minds of many people. We think it is an important step to attempt this experiment. Therefore, as one of the limitations during the testing of it, and its applicability to meet the problem, it was a limitation which we decided to put upon the program at this time.

We are confident, on the basis of all the information we have, that it will develop into a satisfactory program, but it was one of the limitations we decided to place upon it during the experimental stage. Senator LEHMAN. Thank you.

Senator SPARKMAN. May I ask a question relating to the last sentence on page 5 (reading):

Mortgage financing is also available for single-family homes built for sale in amounts not to exceed 85 percent of value, to assist in the construction and provide financing pending subsequent sale to a qualified owner-occupant.

Does that mean the financing goes to the builder, to assist him in building?

Mr. HOLLYDAY. Yes, sir.

Senator SPARKMAN. And that has no effect upon the eventual mortgage?

Mr. HOLLYDAY. No, sir. That was to try and bring the builder into the picture, with the hope that that type of financing would help create the houses for people who could purchase.

Senator SPARKMAN. Purely temporary financing, to aid in building and to carry until a sale?

Mr. HOLLYDAY. Yes, until the purchase.

The CHAIRMAN. A man could rent it for 10 or 20 years, couldn't he? Mr. HOLLYDAY. That would depend upon the terms made by the builder. I would assume the objective is to get the man who is displaced to go in and take the house that is built by the builder, and occupy it, with the hope of being able to own it within a reasonable period of time.

Senator SPARKMAN. What I mean is that that loan goes to the builder, rather than to the eventual owner of the property?

Mr. HOLLYDAY. Yes, it is an endeavor to stimulate his interest, if possible.

The CHAIRMAN. What do you say we recess until 10:30 tomorrow morning. It is after 4 o'clock now. Has anyone any objection to our standing in recess until 10:30 tomorrow morning, at which time we will meet in our regular committee room in the Senate Office Building? Then we will meet at 10:30 tomorrow morning in the regular committee room.

Thank you very much, gentlemen.

(Whereupon, at 4:05 p. m., the committee recessed, to reconvene at: 10:30 a. m., Wednesday, March 10, 1954.)

HOUSING ACT OF 1954

WEDNESDAY, MARCH 10, 1954

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met, pursuant to recess, in room 301, Senate Office Building, at 10:30 a. m., Senator Wallace F. Bennett presiding. Present: Senators Bricker, Ives, Bennett, Bush, Payne, Goldwater, Maybank, Robertson, Sparkman, and Douglas.

Senator BENNETT. The hearing will come to order, and, Mr. Cole, you may proceed on any basis that you wish.

STATEMENT OF ALBERT M. COLE, ADMINISTRATOR, ACCOMPANIED BY B. T. FITZPATRICK, DEPUTY ADMINISTRATOR AND GENERAL COUNCIL, HOUSING AND HOME FINANCE AGENCY; GUY T. 0. HOLLYDAY, ADMINISTRATOR, AND ALLAN T. THORNTON, DIRECTOR, RESEARCH AND STATISTICS DIVISION, FEDERAL HOUSING ADMINISTRATION; WALTER W. MCALLISTER, CHAIRMAN, AND WADE HARRISON, GENERAL COUNSEL, HOME LOAN BANK BOARD; CHARLES SLUSSER, COMMISSIONER, AND LAWRENCE BLOOMBERG, ECONOMIST, PUBLIC HOUSING ADMINISTRATION; AND J. STANLEY BAUGHMAN, PRESIDENT, AND ROBERT N. REID, GENERAL COUNSEL, FEDERAL NATIONAL MORTGAGE ASSOCIATION

Mr. COLE. Thank you, Mr. Chairman.

If satisfactory with the committee, we would prefer to begin now with the testimony with respect to the appointment of conservators and receivers for Federal savings and loan associations. That begins on page 38 of my statement.

Senator BENNETT. Are you going to continue to make the statement personally?

Mr. COLE. Yes, sir.

Senator BENNETT. You may begin.

Will you identify the gentlemen who are at the table with you? Mr. COLE. Yes. To my left is Mr. Walter McAllister, Chairman of the Home Loan Bank Board; and to his left, Mr. Wade Harrison, General Counsel, Home Loan Bank Board; and to my right, Mr. Fitzpatrick, Deputy Administrator and General Counsel, HHFA.

The Home Loan Bank Board has been conferring with managers and representatives of Federal savings and loan associations for a number of years on various legislative proposals governing the en

forcement of the Board's supervisory authority and its powers with respect to the appointment of conservators and receivers for these associations. Under broad statutory powers, the provisions for the appointment of conservators and receivers have always been incorporated in the regulations for the Federal savings and loan system. Because such regulations can be changed from time to time by the Board, representatives of the institutions supervised by the Board have felt it desirable that the provisions should be clearly set out in the statutes as they are in the National Banking Act, the Federal Reserve Act, the Federal Deposit Insurance Act, and in the statutes in most of the States.

The bill would give the Board the authority needed to protect the welfare of Federal associations and their members, and at the same time provide more orderly procedures for the exercise of the supervisory powers of the Board. It is my understanding that these provisions of the bill are satisfactory to the representatives of the savings and loan industry, as well as to the Board.

Presently, the Board has rather broad powers with respect to the appointment of conservators and receivers. However, even under these broad powers, the Board presently has no means, except through the appointment of a conservator or receiver, to enforce the laws and regulations under which Federal savings and loan associations operate. The bill would, therefore, provide a method for the enforcement of law and regulations without the necessity of the appointment of a conservator or receiver, and would also establish standards and procedures for the appointment of conservators and receivers.

It provides that, in the event of a violation of law or regulation, the Board will give the Federal association concerned, notice of such violation, and 30 days in which to correct the same. At any time during the 30 days, either the Board or the association is given the right to apply to the United States district court for a declaratory judgment, an injunction, or other relief. If, after 30 days, the violation has not been corrected, the Board will give the association 20 days' notice of the time and place of a hearing which will be held in the judicial district where the association is located, unless the association consents to another place.

After hearing and adjudication by the Board, the right of appeal is given as is provided by the Administrative Procedures Act, and court review is upon the weight of the evidence. The Board is specifically given the access to the courts for the enforcement of its adjudication and orders.

The bill also provides standards and procedures for the appointment by the Board of a conservator or receiver, and gives the Board exclusive jurisdiction to make such an appointment. The grounds for such appointment are: (1) Insolvency; (2) violation of law or regulations: (3) concealment of books, records, or assets; and (4) unsafe and unsound operation.

The bill provides that a conservator or receiver shall not be appointed until after notice and an opportunity for an administrative hearing held in accordance with the provisions of the Administrative Procedures Act, that such appointment shall be subject to court review as provided in the Administrative Procedures Act, and that such review shall be upon the weight of the evidence.

However, the bill further provides that, if the Board determines that an emergency exists requiring immediate action, the Board may, without notice and hearing, appoint a supervisory representative in charge who shall have all the powers of a conservator or receiver. Such a supervisory representative may hold office for not more than 6 months, or until a conservator or receiver is appointed and takes charge, or until 30 days after the final proceedings of a hearing, or until 60 days after final termination of any litigation affecting such temporary appointment, whichever is longest.

In my judgment, these provisions of the bill retain in the Board the authority and power needed for the proper discharge of its responsibilities, and, at the same time, give adequate protection to the institutions supervised.

I believe this represents a fine example of the results of industry and Government working together to develop a constructive solution to a particularly vexing problem. I think Mr. McAllister, the Chairman of the Home Loan Bank Board, who is here with me, and who will be glad to answer any questions you gentlemen may have, is to be congratulated for his work in connection with this matter. Senator BENNETT. Do you wish to stop at that point?

Mr. COLE. Yes, sir.

Senator BENNETT. Are there any questions, Senator Maybank? Senator MAYBANK. No.

Senator BENNETT. Senator Sparkman.

Senator SPARKMAN. No, sir.

Senator BENNETT. Senator Bush.

Senator BUSH. How have you been handling this question at the present time, and in the past, respecting the emergency requiring the appointment of a conservator?

Mr. COLE. I would like to have Mr. McAllister answer that.

Senator BUSH. Yes. How does it work today? How did it work last year, et cetera?

Mr. MCALLISTER. We endeavor to get the institutions to comply. In the event the institution does not comply, we will say it is entirely solvent; our only recourse is to take charge and put in a conservator. It seems utterly ridiculous to put a solvent institution in the hands. of a conservator.

Senator BUSH. You have influence over that?

Mr. MCALLISTER. I think we could use considerable influence as far as that goes. I don't know to what extent our general counsel would say we are strictly on safe grounds.

Senator BUSH. This would seem like a real improvement in the situation; this formalizes the machinery, and there can't be any possible question about your authority, then. Is that the purpose of the bill?

Mr. MCALLISTER. That is one of the purposes. The other purpose is to protect the institution and management from the capricious and arbitrary acts of the Board. If the Board were to simply make up its mind it wanted to take a certain action with regard to an institution, they could cause that institution and management considerable embarrassment, if not loss and cessation of business.

Here, reasonable grounds are determined, and under what conditions we would proceed and the institution is given fair protection.