the bank going; and those efforts indirectly will benefit the deposits of over $5,000. But I did not follow you very closely in respect to how the amounts over $5,000 are going to be paid. Mr. BODFISH. As I understand it-and I do not criticize it at all, because I think the F. D. I. C. has done one of the outstanding jobs of the last 10 years-the F. D. I. C. segregates the good assets, either opens a new bank with the good segregated assets or sells the assets to another bank. The liquidation is completed rapidly by the loan on the poor or remaining segregated assets sufficient to pay off the deposit liability; and the resulting settlement is practically a 100 percent pay-off of depositors. The minute they make a loan equivalent to the segregated assets or the book value, they have in reality taken their loss, in the failure of that segregated collateral to pay off the loan entirely; and it amounts to practically a 100-percent guaranty. I see Judge Birdzell there. I do not mean to represent or to misrepresent his procedure. I think they are doing a great job. Is that a reasonable statement or an approximately correct statement, Judge Birdzell? Mr. BIRZDELL. I did not hear all of your statement. Mr. BODFISH. I see. I should like to deal for a moment, if I may, with section 14, which rewrites the settlement section, in case an institution has been closed, as insolvent, and is being liquidated by State or Federal authorities. It does not alter in any way the contracts or relationships between savers and investors in a savings and loan association which is a going concern and in which savers may be required to wait an extended period for their funds if the institution is solvent. The reason the change was developed or proposed for change is that there was circulated in some communities the statement that the provision does not protect the saver against loss. I should like to deal with that a little later; because Mr. Eccles made a substantial point of it, and in the latter part of my statement I am going to deal with it at greater length. As I say, it does answer the unfair allegation circulated by certain banking competitors to the effect that the insurance of accounts does not really protect the saver against loss. It seems to us to be proper public policy to promptly pay off small investors in closed and insolvent institutions. This change does not increase the costs or liabilities of the Insurance Corporation. Section 16 provides that State-chartered institutions may withdraw from the Insurance Corporation on a reasonable 2-year basis, and an orderly procedure is provided designed to protect investors and the insurance funds. This 2-year period is similar to that of the F. D. I. C. The other sections dealing with amending the insurance of accounts statutes are largely technical and, along with other sections of the bill, have our approval, although the above-mentioned sections are of first importance, from point of view of the savings and loan business. The principal opposition to this legislation before the House Banking and Currency Committee came from the representatives of the American Bankers Association. Since then the accredited representatives of the banking and the savings and loan group have conferred and agreed upon certain amendments and, as Mr. Wiggins, speaking on behalf of the American Bankers Association, indicated to this com mittee, every amendment agreed upon by the two business groups is embodied in S. 4095 and, therefore, the American Bankers Association presents no objection to its enactment at this time. We believe that all differences of opinion by those directly interested and concerned in the legislation has been resolved. We understand that the State authorities charged with the supervision of savings, building and loan associations, and the certified public accountants group favor the enactment of the bill, although they desire to make a suggestion regarding section 5 (b), which contains the House amendment by Congressman Spence in regard to minimizing duplicate expenses and inconvenience in connection with. the examination and auditing of State-chartered insured institutions. The opposition arising from the Federal Reserve Board will be treated in the second part of this statement. Again, I believe that all who have a direct interest or concern in this legislation are in reasonable agreement. The attention of the subcommittee was called to language in section 4, page 13, lines 3 to 11, amending the Federal Home Loan Bank Act, by Senators Townsend and Danaher and the American Bankers Association. We would like to ask your committee to clearly confine the operation of these broad powers to conservatorships and receiverships, which we understand to be the intention of the Board and its draftsmen. If this language is of broad applicability, we would object strongly to a grant of power by Congress to the Board to make orders, rules, and regulations of limited or special applicability, and we would object to a grant of power by Congress to the Board to modify or abrogate present law and to enlarge these powers without limit, as regards the 4,000 State-chartered savings and loan associations, mutual savings banks and insurance companies, and Federally chartered associations, all of whom are members of the Federal Home Loan Bank System. To give the committee in summary the number and resources of the institutions directly affected by the Federal Home Loan Bank System and the Federal Savings and Loan Insurance Corporation, the following information is respectfully submitted: The 12 Federal Home Loan Banks have 3,912 members, with assets of approximately $5,000,000,000, which is employed almost entirely in the financing of housing and predominately small homes: There are 1,404 Federal savings and loan associations, with resources approaching $2,000,000,000, which are similar to cooperative banks and building and loan associations, although operating under Federal charter, just as many commercial banks operate with national charters. There are 2,218 institutions, with assets approaching $3,000,000,000, whose accounts are insured up to $5,000 by the Federal Savings and Loan Insurance Corporation. It is with these relatively small businesses, located in thousands of communities, that S. 4095 deals. Over 50 percent of the institutions are in cities with less than 25,000 population. These local community institutions are financing considerably more home construction than any other type of institution or agency. They will be substantially benefited by and assisted and encouraged by the enactment of S. 4095, with such refinements and improvements as members of the Senate Banking and Currency Committee decide upon. Attached as table I is a summary of the number of associations, total membership and total assets of savings and loan associations by States, from the report of the Comptroller of the Currency, and also the memorandum of agreement of the representatives of the American Bankers Association and the United States Savings and Loan League, dated December 6, 1939. Senator BROWN (presiding). They may be received. (Table I, summary of number of associations, membership, and total assets, is as follows:) Amount of assets TABLE I.—Summary table of number of associations, total membership, and total assets of savings, building and loan associations, by States, 1938 Federal Total 44, 497, 989 Increase or $271, 957 639, 004 3,886, 518 989, 118 1 35, 836, 539 10, 622, 432 631, 344 1 4,084, 254 10, 419, 725 27, 202, 037 2, 190, 271 |