PROBLEM IS COUNTRYWIDE

I feel this report by the Study Committee of the New York

State Bankers Association can be valuable to the members of

the House Ways and Means Committee in their deliverations.

Accordingly, I respectfully present the section of the report entitled "Analysis of Problem."

Before doing so, however, I would like to point out the basic conclusions reached by the Study Committee within the Analysis section of their report:

I

The problem is countrywide and not peculiar.to New York State.

Exactly as in Report

Π

The problem is somewhat greater and more troublesome in New York State than elsewhere throughout the country.

III

These problems are of recent origin and were not serious until the end of World War II.

IV

The last ten years have witnessed a startling change in this pattern of growth.

V

This raises the question as to where these fundamental changes in our banking and credit structure will lead unless the competitive advantages of the mutuals are leveled off.

Exactly as in Report

VI

The reasons for this drastic change in the growth patterns of commercial banks and mutual thrift institutions are not hard to find. They are principally these.

(i) The mutual thrift institutions have been largely exempt from the payment of taxes.

(ii)

The mutual thrift institutions do not maintain the large cash reserves required by law of commercial banks and upon which they receive no income what

soever.

(iii) The availability of real estate mortgage investments, plus substantial exemption from taxation, plus freedom from maintaining large cash reserves have enabled the mutual thrift institutions to pay a high dividend return to their depositors and shareholders. (iv) The mutual thrift institutions have used exceedingly effective high pressure promotional techniques, some of which are of doubtful propriety. Among these are:

VII

The virtually explosive growth of the mutual savings banks, savings and loan associations and credit unions over the past ten years and the probability of continued mushrooming growth in the future poses some questions of vital concern to all the people.

ANALYSIS OF PROBLEM

EXACTLY AS

IN NEW YORK REPORT

The analysis section of the report submitted by the

Committee for the Study of the Banking Structure in New York

State is as follows:

Exactly

as in Report

ANALYSIS OF PROBLEM

I

The problem is countrywide and not peculiar to New York State.

Since the end of World War II, mutual banking and quasi-banking institutions have experienced a phenomenal growth. In the seventeen northeastern states where mutual savings banks have been established, this growth dollarwise has been largely centered in the mutual savings banks. In the balance of the country, it has centered principally in the savings and loan associations. In addition, credit unions throughout the country are beginning to be an important factor. It is noteworthy that even in the seventeen northeastern states where mutual savings banks have been firmly established for upwards of a century, the growth of savings and loan associations percentage-wise has been much greater than that of the mutual savings banksthough not dollar-wise.

As will be seen from the statistical data appearing later in this report, the growth of these mutual institutions throughout the nation has been far in excess of that of commercial banks, and if it continues is certain to effect

some revolutionary changes in banking and in the credit structure which supports our whole economy.

Consequently, in whatever we do in New York State we must be keenly aware of the fact that we are dealing with a national problem and not one that is strictly local in our own state.

Exactly

as in Report

II

The problem is somewhat greater and more troublesome in New York State than elsewhere throughout the country.

A few facts will suffice to demonstrate the accuracy of this statement.

(i) of the 527 mutual savings banks operating in seventeen states, 129 are located in New York State.

(ii) of the $28.1 billion of deposits held by all 527 of

these mutual savings banks at the end of 1955, $16.3 billion were held by the 129 mutual savings banks in New York State.

(iii) of the $16.3 billion of deposits held by the 129 mutual savings banks in New York State at the end of 1955, $13.3 billion were held by the 53 mutual savings banks in New York City and only $3 billion were held by the 76 upstate mutual savings banks.

(iv) Of the 100 largest mutual savings banks in the nation,

65 are located in New York State and all but two of the largest 42 in the nation are situated in the metropolitan New York City area.

(v) of the 100 largest savings and loan associations in the nation, 12 are located in New York State, of which nine are in metropolitan New York City area.

The problem of the increasing flow of funds out of commercial banks and into the mutual savings banks, savings and loan associations, and credit unions is substantially more critical in New York State than elsewhere throughout the nation.

Exactly as in

Report

III

These problems are of recent origin and were not serious until the end of World War II.