitation does not now exist as to the first 15 percent, and it continues in this present bill, S. 4095, as to the second 15 percent.

Senator BROWN. I thought they limited it in regard to these larger loans.

Mr. LEE. That is correct. As to the first 15 percent, it is removed in the present act as in the existing law. The second 15 percent, which is provided in S. 4095, must be within the 50-mile limit and the $50,000 limit.

Senator BROWN. I think it is a rather sound policy to stick to the 50-mile limit in regard to real-estate loans; and I should like to know why you eliminate it.

Mr. LEE. They have not eliminated it. The 50-mile limit does not apply to the first 15 percent. That is true of the 15 percent provision in the present law and also of the first 15 percent provision in the bill now before us. The second 15 percent is subject to the 50-mile limit.

Senator BROWN. Then this makes no change whatever?

Mr. LEE. No change in the 50-mile limit.

Senator BROWN. I see.

I wanted to inquire about the reduction in premium rates. Do we have a statement of the operations of the Insurance Corporation, which justifies the proposed reduction? I think that ought to be put in the record.

Mr. FAHEY. Would you like to look at it now?

Senator BROWN. No; I just thought it ought to go in the record. Mr. FAHEY. All right; we will take it out of the book and submit it for the record.

(Financial statement of Federal Savings and Loan Insurance Corporation, Washington, D. C., at the close of business May 31, 1940, is as follows:)

Financial statement, Federal Savings and Loan Insurance Corporation, Washington, D. C., at the close of business May 31, 1940

[Prepared in the office of the Treasurer June 7, 1940]

Cash in United States Treasury:

Special deposit account_

ASSETS

Disbursing account for administrative expenses, 1939.
Disbursing account for administrative expenses, 1940..

Accounts receivable:

Insurance premiums due

Insurance premiums deferred.

$351, 253. 70

1, 832. 00

21, 260. 81

374, 346. 51

24, 628. 84

699, 514. 57

724, 143. 41

Investments:

U. S. Government securities and securities wholly guaran-
teed by the United States__

Unamortized premium and discount on investments_

Accrued interest: On investments_

Deferred charges: Prepaid expense, Federal Home Loan Bank
Board ---

Other assets: Subrogated shares in insured associations__

Total assets__

122, 311, 500. 00 370, 708. 46

122, 682, 208. 46 406, 855. 36

10, 421. 00 189, 705. 84

124, 387, 680. 58

Financial statement, Federal Savings and Loan Insurance Corporation, Washington, D. C., at the close of business May 31, 1940—Continued

Special reserve for contingencies--

$330. 50

1, 250, 471. 91

100, 000, 000. 00

$6, 289, 698. 81

537, 471. 73

Unallocated income per statement (July 1, 1939, to May 31,

1940)

5, 752, 227. 08 14, 750, 000. 00

2, 634, 651. 09

Total liabilities and capital___

123, 136, 878. 17

124, 387, 680. 58

NOTE. A contingent liability of $323,756.46 exists due to tentative commitments to insured associations.

Senator BROWN. Is there any general average that you can give us as to the rates charged by the building and loan associations that are under your jurisdiction, interstate?

Mr. FAHEY. Yes. Those rates vary, depending largely upon local circumstances. They range all the way from 4 and 41⁄2 up to 61⁄2 and, in some instances, as much as 7 percent.

Senator BROWN. Do you exercise any limitation upon those rates? Mr. FAHEY. Nothing except persuasion. We have no power to fix the rates.

I might say in that connection that the general run of rates on the community basis is about the same on all classes of institutions. There is not much difference between them.

Senator BROWN. I was going back to this insurance rate. What is the rate that these institutions pay to their depositors?

Mr. FAHEY. In dividends?

Senator BROWN. Yes.

Mr. FAHEY. All the way from 2 to 4 percent. There has been a general trend downward, just as there has been in the rates on mortgage loans.

Senator TOWNSEND. What percent of them pay 4 percent? Do you have any idea?

Mr. FAHEY. Comparatively few, now. That has been coming down right along.

Senator BROWN. Would you say it would average 3 percent, Mr. Fahey?

Mr. FAHEY. I would hesitate to make a guess as to what that average would be, Senator; because in the larger cities, where money is abundant, of course it has been going steadily down to 2 and 21⁄2 percent. Over the country generally, the people paying 4 percent are now quite the exception. Three and 31⁄2 percent is about the general

run.

Senator BROWN. Then in your judgment it would average 3 percent or better?

Mr. FAHEY. I should think, offhand, that it would average 3 per

cent.