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Section 20 is identical with section 14 of the Senate bill, and gives the free use of the mails to the Federal Savings and Loan Insurance Corporation.

Section 21 is the same as section 15 in the Senate bill, with the exception of payment of dividends in an insured corporation, if any losses are chargeable to reserves, the original bill providing that that might be done if the association would get permission from the Board at Washington. Some of us believe that that is impracticable, and that sufficient power and authority exists in the Board to prevent the abuse of it under other sections of the act, which I am going to ask Mr. Bodfish to discuss more in detail.

Section 22 is identical with section 16 of the Senate bill, and affects the premium paid by individual institutions for the insurance of shares. We are very much in favor of that section, because we believe that the reduction of the premium will enable the solvent institutions of the country to come in and get the advantage of this insurance system.

Senator TOWNSEND. This amendment does not reduce it, does it? It does not say it is reduced ?

Mr. FRIEDLANDER. It reduces the premium which is now provided. No; that is section 22. I am reading ahead. I beg your pardon. That is section 23. Section 22 merely corrects an error in previous legislation.

Section 23 is the premium section, which reduces the amount from one-fourth to one-eighth.

Section 24 is a new section which the United States League recommended to the House committee, a change in the language with reference to the disposition of the assets of an institution in default. We do not believe that there is any objection to that change of language on the part of the Board. Under the present language the Board itself felt it necessary to clarify it by regulation, so that the investors of these institutions, in amounts above $5,000-as you recall, the insurance act limits the insurance to $5,000—will not be subjected to having the Corporation become a preferred creditor. The Corporation merely steps in and becomes subrogated to the rights of the shareholder, whom they insure, and this changes that language.

Section 25 is identical with section 18 of the Senate bill. I believe there is a slight change in that which I noticed in going over it. However, we are not particularly interested in it. Mr. Russell and Mr. Fahey will probably go into it with the committee.

Section 26 is identical with section 19 of the Senate bill. It affects the National Housing Act, and permits insurance of loans up to $50,000 on hotels, apartment houses, hospitals, and so forth, and does not concern building and loan associations.

Section 27 is identical with section 20 of the Senate bill, reducing the minimum capital of national mortgage associations from $5,000,000 to $2,000,000, with which we are not concerned.

Section 28 is identical with section 21 of the Senate bill. It raises the bonding capacity of national mortgage associations, with which we are not concerned.

Section 29 is a new section, with which we are not concerned. I think, Mr. Chairman, that that completes a rather hasty account of our position. There are some few matters of importance there that represent a conflict between the Senate bill and the House bill that I would like to have Mr. Bodfish, our executive vice president, go into with the committee in more detail, if you have the time.

Senator BULKLEY. More detail about what?

Mr. FRIEDLANDER. There are two or three of these items which are in conflict as between the Senate and the House bill.

Senator BULKLEY. I think, if Mr. Bodfish has some suggestions to make, we had better hear him at this time. Is that all you wanted to say, Mr. Friedlander?

Mr. FRIEDLANDER. That is all I care to say. We are very favorable to the legislation. Thank you very much for the courtesy of the hearing

STATEMENT OF MORTON BODFISH, EXECUTIVE VICE PRESIDENT

UNITED STATES BUILDING AND LOAN LEAGUE

Mr. BODFISH. Mr. Chairman and gentleman of the committee, my name is Morton Bodfish. I am executive vice president of the United States Building and Loan League, and was a member of the original Federal Home Loan Bank Board.

In the interest of your record, Mr. Chairman, I wonder if it might not be worth while to include in your record the petition which we presented before the House committee, which was addressed to both the original House bill and the original Senate bill, and which makes a matter of record our suggestions, at least, on the original legislation. It is only 8 or 9 pages in length, and it would put in your Senate hearings the exact proposals we made with regard to the bill as originally introduced. If it meets with your approval I would like to have that in the record.

Senator BULKLEY. Very well.

(The statement referred to will be found at the conclusion of Mr. Bodfish's statement.)

Mr. BODFISH. I also have—which I think would be helpful to the record-the latest tabulation of the number and distribution of the building and loan associations throughout the country. It is a simple little table, and the Senators often ask questions about it.

Senator BULKLEY. Yes; I think that should be in the record.

(The tabulation referred to will be found at the conclusion of Mr. Bodfish's statement.)

Mr. BODFISH. I have put in memorandum form an analysis of H. R. 6021 in relation to S. 1771, which I think would be helpful to you in your study of the bill. They interrelate all the sections, ind that sort of thing.

(Mr. Bodfish submitted the following matter for printing in the record :) To: Senate Banking and Currency Committee, Subcommittee on Home Loan

Banks and Related Matters, Hon. Robert J. Bulkley, chairman. Memorandum Re: H. R. 6021, Passed by House of Representatives March 12,

1935. In the Senate of the United States March 13, 1935. From : United States Building and Loan League, 104 South Michigan Ave.,

Chicago, Ill., Morton Bodfish, executive vice president.

PRELIMINARY STATEMENT

The executive committee of our national organization, meeting in Washington, February 25, 1935, gave its unqualified approval to H. R. 6021, as reported

by the House Banking and Currency Committee. Several additional matters were treated by amendment in the House, relating to Home Owners' Loan Corporation, which are not germane or important to our thrift and homefinancing activities. More reasonable withdrawal privileges from the Federal Savings and Loan Insurance Corporation are proposed in our petition re S. 1771 and we would like to see a proper amendment to H. R. 6021, if it is reported instead of an amended S. 1771.

H. R. 6021 contains the most important recommendations urged by the United States Building and Loan League and the State supervisory authorities who joined with our organization in making suggestions regarding the original bills. This analysis compares and relates each section of S. 1771 with H. R. 6021. Section 3 of S. 1771 was replaced, as noted in this memorandum, and section 22 of S. 1771 was completely eliminated. All other changes are noted in the memorandum.

COMMENTS AND RECOMMENDATIONS RE H. R. 6021 (SECTION BY SECTION)

Section 1: Satisfactory in present form. Language identical with S. 1771. Section 2: Satisfactory in present form. Language identical with S. 1771.

Section 3: Satisfactory in present form. This gives statutory existence to an Advisory Council, similar to the one provided for banking institutions in section 12 of the Federal Reserve act. The savings, building, and loan associations heartily support this section and feel that such a council can be of greatest service if provided by statute and if selected by the membership of the Federal Home Loan Bank System. The council involves no cost to the Federal Government. The section follows the language of the Federal Reserve statute, as regards meetings, except that it provides for a minimum of two meetings, where the bank statute sets a minimum of four. Other provisions are strictly similar. There is one additional provision, which causes the recommendations of the Advisory Council to be printed in the annual reports of the board to Congress, thus making the conclusions of the group available to the legislative bodies, the public, and to the institutions who support the Federal Home Loan Bank Board through bank membership and insurance premiums.

This section replaces section 3 in S. 1771, which proposes to eliminate three directors representing the membership from the board of each Federal homeloan bank. The savings, building, and loan associations are, without exception, opposed to a change in the original Federal Home Loan Bank Act, under which they joined the system and have invested over $22,000,000 (the members' investment has doubled in the past year), as regards representation on regional boards.

Section 4: Satisfactory in present form. Language identical with section 4 of S. 1771, except that an amortized loan maturing in 6 years is given collateral loan value as an amortized mortgage. The original Home Loan Bank Act provided an 8-year minimum.

Section 5: Satisfactory in present form. Section and language identical with S. 1771.

Section 6: Satisfactory in present form. This section was proposed by the building and loan interests in the spirit of cooperation with the Federal Housing Administration's program. It permits the 12 Federal home-loan banks to function to a limited extent after the manner of national mortgage associations. Nonmember mortgagees, who are approved by the F. H. A., may borrow on title II insured mortgages up to 90 percent of their unpaid principal.

Section 7: Satisfactory in present form. Language identical with section 6 of S. 1771.

Section 8: Satisfactory in present form. This language was a floor amendment and goes farther than had been urged by our organization. We did clearly desire that the assessments levied on the 12 Federal home-loan banks for the support of the activities of the Federal Home Loan Bank Board should be handled as Government funds and appropriated moneys. Examination fees and the like might very properly be excepted from the regular procedure.

Section 9: An H. O. L. C. amendment, not directly important to savings, building and loan associations, and apparently satisfactory.

Section 10: This section replaces section 8 of S. 1771. Both sections have our approval. It is the duty of Congress to determine how much additional bonding power is to be given to the H. 0. L. C., although we believe that the lower figure will be sufficient to service applications now on file.

We strongly feel that in the interest of business recovery and the resumption of lending activities by existing institutions, these funds should be confined to "applications heretofore filed." There is no great objection, of course, to the additional suggestion in H. R. 6021 that some persons, who have attempted to file since the Corporation ceased taking applications, be served. If the Corporation is open to new applications in general private mortgagelending activities will be confused, if not completely thwarted for the next 6 months or year.

Section 11: This section does not appear in S. 1771, and deals with the personnel of the H. O. L. C. It involves a policy which is not germane or of interest to our institutions.

Section 12: This is a new section and does not appear in S. 1771. We understand that the wholesale work in refinancing mortgages in closed banks has been accomplished. We have always taken the position that the granting of loans by the H. O. L. C. should be determined entirely by the distress of the mortgagor and we therefore see no objection to the amendment.

Section 13: This section was not in S. 1771 and its inclusion or exclusion is not a matter of importance to savings, building and loan associations.

Section 14: A new section, not found in s. 1771, providing that H. O. L. C. collections may be made through post offices and substations, in addition to H. 0. L. C. branches. This matter is not of importance or concern to savings, building and loan associations.

Section 15: Satisfactory in present form. This language is identical with section 9 of S. 1771.

Section 16: Satisfactory in present form. This language is identical with section 10 of S. 1771, except that the privileges of share purchase proposed for Federal savings and loan associations are authorized for State-charter institutions without discrimination. The United States Building and Loan League is strongly in favor of the revised section 16 found in H. R. 6021. If the principle and objective is to get mortgage money flowing, it would seem that the 10,000 State-chartered institutions, now doing over 97 percent of the savings, building and loan association business, are appropriate vehicles achieve this important end, especially if the H. 0. L. C. activities are to be tapered off at this point. The precedent established in the R. F. C. stock purchases in banks further suggests that these privileges be made available to State-chartered as well as to Federally chartered institutions.

Section 17: Satisfactory in present form and is identical with section 11 of S. 1771, except that the proposition in the original Home Owners' Loan Act of 1933 that these funds be used in the development of existing institutions, in addition to organizing new federally chartered institution, is restated.

Section 18: Satisfactory in present form. Language is identical with section 12 of S. 1771.

Section 19: Satisfactory in present form. Language is identical with section, 13 of S. 1771.

Section 20: This section is, in part, similar to section 14 of S. 1771. Either section is satisfactory from the point of view of savings, building and loan associations.

Section 21: Satisfactory in present form. It is, in part, identical with section 15 of S. 1771, although the savings, building and loan associations much prefer the elimination of the unworkable and unnecessary requirement regarding dividends in case of charge-offs to reserves, to the impractical proposal of the Federal Board that dividend declarations under such conditions be approved by the Corporation in Washington.

Section 22: Satisfactory in its present form. Language is identical with section 16 of S. 1771.

Section 23: Satisfactory in present form. This language is identical with section 17 of S. 1771. The United States Building and Loan League has made considerable study of this question and strongly urges the approval of this section.

Section 24: Satisfactory in present form. This section is not included in S. 1771, but is to correct an illegal and unworkable provision of the original National Housing Act. The language inserted in lieu of the existing law is taken from the rules and regulations of the Corporation.

Section 25: Satisfactory in present form. Language is identical with section 18 of S. 1771.

Section 26: This is identical with section 19 of S. 1771 and is not of direct concern or interest to savings, building and loan associations.

Section 27: This is identical with section 20 of S. 1771 and is not of direct concern or interest to savings, building and loan associations.

Section 28. This is identical with section 21 of S. 1771 and is not of direct concern or interest to savings, building and loan associations. Note that the final section 22 of S. 1771 was completely eliminated by the House Banking and Currency Committee.

Section 29: This is a new section and is not germane or of interest to savings, building and loan associations

A PROPOSED NEW SECTION

Recommendation.-Amend H. R. 6021 or S. 1771 by adding a new and additional paragraph as a section :

“ SEC. Amend section 407 of title IV of the National Housing Act by striking out the words 'three', in the last line of subsection (a); 'five' in the third from the last line of subsection (b) and 'five' in the phrase 'fiveyear period' in the last line of subsection (b), and inserting in lieu thereof in each instance the word 'one.'"

Explanation.Mutual savings banks are permitted to withdraw from the F. D. I. C. without penalty; in fact, they are refunded a substantial portion of their premium or contribution to the F. D. I. C. funds. It seems unfair and unnecessary that the savings and loan associations, having no rights in the reserves accumulated through the annual payments, should be required to pay three additional annual premiums in case they withdraw, or five additional premiums in case the insurance is terminated by the Corporation. Some more reasonable withdrawal privilege should be provided, either the amendment above suggested, or at most, two additional annual premiums. Directors and trustees of savings institutions are properly hesitant to join the Insurance Corporation and pay annual premiums unless they can reverse their action should the insurance regulations, expenses, and benefits prove onerous or unnecessary.

The new administration banking bill S. 1715 permits banks to withdraw with a payment of 2 years' penalty premiums, where our act provides 3 and 5 years, respectively.

Mr. BODFISH. Mr. Chairman, in the development of our suggestions we went over these matters very closely with the State supervisory authorities. To be frank, there is great concern on the part of a number of the State supervisory authorities that undue pressure and influence is being used to develop the Federal Savings and Loan System to the detriment of the existing State chartered system of building and loan associations. I personally am not unfavorable, and our organization is not unfavorable, to the development of the Federal Savings and Loan System. We have them in our membership. We want to encourage them. On the other hand, we do want the largess and encouragement of the Federal Government to be made available equally as to those two different sets of institutions.

The House hearings on this bill were quite full, and the committee gave a great deal of study to it. I will say that they embodied the major suggestions in the bill that were made by our organization and by the State supervisors. I want to comment a little

further regarding the section 3 matter, which involves two issues: First, the change in the directorates of the 12 Federal Home Loan Banks; and second, the replacing of that section with a section dealing with an advisory council.

Our people feel rather strongly about this change in directors. This system was set up with voluntary membership. Nearly 3,000 of them have come in. A program was laid out in the legislation whereby the Government stock was to be ultimately retired and the members own these 12 banks. They now have over $22,000,000 in

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