Mr. Cook. We anticipate those things sometimes.

Mr. PATMAN. I know you are on the alert, and I appreciate that. The Federal Reserve banks charge about one-half of 1 percent or up to 13% percent for commitments and that is reported every month in the Federal Reserve Bulletin; isn't it? You read the Federal Reserve Bulletin; don't you?

Mr. Cook. When time permits; yes.

Mr. PATMAN. You are acquainted with general banking matters and that is an important banking matter. Why are you reluctant to say it, Mr. Cook? It is a fact.

it.

Mr. Cook. I am not reluctant to say Mr. PATMAN. Well, I will say it. They charge for commitments, about one-half of 1 percent to 13% percent. It is a true statement because I have watched it over the years. I know something about these rates. I am on the Joint Defense Production Committee with Mr. Brown and we run into such problems on commitments on industrial or commercial loans sometimes, and on all of the Regulation V loans. The Federal Reserve banks charge one-half of 1 percent, so if the Government charged you one-half of 1 percent on these commitments, the interest would amount to $15 million a year, so there is something the Government is giving you. I am not objecting to it, I am strong for it. But suppose you should have a chain of banks fail and their assets amount to about $6 billion and they probably have less than a billion dollars of Government bonds which have depreciated and the FDIC has about $5 billion of deposits to take care of. Well, you have only $1,800 million, and you get $3 billion from the Treasury, but there is a difference there. Where would you get that difference?

Mr. COOK. Well, I might make this observation, Mr. Patman: You are anticipating more trouble in this economy than we anticipate or that anyone else anticipates. Now, as far as this $15 million that you suggest we should pay as a commitment fee, I think that that is worth far more than $15 million

Mr. PATMAN. You are making an argument that is not necessary, because, as I said, I am not asking that a commitment fee be paid. The absence of a fee is perfectly all right, but it is giving you something, which I am glad to see you get.

Mr. Cook. I was going to complete that statement and that is this: It is worth far more than $15 million to the Government to have the confidence of the people in the banking system and to have the stability we have; it saves the Government far more than any commitment fee we might pay.

Mr. PATMAN. You don't need to make any argument on the point to me, because I am not proposing to change it, but I am saying that you are getting something of value. Besides, the people are not trusting the banks, necessarily, they are trusting the Government. It is like the chairman said, the full faith and credit of the Government that the people trust, and that is why the banks proudly display these signs, "Protected by the Government of the United States, Federal Deposit Insurance Corporation." They like to do that. I don't blame them. It is a fine thing to protect our banking system by having the full faith of the Government behind it. How much in dollars do you have in a reserve to protect the insured deposits; is it not about $1.41 per hundred dollars of deposits, Mr. Cook?

Mr. Cook. What is the ratio on that now, Dr. Cramer, the ratio of our funds to the insured deposits, not to the total deposits but to the insured deposits?

Dr. CRAMER. 1.44.

Mr. PATMAN. Now, what is the ratio of reserve funds to all deposits; is it about 80 cents?

Dr. CRAMER. $0.79.

Mr. PATMAN. In other words, you have 79 cents to protect every hundred dollars of deposits; is that right?

Mr. Cook. Yes; that is on total deposits.

Mr. PATMAN. But your objective is, whenever a bank closes, not just to protect the depositors whose deposits are insured, but to protect all deposits. You try to have mergers and consolidations so as to protect everyone.

Mr. Cook. That has worked out in some cases.

Mr. PATMAN. In every case, has it not?

Mr. Cook. No. Take a receivership that didn't work out-I would rather have General Counsel explain that technicality.

Mr. COBURN. Mr. Patman, under our present law, we have the right to make loans and purchase assets in instances where it will effect a saving to the corporation and we enter in such a transaction. Now, when we make a purchase of assets, it in effect is providing a hundred percent insurance to the depositors. That is, it is providing insurance to all of the depositors as distinguished from the deposits up to $10,000. But under the law and for the last 4 years that has been adhered to, most strictly, that is the years that I have been with the Corporation, in no instance have we made a purchase of assets where there was not a finding of fact that it would reduce the risk of the Corporation.

Mr. PATMAN. All right, thank you very much, sir.

Mr. Cook, I asked you to furnish a statement. You must have misunderstood it. Do you have the request that I made of you about the original capital of the FDIC that was furnished by the Government and the Federal Reserve banks in the amount of $289 million, plus the interest going up to the time the principal was paid back? Do you have that request with you?

Mr. Cook. I don't recall that we have.

Mr. COBURN. I think I have it, Mr. Patman.

Mr. PATMAN. Either the request is not plainly written or your reply is not responsive, one or the other. I have not been able to get the information I desire, so I am going to ask you to get it for me. Here is what I want: The amount of this capital, $289 million that was paid back in 1947 or 1948.

Mr. Cook. 1948 was the final payment.

Mr. PATMAN. Now, I want you to give me information-most of it is in the 1947 hearings on the FDIC bill, but all of it is not there-I want you to give me a statement showing up until that capital was paid back, how much the FDIC had collected in interest or how much interest had accrued on its Government bonds, on the investment on this capital. I know you gave me a statement here of $201 million that the FDIC has earned on all investments up to August 31, 1948, but you included in earnings the assessments on the banks which I want entirely separated.

Mr. COBURN. As I understand it, we have provided you with the figures of the total interest we received from the entire

Mr. PATMAN. Well, that is meaningless for my purposes.

Mr. COBURN. Well, the only way we can arrive at that figure is to allocate the proportion that the capital stock bore to the total investment, and I think

Mr. PATMAN. Well, you can do that by taking the average rate of

interest.

Mr. COBURN. I thought that was included in the figures.

Mr. PATMAN. I don't say that you are evading the question, but if you had been trying to evade it, this would have been the only way to do it and the best way to do it.

Mr. COBURN. Well, Mr. Loeffler prepared the figures.

Mr. PATMAN. I would like to ask for this information which I have been trying to get for 10 years. I hope this time that I will get it. It is always included with some other data so that I cannot separate it. Mr. COBURN. May we talk to you afterward?

Mr. GREENSIDES. I was wondering if you would take a look at this material, which Mr. Loeffler has, to see if that is what you desire. Mr. PATMAN. I would be glad to. Thank you.

Possibly I didn't make my request plain enough. Now this shows for the period, the capital stock outstanding, and so forth, and the interest on securities. That table shows the same information that I have here. It is the interest earned on all United States securities, but again it is combined with interest received on the invested capital accumulated through your investments.

Mr. LOEFFLER. I don't know whether this is entirely complete for what you want, Mr. Patman, but taking the total capital at the end of each year, I worked out a ratio then between that and the capital put up by the Government.

Mr. PATMAN. It is possible I will be able to get the information which I need from this table. I will study this, but in the meantime I should appreciate it if you would get me a statement which plainly sets out the interest received on the capital furnished by the United States Government and the Federal Reserve banks, as I have suggested here.

Mr. LOEFFLER. All right.

Mr. PATMAN. In language that I can understand.

Mr. Cook. If that does not give you the complete information, sir, see that you get it.

we will

Mr. PATMAN. Thank you very kindly.

(For data requested above, see p. 852.)

Mr. MULTER. Will the additional information be made part of our record?

Mr. PATMAN. That is my understanding. Now, the other day the rate was raised by the Bankers Trust Co. on prime commercial paper from 4 to 42 percent. Is it customary for banks to require people who borrow money to keep what is known as a compensating balance, like in the case of the New York Savings Bank, of about 20 percent on deposit?

Mr. Cook. That depends entirely on the bank itself. Many banks require compensating balances on accounts of that kind.

Mr. PATMAN. That would really mean an interest rate of about 55% percent on the actual money they could use; would it not?

Mr. Cook. Approximately, yes. That is something over which the Federal Deposit Insurance Corporation has absolutely no control and nothing to do with.

Mr. PATMAN. Is that a practice all over the country in both country banks and central reserve city banks?

Mr. Cook. It is with some banks, but that depends on the practices in the locality where the bank is located, and those things vary with different sections of the country, different operations, different managements of banks, depending on how they look at these things, and, of course, keenness of competition enters into it.

Mr. PATMAN. The net result is, then, that it is a means by which more interest is paid on actual money that is loaned; isn't it? Are you familiar with section 35 (a) of the bill which is to permit the national banks to charge the same amount of interest that the State banks charge? I won't pursue that with you because it is not directly related to your business.

Mr. COBURN. It is in the National Bank Act.

Mr. PATMAN. Are interest rates paid on interbank demand deposits, Mr. Cook?

Mr. COOK. Under the law there is no interest paid on demand deposits.

Mr. PATMAN. None paid?

Mr. Cook. No.

Mr. PATMAN. Now, you know about the present policy of the banks doing things for their customers like keeping their books, as a substitute for paying interest on demand deposits, and so on.

Mr. Cook. That depends on the policy each individual bank adopts as its own policy.

Mr. PATMAN. The point I am trying to get to is this, Mr. Cook: As the law is now, if any payment of any kind is made to a depositor on demand deposits, whether it is paid by one bank to another bank for interbank deposit, or whether it is by a bank to a depositor, it is in violation of the law, isn't it, whether it is money payment or any kind of indirect payment?

Mr. Cook. Well, the law provides that there shall be no interest paid. Mr. PATMAN. Doesn't it say directly or indirectly?

Mr. Cook. That is correct.

Mr. PATMAN. So that means payment either in money or in anything else, such as services. That provision means such payments would be a violation of the law; wouldn't it?

Mr. Cook. I think that would apply purely to the payment of interest. There are accommodations banks give to customers, naturally. Mr. PATMAN. Now this is what I want to ask you about: It is proposed in here that we loosen up that language so that a bank could give $2,000 worth of tickets to My Fair Lady, or something like that, to a customer if his account justified it, if it was big enough, or they could give him parking advantages, or they could give him loans at a low rate of interest, and instead of charging him 5 percent, charge him 2 percent, and things like that. Don't you think that if we loosen up the statute so as to let payments in kind be practiced legally, we should put something in the bill to make it a violation of the law if a bank discriminated among its own customers; in other words, if it gave 1 customer certain benefits for having a $10,000 balance in demand de

posits, that it should give other customers with the same balance the same thing? Don't you think it would be proper to have such a provision in the law?

Mr. COBURN. May I call your attention, Mr. Patman, to the fact that the prohibition against payment of interest in section 26 is identical with the present law. The only change strikes the words "of directors," and changes the word "section" to "subsection." So there is no change in the law on the prohibition on the payment of interest on demand deposits.

Mr. PATMAN. You mean in this bill and in the law.

Mr. COBURN. Insofar as it provides to Federal Deposit Insurance. It says by regulation they shall prohibit the payment of interest on demand deposits.

Mr. PATMAN. If we are going to permit the practice of granting favors, don't you think we should have something in there about discriminating among customers?

Mr. Cook. There are courtesies extended, but I don't know of any case where they give more favoritism to one customer as to another. Mr. PATMAN. Don't you think it is fair that they treat all customers alike?

Mr. Cook. I think for the most part they do.

Mr. PATMAN. I know, but a little amendment of the bill to require it wouldn't hurt it, Mr. Cook?

Mr. Cook. It wouldn't hurt anything, no, but I think we are getting down to some fine points in the matter of practical operations, and we are trying to confine our statements to you, sir, to the effects on the Federal Deposit Insurance Corporation, and that is something over which we have no control, and I don't think it is, frankly, any of our business.

Mr. PATMAN. Well, I admit that part of it.

Mr. MULTER. Will you yield?

Mr. PATMAN. I yield to Mr. Multer.

Mr. MULTER. I have in front of me, Mr. Cook, page 20 of the August 8 copy of the New York Journal-American, under "Business and Finance", pictures and a statement of a gift of $1,560 by a national bank to one of its customers celebrating the fact that it has now reached $4 billion in personal loans. Isn't that any of the business of your corporation?

Mr. Cook. Frankly, no.

Mr. MULTER. Well, then, I don't understand what the Corporation is supposed to do.

Mr. Cook. I will tell you what we are supposed to do, and that is just what we are doing, protect the depositors of the banks.

Mr. MULTER. You are not protecting the depositors of a bank when you permit a bank to give away $1,560.

Mr. Cook. That is none of our business.

Mr. MULTER. I don't think you know your business, then.

Mr. Cook. Listen to me just a minute. Our business is to protect the depositors and not to manage these banks.

Mr. MULTER. You are not protecting the depositors when you fail to go in and find out what a bank is doing by way of giving away its money?

Mr. Cook. If you say it is a national bank, that is the business of the Comptroller of the Currency, and not ours.