Mr. MUMMA. Didn't the figures on the former downpayment plans show that a person didn't make any appreciable payment on the principal of the loan in the first 5 years, and with a lower downpayment and higher interest rate, it will mean he will make no appreciable payment on the house for a longer period. It is cheaper to buy than to pay rent, because he is getting housing at a good figure.

Mr. ANDERSON. There are some areas where the demand for homes exists at the current prices for houses and at the current rates of interest or at the new rate of interest, which I believe went into effect yesterday, of 54 percent, but the money is not available to build them, to finance them.

Mr. MARTIN. This is a big country, and I think in most instances you will find the money is available if that situation exists.

Mr. MUMMA. If you are talking about your community, Mr. Anderson, aren't there special sources set up for those areas where money is apparently hard to get?

Mr. ANDERSON. We haven't been able to cash in on them if there

are.

Mr. MUMMA. I believe where there is a will, there is a way.

Mr. ANDERSON. I want to thank Mr. Martin again for his very cooperative and helpful colloquy.

Thank you, Mr. Chairman.

Mr. PATMAN. Mr. Chairman, I would like to follow up on one question on Federal funds traded by the banks. It probably will not take me 5 minutes.

I would like to ask Mr. Martin about these matters:

First, what about prohibiting any trading of Federal Reserve funds for other than adjustment of reserve requirements; and

No. 2, what about prohibiting any Federal Reserve bank from selling funds to any other member bank.

Mr. MARTIN. Why would you want to prohibit it, Mr. Patman? Mr. PATMAN. For the reason that they ought to deal with the Federal Reserve if they want reserves. If you are going to permit them to get funds outside of the Federal Reserve and let them go back to the old system of concentrating the money in New York, as it used to be, the Federal Reserve has not served its purpose a hundred percent. Mr. MARTIN. In the case of the movement of funds of the magnitude that we have in this country, it is almost impossible to cut this thing finely enough to know what reserves you are going to need. It seems perfectly appropriate for a Federal funds market to develop, where a bank has miscalculated its needs at a given point, in order to put those funds to use, it resorts to the Federal funds market.

Mr. PATMAN. That is all right in order to take care of adjustments in the reserve requirements. To sell the use of the funds, I think, is another matter. You don't consider it so.

Mr. MARTIN. No; I think the market would be considerably tighter if we didn't have the Federal funds market, and it seems that the flexibility that is provided by movement in this way is advantageous rather than the reverse.

Mr. PATMAN. I will not ask any more questions at this time, Mr. Martin.

Mr. MULTER. Mr. Chairman.

The CHAIRMAN. Mr. Multer.

Mr. MULTER. Mr. Martin, one of the things that you have asked be eliminated from the statute is the limitation on the aggregate cost of construction of Federal Reserve branch bank buildings.

Why do you ask that that limitation be eliminated?

Mr. MARTIN. It is not a terribly important matter, Mr. Multer, but it seemed to us that that was a capitalized expense, just an ordinary operating capitalized expense of the system, and that rather than coming back to the Congress all of the time for a given amount of money, and then having to revise this, that it would be just as well handled. You always see the building when it is put up. You are always welcome to visit it, and it would just be a normal capitalized expense, as any other building.

Mr. MULTER. Do you contemplate any new branch buildings in the immediate future?

Mr. MARTIN. We have one or two that have been in the mill for some time. I don't know of any new ones at the moment.

What is the status of branches?

Mr. LEONARD. There are 2 or 3 in a tentative state of planning, sir. Mr. MULTER. Where?

Mr. LEONARD. In the state of tentative planning.

Mr. MULTER. What is the total aggregate cost carried on the books of the Federal Reserve of all its branches and buildings, both in Washington and elsewhere?

Mr. LEONARD. We have a table in the annual report. At the end of the year the carried value of all of the Federal Reserve bank and branch buildings were $73 million, and they had $4,600,000 other real estate acquired for banking house purposes.

Mr. MULTER. And that compares with your total capital stock of three-hundred-twenty-odd million dollars.

Mr. LEONARD. Three-hundred-thirty-odd million dollars, and sevenhundred-odd million dollar surplus.

Mr. MULTER. So that by raising or eliminating the limitations now on the statute, the Board would be free to do as it pleased, tear down existing structures, build new ones, do anything they pleased without limit, as to the amount that may be spent, either on any individual or specific building or on the overall program; is that correct?

Mr. LEONARD. That is correct. They are bound by the judgment and control of the Board. All of these building programs are subject to the specific approval of the Board of Governors.

Mr. MULTER. Do you think it is proper that the Board have this unlimited right when the statute limits and charges you with the duty of seeing that banks that are members of the System do not go beyond certain limitations as to bank premises?

Mr. LEONARD. That is a policy question. Are you asking me?
Mr. MULTER. Anyone from the Board who wants to answer it.

Mr. MARTIN. Yes; I think it is proper, Mr. Multer.

At the risk of putting in your mind the suggestion that there ought to be a limitation on head offices, there is no such limitation at the present time, and all this does is make the branch office the same asMr. MULTER. I thought there was a limitation on the head offices,

and that is why I asked the question.

Mr. MARTIN. No, no limitation on the head offices.

Mr. MULTER. It isn't necessary to have authorization

Mr. MARTIN. There never has been since the Federal Reserve Act.

Mr. MULTER. I understand at one time you had to come in and get some authorization.

Mr. LEONARD. That refers to branch buildings only.

Mr. MULTER. Why shouldn't there be a limitation on the Federal Reserve System as to both head office buildings and branch buildings to the same extent we have it on the member banks? The law fixes a maximum for member banks, does it not?

Mr. LEONARD. That maximum would be

Mr. MARTIN. Could I ask Mr. Hexter to read the statute?

Mr. MULTER. Surely.

Mr. HEXTER. There is no actual limit under the Federal Reserve Act on bank member premises, Mr. Multer. The statute provides that no national bank, without the approval of the Comptroller of the Currency, and no State bank, without the approval of the Board of Governors of the Federal Reserve System, shall invest in bank premises an amount in excess of its capital stock.

Mr. MULTER. That is a limitation, isn't it?

Mr. HEXTER. Not an actual limitation. It is subject to supervision. In some cases it is

Mr. MULTER. That is the point I make. If the member banks cannot do it without supervision, why should the Federal Reserve banks do it without supervision?

Mr. MARTIN. The Federal Reserve does have supervision. The Board of Governors is working full time on this.

Mr. MULTER. But the Board of Governors is representing the entire System, is that right? Shouldn't there be any supervision by the Congress over what you are doing? You are an agent of Congress.

Mr. MARTIN. Well, the Federal Reserve Act-all that you are suggesting in this case is that the same treatment, the same discretion be given us with respect to branch buildings that is given us with respect to head offices?

Mr. MULTER. I am suggesting what we ought to do is recommend the other, that the Congress be given the right of approval or disapproval as to what you may do beyond certain limits on all of your buildings, branch and head offices.

Mr. MARTIN. Well, I don't think that it is necessary, but I suggested to you in your question on the other, since you were talking about this specific bill, that you could take the position that we shouldn't have the discretion on the head offices as well as the branch offices, but if we are going to have the discretion on the head offices, I think we should have it on the branch offices, which are infinitely less important.

Mr. MULTER. Well, I was under the impression that we had supervision over the Board as to its head offices. I think we should have it on both. There should be a limit fixed in the first instance, and then if you want any more than that, come to the Congress for approval.

Mr. MARTIN. Well, I merely made the observation that I don't think that limitation is necessary, and I think it is

Mr. MULTER. Now, let's take it with reference to the member banks and the national banks, the limitation presently without approval is, I think, 50 percent of capital stock, is it not?

Mr. HEXTER. 100 percent, Mr. Multer.

Mr. MULTER. Isn't that the amendment that is proposed, to make it 100 percent?

Mr. HEXTER. No, the present provision is the amount of the capital stock of the member bank.

Mr. MULTER. That is the present provision.

Mr. HEXTER. Yes.

Mr. MULTER. The amendment is merely a change of language?

Mr. HEXTER. I believe that the amendment, Mr. Multer, would change it from 100 percent of capital stock to either that amount or 50 percent of capital plus surplus, whichever is greater.

Mr. MULTER. Which would obviously in most instances create an increase on what they could spend.

Mr. HEXTER. In most instances, I believe so; yes, sir.
Mr. MULTER. Is that right?

Mr. MARTIN. I think that is right.

Mr. MULTER. Now, tell me, do you know of a single instance in the country, member bank, nonmember bank, or national bank, that has bank premises that are equal to the capital? Never mind the capital and surplus, but equal to the amount of capital?

Mr. MARTIN. Mr. Hexter says there are cases of that sort.

Mr. MULTER. I would like to have you submit a list of those banks, if you will, please.

(The data requested above are as follows:)

List of State member banks as of Mar. 14, 1957 (call report), where investment in bank premises equals or exceeds amount of capital stock (in no case does investment exceed bank's total capital stock, surplus, and undivided profits) 1

1 List does not include cases where bank premises may be subject to outstanding liens. NOTE.-The Board does not have the requested information involving national banks and nonmember insured banks

95375-57-pt. 1—35

Typical cases of State member bank applications for authority under sec. 24A of the Federal Reserve Act to invest more than 100 percent of capital stock in bank premises

NOTE. For the 12-month period ending June 30, 1957, there were 31 such applications received and approved.

Mr. MULTER. Now, let me say to you that I have examined over the weekend some 50 different bank statements of banks-that is, State member banks and national banks. I haven't been able to find a single instance where the amount carried for bank premises and furniture and fixtures even equals the amount of the capital. If that is so, I would like to know why it is necessary to give any member bank or national bank the right to increase that kind of realty investment to the amount of 50 percent of capital and surplus.

Mr. MARTIN. Mr. Hexter will comment on this.

Mr. HEXTER. Mr. Multer, I can assure you from my own experience that there are constantly coming to the Board of Governors requests by member State banks for authority to invest more than the amount of their capital stock in bank premises. It is not a large number, relative to the number of banks in the country, and for large banks generally it is not true. I believe the bank premises investments of