by our Constitution and laws. We believe that the existing act and regulations raise the threat that the mere desire for information will tend to become the equivalent of the legitimate need to know. We are convinced the respect for privacy and assurance of confidentiality are essential to the reputation of any bank with its customers.

The very existence of detailed financial records creates a temptation to look at them. But, individuals' financial records must not be available for speculative exploration or fishing expeditions.

Among our members, there are thousands of smaller banks that receive demands for access to their records from large and powerful law enforcement agencies. Those records contain detailed financial information on most of the adults in this country, and they should be held in confidence. The nature of the banking industry should be considered carefully in any action that may be taken, and realistic guidelines provided to spell out clearly the procedures that must be followed by law enforcement agencies in seeking access to the records of bank customers.

Both measures being considered by the subcommittee today are obviously designed and intended to protect an individual's banking privacy. They would do so by imposing legislative safeguards against unwarranted dissemination of information by financial institutions to agencies of the U.S. Government under Public Law 91-508 and the implementing regulations issued thereunder by the Secretary of the Treasury.

However, both of these bills may raise some questions of construction in relation to other laws which require further study. For example, it is far from clear what effect either of these bills would have on the carefully drafted procedures in the Internal Revenue Code for examining the records of banks relating to the transactions of taxpayers being investigated.

Moreover, we would call to the committee's attention the fact that the prohibition on providing information to other persons, not Government agencies, may be so limited as to impede the proper carrying on of ordinary business. For instance, in S. 3814, authority is given to make records available to a surviving spouse or relative of a deceased account holder, while no authorization is provided for supplying such information to a guardian or committee for an incompetent or minor account holder or for the executor or administrator of a deceased account holder if the executor or administrator is not a suviving spouse or relative.

The prohibition on disclosure in S. 3828 is even more restrictive, requiring either specific consent from the customer or a court order. Guestions might be raised under this limited authorization as to the supplying of information to bank service corporations, correspondent banks, or other data processing organizations preparing checking account statements and other information for bank customers.

In view of the existing controversy now surrounding both the act and regulations, bank customers and the public, as well as the banking industry, need clarification of the rules of availability of banking records and information.

The Congress has expressed its understanding and concern over the right-to-privacy problem. Government officials have stated that neither

the act nor the Treasury regulations alter the procedures which law enforcement agencies should follow in order to gain access to bank records, and that access to inspect bank records will still require an administrative summons or judicial subpena.

Still, the fact is that such limitation is not expressly stated in the act, except as to foreign transactions in section 241(b).

Accordingly, in light of recently initiated judicial proceedings in California and the District of Columbia, we believe that additional positive legislation is needed to assure the public that their bank records will not be available to Government agencies except under proper safeguards.

This could be accomplished by extending the language of present 241 (b) to all provisions of Public Law 91-508 as follows:

No person required to maintain records under Titles I through IV of this Act shall be required to produce or otherwise disclose the contents of the records except in compliance with a subpoena or summons duly authorized and issued or as may otherwise be required by law.

Senator PROXMIRE. Thank you, very much, Mr. Morthland. I think this is an extremely well-balanced and thoughtful statement. I think your suggestion requiring a subpena is one I can enthusiastically support.

As a matter of fact, we thought we were doing that. We put that into the report, but it has not been honored, at least as I think it should be.

I have just a few questions to ask. First, the Treasury and Justice Departments have argued that the enactment of either bill before the subcommittee would cripple law enforcement activities. In view of the attitude taken by the administration, do you support the enactment of either bill as written? Have yau had a chance to study them?

Mr. MORTHLAND. Yes, Senator; we have had a chance to study the bills. The provisions of these bills, while they relate to bank records, parallel a number of other statutes relating to the availability of other types of information. I believe it would be our position that adoption of something similar to section 241 (b) would be a desirable and useful stopgap, but that before the statutes relating generally to bank information are amended, the procedures followed with respect to many other types of administrative summons and subpena and the availability of information therein should be studied and correlated.

I believe it was Senator Tunney who quoted the Library of Congress as telling him there were approximately 100 types of administrative summonses and subpenas currently being utilized by the various Government agencies.

Senator PROXMIRE. Would you favor a statutory requirement that banks and other financial institutions are not to release any information required to be kept by title I unless by subpena or other legal process? You seem to be saying that in your last statement; is that correct?

Mr. MORTHLAND. Yes, Senator: that is correct. In view of the existing controversy now surrounding both the act and regulations as reflected by the recently initiated judicial proceedings in California and the District of Columbia, we believe that additional positive legislation is needed. It is needed to both clarify the rules of availability of

banking records and information and to assure the public that their bank records will not be available to Government agencies except under proper legal safeguards. It is with this in mind that we have recommended the extension of the language in section 241 (b) to all provisions of titles I through IV of Public Law 91-508.

Senator PROXMIRE. Do you believe the regulations issued by the Treasury to implement this law will be excessively costly to the banking industry?

Mr. MORTHLAND. I do not believe they will be excessively costly to most parts of the banking industry. Although I am aware that prior to the passage of Public Law 91-508 some banks did discontinue maintaining some records because of the cost under their own analysis, for most of the banks in the country, I do not think it will increase their costs of operations above the point that they ought to be asked to incur as good citizens of the country.

Senator PROXMIRE. Can you tell us what the practice has been in most commercial banks in the past? Have they cooperated with law enforcement agencies by making customers' accounts information available without subpena?

Mr. MORTHLAND While I cannot address myself to what the policy or practice is in all 14,000 banks throughout the country, I can tell you that in our own particular bank the policy is not to disclose any information without presentation of a subpena or other evidence or comparable legal process.

Senator PROXMIRE. Of course, you are speaking for the American Bankers Association and I thought perhaps you might have a feel for it.

Mr. MORTHLAND. Senator, while I have nothing on which to substantiate it, it is my impression that most banks are fairly careful about making records available. And, I might add, that if we do not observe proper legal processes, we may have liability for improper disclosure of information.

Senator PROXMIRE. I just have one other question.

Last Friday, the Justice Department opposed the statutory requirement which would prohibit banks from disclosing bank records to law enforcement agencies unless pursuant to subpena.

Now, Justice argued that bankers were responsible officials and could be trusted to act with responsibility and discretion.

Would you agree that deciding whether to release information without a subpena is a proper function for bank officials to perform, or should Congress prohibit the practice?

Mr. MORTHLAND. Senator, although I personally have not been faced with a situation in which I have felt justified in releasing information without a summons or other legal process. While I believe the bank officers are responsible and can be, and, in fact have to be, trusted to act with discretion and in a responsible manner, I still believe that realistic guidelines should be given them to spell out clearly to whom and under what legal procedures they are to grant access to the records of their customers.

Senator PROXMIRE. You see what I am getting at is a little different than that. It is whether or not a banker with all of the recognition of his good judgment and so forth should be put into the position of making what seems to me a judicial decision. This is a decision that I would think is so fraught with rights and liberties and so on, and social

content and also perhaps the crminal implications involved, that a judge should make these decisions rather than a banker. That is why I am wondering-I am trying to reinforce or understand more thoroughly your final recommendation, which I think is a very helpful and useful recommendation, and I take it that you feel that you can make judgments yourself; but applying it generally in the banking industry, would you, or would you not feel this is something that should not be expected of a banker and we should rely on the courts? Mr. MORTHLAND. I would prefer to have specific guidelines and be required to release information only under those guidelines. Is that a direct response, sir?

Senator PROXMIRE. I am not sure what you mean by guidelines. Mr. MORTHLAND. Legal processes, or administrative summons, subpena or other comparable legal process.

Senator PROXMIRE. Administrative subpena?

Mr. MORTHLAND. Yes, if properly signed in accordance with statute. Senator PROXMIRE. Do you think all banks should be required to follow that procedure of notifying the customers before they disclose this kind of information?

Mr. MORTHLAND. Senator, in the case of our bank, we do it as a matter of policy. However, if such notification is to be reformed, we think this requirement should be improved on the agency seeking the information and not on the banks.

Senator PROXMIRE. You go a little further. You not only respond to a subpena, but you would feel compelled to notify the customer, if you could reach him.

Mr. MORTHLAND. We now do it as a matter of policy.

Senator PROXMIRE. Why should not all banks do it?

Mr. MORTHLAND. As a matter of policy, I personally think all should. Senator PROXMIRE. Why should not they be required to do it by law?

Mr. MORTHLAND. In many cases it is extremely difficult if not impossible to locate a customer. Accordingly, I believe it would be unfair to require the bank to notify its customer that a particular government agency was seeking access to his bank records. This is a burden and responsibility that should more rightly be placed on the agency seeking the information-not the bank.

(Charles R. McNeill, executive director of the American Bankers Association wrote a letter to Senator Proxmire commenting on the views of the Justice Department. The letter is printed at page 131 of this publication.)

Senator PROXMIRE. I am going to have to leave.

Senator Sparkman, I believe, can stay a few minutes, and Senator Tunney can stay a little longer.

Senator SPARK MAN. Should we risk it with him? He is the author of one of these bills.

Senator PROXMIRE. There is no way in which our prejudices can be better reinforced than assuming the chairmanship of a committee that is considering a bill you are pushing. I am sure we can.

Senator TUNNEY. As a member of the Judiciary Committee, I will be judicious.

Senator SPARKMAN. I want to remind you that Dr. Morthland in his statement said his bank did it as a matter of course, but he thought if notice was compelled, it should be by the agency seeking the infor

mation rather than the bank, I doubt very seriously that we could do that. We cannot direct them to do it.

Senator Tunney's Judiciary Committee could.

Senator SPARKMAN. I think you have given us a good statement, and I commend you on it. I, too, am impressed with the recommendation you make. I am speaking of the amendment that you suggest.

Senator SPARKMAN, Miss Eastman, who appeared before you, has in her prepared statement some statistics. It seems that her organization wrote to every bank asking what they did about giving notice and so forth, and according to her report, only a relatively small number repbed, and an even smaller number did anything about giving Notice to their depositors

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