Additional data submitted to the committee by-Continued American Stock Exchange, Division of Securities, letter of July Bank Profit Here Expected To Rise-Schapiro & Co. Foresees 9.3 Percent Return by Big Commercial Institutions This Year- Interest Rate Noted, article from New York Times, June 29, 1957__ Blue Sky Practices Rampant in Installment Credit, extension of 1957. Convention address of Harry J. Harding, president, Independent Economics For Consumers-A New Approach to Credit Controls, Percentage of each bank to total of all clearinghouse banks Page 676 683 684 677 683 680 682 New York Stock Exchange, letter of July 31, 1957. 676 The First National Bank of Pleasanton, Pleasanton, Calif., letter 675 Zeitlin, Eugene, Denver, Colo., letter of August 5, 1957_ 785 523 Alpine Lumber Co., letter of July 13, 1957---- Bureau of Engraving and Printing, letter of July 31, 1957. Federal Reserve notes delivered to Comptroller of the Cur- 636 Classification of loans, discounts and advances and total accep- Cumulative report of Federal Reserve agents' note account from the beginning of the Federal Reserve System to May 31, 1957-- Additional data submitted to the committee by-Continued Number and salaries of officers and employees, and net expenses of Federal Reserve banks, by head office and branches, 1956__ Pennsylvania Department of Banking, letter of July 23, 1957- What Banks Will Do for Money-Some Groan at Clerical Chores, Sullivan, Hon. Leonor K.: Missouri Bankers Association, letter of July 12, 1957.. Maurice S. Brody Associates, investment economists, Denver, Colo., letter Ohio Bankers Association, Columbus, Ohio, letter of July 17, 1957. Recommendations of the Legislative Committee in regard to proposed Arizona Association of Insurance Agents, letter of February 25, 1957. Miller Insurance Agency, Phoenix, Ariz., letter of March 1, 1957- Standard Insurance Agency, Phoenix, Ariz., letter of March 1, 1957-- Robert Morris Associates, Rochester, N. Y., letter of July 19, 1957 (state- Sterns Department Stores, Inc., Waterville, Maine, letter of August 7, The Chase Manhattan Bank; New York, N. Y., letter of July 22, 1957. 93 864 869 869 868 FINANCIAL INSTITUTIONS ACT OF 1957 MONDAY, JULY 15, 1957 HOUSE OF REPRESENTATIVES, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met at 10 a. m., Hon. Brent Spence, chairman, presiding. Present: Chairman Spence (presiding), Messrs. Brown, Patman, Multer, Barrett, Mrs. Sullivan, Mrs. Griffiths, Messrs. Vanik, Rutherford, Coad, Breeding, Talle, Kilburn, McDonough, Widnall, Betts, McVey, Hiestand, Henderson, and Chamberlain. (Summary of amendments made by S. 1451 and H. R. 7026 follows:) SUMMARY OF AMENDMENTS MADE BY FINANCIAL (S. 1451 and H. R. 7026) EXPLANATORY NOTE The following is a summary of the changes in existing law incorporated in the Financial Institutions Act of 1957 (S. 1451 and H. R. 7026), prepared to assist the members of the committee during the hearings on these bills. The summary does not cover those provisions of the bill which are the same as existing law or which make only formal changes in existing law. References to page numbers are to pages of the bills and apply alike to both bills. There are two differences between the bills; these are covered by paragraph 1 under title IV of the summary, and paragraph 3 of title V. TITLE I. NATIONAL BANK ACT 1. Deputy Comptrollers Section 5 (p. 8) authorizes appointment of two new Deputy Comptrollers of the Currency. 2. Conflicts of interest Section 8 (b) (p. 9) prohibits the Comptroller and Deputy Comptrollers from owning stock or holding a position in any national bank. It also prohibits employees of the Comptroller's Office from accepting employment in any national bank within 2 years after leaving the Office, except with the Comptroller's approval. 1 3. Capital stock Section 14 (a) (p. 10) requires that 100 percent of capital stock be paid in before a new national bank may start business; existing statute requires 50 percent, but the practice since 1935 has been to require 100 percent. 4. Preferred stock Section 20 (p. 14) authorizes national banks to issue preferred stock; present law authorizes this only on emergency basis. 5. Dividends Section 21 (p. 15) permits national banks to pay dividends quarterly or annually, as well as semiannually. It forbids payment, without the Comptroller's approval, of dividends in any year which exceed that year's net profits, plus retained net profits from previous 2 years, minus required transfers to surplus or stock-retirement fund. 6. Shareholders' list National banks must now maintain lists of all shareholders, and permit creditors to see the lists. Section 22 (p. 16) repeals the creditor's right to see the list, and adds a requirement that the bank must notify the Comptroller of any sale of shares involving more than 10 percent of outstanding stock. 7. Disclosure of stockownership Section 23 (p. 17) applies where someone other than the record owner has a beneficial interest in stock of a national bank, and the stock involved is more than 5 percent of the bank's total outstanding stock. It requires the record owner, in such a case, to notify the Comptroller of the name of the beneficial owner. 8. Cumulative voting A shareholder in a national bank now has a statutory right, in voting for directors of the bank, to cumulate his shares. That is, he may give one candidate a number of votes equal to the number of his shares times the number of directors, or distribute his votes on the same principle among as many directors as he sees fit. Section 26 (c) (p. 18) would eliminate cumulative voting unless the articles of association provide for it. 9. Removal of officers and directors Section 29 (p. 20) revises the procedure under which the Federal Reserve Board may remove an officer or director of a national bank. Under present law, to remove an officer or director the Board must find he "continued" to violate a banking law or to engage in an unsound practice after the Comptroller had warned him against it. Under the new section, the Board could remove him on the basis of a single violation or unsound practice after warning. The new section continues existing provisions for court review of the Board's removal action, but provides for review on the "weight of the evidence" rather than under the substantial evidence rule as is now provided. 10. Charitable contributions Section 31 (a) (8) (p. 22) authorizes national banks to contribute to community funds, charitable, philanthropic, benevolent instrumentalities conducive to public welfare, nonprofit educational in stitutions, or other nonprofit organizations established for civic improvement, without regard to State law. The present law authorizes such contributions only if they are not prohibited by State law. 11. Stock options Section 31 (a) (9) (p. 22) would authorize a national bank to set up a stock option plan, if approved by the Comptroller and the holders of two-thirds of the bank's stock, under which stock may be sold to employees at not more than a 15 percent discount. That is, the price must be at least 85 percent of market value or book value, whichever is greater, as determined by the Comptroller. 12. Acquisition of bank stock Section 32 (b) (p. 25) authorizes a national bank to acquire stock in another bank in connection with a merger or consolidation if the Comptroller approves. This would be an exception to the existing probibition against a national bank acquiring the stock of any other bank. 13. Transfer of trust powers The Federal Reserve Board now has authority to grant trust powers to national banks and to issue regulations governing the exercise of such powers. Under section 33 (p. 25) this authority would be transferred from the Board to the Comptroller. 14. Loan limits As a general rule, a national bank may not lend more than 10 percent of its capital and surplus to any one borrower. Section 34(p. 28) relaxes this limit for loans on frozen food, dairy cattle, and installment consumer paper. Under the new section 34 (b) (6) (B) (p. 30) a bank could lend up to 25-percent of its capital and surplus to one borrower for not more than 6 months, if the loan is secured by insured frozen or refrigerated readily marketable staples. Under section 34 (b) (7) (B) the 25-percent limit would apply also to obligations of dealers in dairy cattle arising out of the sale of dairy cattle, where the obligations bear a full recourse or unconditional guaranty of the dealer. Section 34 (b) (12) applies the 25-percent limit to consumer installment paper acquired from one seller which carries the seller's full recourse endorsement or unconditional guaranty, unless the bank certifies that it is relying on the original maker of the note, in which case the basic 10-percent limit on loans to the maker would apply and the obligation would not be considered in determining whether the 25-percent limit on loans to the seller of the note had been reached. 15. Maximum interest rate Section 35 (p. 32) continues the existing limits on interest rates chargeable by national banks (roughly, it is the State legal limit, or 7 percent if there is no State limit), with one new provision. The new provision exempts certain purchases of obligations from these limits: that is, where a national bank purchases an obligation in a State where such a purchase is not subject to the State usury laws, the purchase would also be exempted from the Federal limits prescribed by section 35. |