Mr. MULTER. You didn't follow my question. I say suppose we were going to go along and take examiners out from under civil service, why shouldn't all of your other employees and all of the other employees of the Federal Reserve, and the other agencies, why shouldn't they all be subject to civil-service law, rules, and regulations? Mr. COBURN. As far as the other agencies, I will let them speak for themselves. We can live with civil service as far as the other employees. Mr. MULTER. I think you said you have about 630 examiners on your payroll? Mr. GREENSIDES. Yes, sir. Mr. MULTER. About how many examiners does the Comptroller have on his payroll? Mr. GREENSIDES. I think that was placed in the record when Mr. Gidney was here. I don't know. Mr. MULTER. Do you recall how many examiners the Federal Reserve Board has on its payroll? Mr. GREENSIDES. No, I do not. The Federal Reserve banks each have a corps of examiners. The Federal Reserve Board examiners deal with the examination of the Federal Reserve banks and not the member banks. Mr. MULTER. I think the complaint has been from all of them that none of them have enough examiners, nor can you get enough examiners. Mr. GREENSIDES. Right; it is very difficult because the source of supply is so limited. Young men have not been entering the banking business for pretty near a generation-that is, in volume-and the number of men in the colleges studying banking and finance is very limited. Mr. MULTER. I understand the reasons. Now when you are contemplating or there is an application pending for insurance by a State bank, the Federal Reserve Board will send their examiners and you will send your examiners to make a joint examination; is that not the procedure? Mr. GREENSIDES. If the proposed bank does not intend to have Federal Reserve status, but wants to be an insured bank, it will be examined by only our examiners. If they file for Federal Reserve membership, it will be examined by only the Federal Reserve examiners. Mr. MULTER. But many times they file for both, membership in the Federal Reserve Bank System and for insurance; is that not so? Mr. GREENSIDES. Not ordinarily. It is only in the case of a national bank application that the Comptroller makes it a practice of asking the advisory opinion of the Federal Reserve bank and of FDIC. Mr. MULTER. Wait, let's take the State bank first. Then we will get to the national bank. Where a State bank is applying for membership in the Federal Reserve and applying for insurance in your Corporation, is it not the practice for each of you then to send an examiner to examine and make a complete examination as to whether or not they are qualified for membership in the Federal Reserve System and qualified for insurance? Mr. GREENSIDES. No, ordinarily not; for the reason that the Federal Reserve will deal with the same factors as set forth in our law. Mr. MULTER. And then they will send a copy of their report to you. Mr. GREENSIDES. They will send a certification to us that they have given consideration to those factors. Mr. MULTER. Then you act on their report without Mr. GREENSIDES. We do not have to act. If they admit the proposed bank into membership, Federal deposit insurance is automatically extended to the bank. Mr. MULTER. Now, in the case of the organization of a new bank— let's talk about just the national bank-in the organization of a new national bank, FDIC sends out its examiner to make an investigation and report; Federal Reserve System does the same, and the Comptroller does the same? Mr. GREENSIDES. Yes, sir. Mr. MULTER. There are three examiners going out to make an investigation and examination. Mr. GREENSIDES. Yes, sir. Mr. MULTER. Usually they coordinate their investigations and visits; is that not so? Mr. GREENSIDES. There will ordinarily be 1 or 2 or 3 meetings in which the different examiners will work together. Mr. MULTER. And they usually work together in getting up their reports. Mr. GREENSIDES. They may on occasion, but ordinarily I would say that is not so. The reports are individual and separate. Mr. MULTER. Wouldn't it relieve the difficulty of not being able to recruit enough examiners for each of these 3 agencies if we had 1 corps of examiners for all of these 3 agencies? Mr. GREENSIDES. No, I do not believe so, because there is no duplication of examinations now. The amalgamating of 3 forces into 1 would not release any personnel except perhaps 1 or 2 or very few review examiners. Mr. MULTER. Do you exchange reports between the three agencies? Mr. GREENSIDES. Yes, sir. Mr. MULTER. Does FDIC always get a copy of the Comptroller's report of examination and always get a copy of the Federal Reserve report of a member bank? Mr. GREENSIDES. We receive a copy, at least one copy of a national bank report each year, and also the Federal Reserve's report of examination each year. We do not furnish reports to the Comptroller or to the Federal Reserve on our nonmember banks, because they are not interested excepting as they may have an application for conversion or for Federal Reserve membership, Mr. Multer. The CHAIRMAN. The House is now in session. The committee will adjourn. We are very grateful to you for the information you have given us, and we thank you. (Whereupon, at 12:03 p. m., the committee adjourned, to reconvene at the call of the Chair.) APPENDIX (Statements and letters submitted to the committee follow :) OHIO BANKERS ASSOCIATION, Mr. BRENT SPENCE, Chairman, House Banking and Currency Committee, House of Representatives, Washington, D. C. DEAR MR. SPENCE: May we submit the enclosed memorandum reflecting the policy of the Ohio Bankers Association in regard to H. R. 7026, Mr. Brown of Georgia-proposed Financial Institutions Act of 1957. If your Committee on Banking and Currency desires testimony beyond the enclosed, we shall be glad to comply, although we believe all the points covered by the memorandum will be adequately explored. You will note that the memorandum endorses a number of points included in S. 1451, by Mr. Robertson, of Virginia, the companion measure, as passed by the Senate. However, 1 or 2 questions are raised in regard to S. 1451 and emphasis is given to some miscellaneous points. Respectfully, BELFORD P. ATKINSON, Executive Manager. RECOMMENDATIONS OF THE LEGISLATIVE COMMITTEE OF THE OHIO BANKERS ASSOCIATION IN REGARD TO PROPOSED FINANCIAL INSTITUTIONS ACT OF 1957 AND RELATED MATTERS Cumulative voting Section 26 (c): Permission for shareholders of national banks to use cumulative voting in the election of directors when the articles of association so provide, should be supported. Similar Ohio law for State banks works well. Temporary stock in another bank Section 32 (b): If this proposal can be properly safeguarded so that it will not be an instrument used primarily for the promotion of mergers, it should be supported-but 90 days may be too long. Real-estate loans Section 36 (a)—A redefinition providing that a leasehold pledged as security for a real-estate loan would be one having maturity of not less than 10 years beyond the final maturity of such loan, should be supported. Construction loans Section 36 (c): The proposal to permit national banks to make construction loans on industrial and commercial buildings, with maturity not to exceed 18 months, provided there is a valid takeout agreement from a financially responsible concern, should be supported. The increase in the aggregate amount of all construction loans which a national bank can hold from 50 percent of capital to 100 percent of combined capital and surplus, should be supported. NOTE.-Ohio Assembly has just enacted State bank law similar to the provisions of the two paragraphs above. Industrial loans Section 36 (e): The proposal to permit national banks to make loans to established industrial or commercial businesses with repayment from the operation of such borrowers, whether or not secured by a mortgage on real estate, should be supported. The committee feels that amortization and maturity of not more than 10 years should be required. Limit of indebtedness Section 37: The proposal that national banks be permitted to borrow up to an amount not exceeding the amount of the combined capital paid in and unimpaired surplus of such national bank should be supported. Reports by national banks Section 52 (a): The proposed extension to allow national banks 10 days to comply with call reports should be supported. The repeal of present law requiring national banks to report declaration of dividends to the Comptroller should be supported; the information is otherwise available. Loans to executive officers Section 28 (e): The proposal to permit executive officers to borrow up to $5,000 unsecured from their own institutions, and the right to borrow up to $25,000 (rather than $15,000) on homes for personal occupancy, should be supported. Federal home-loan bank-supervisory authority Section 4 (d): Any proposals to have the powers, present and future, of the Federal Home Loan Bank Board spelled out in the statutes should be supported. The word "bank" should be eliminated from the name "Federal Home Loan Bank Board." Federal savings and loan association branches Section 6 (c): The proposal that Federal savings and loan associations should not be permitted to establish branches, except in conformity with the laws and practices of the States governing the establishment of branch offices of Statechartered savings and loan associations or banks, should be supported. Branches across State lines should be prohibited. Federal credit unions Section 15: Maximum loan limits on Federal credit unions should not be increased, and control over such limits should remain in the statutes. Payment of insurance Section 406: Extreme care should be taken to prevent the nature of an insured deposit or an insured account from being changed by either the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation. Payment of interest MISCELLANEOUS Caution: Any language used to define or regulate payment of interest on deposits should be so clear that it cannot be interpreted to prohibit the voluntary absorption of certain State taxes on deposits by banks. Bank mergers Control over bank mergers should be in the hands of appropriate bank supervisory agencies, but without prejudice to the powers of the various State authorities when a State-chartered institution is involved. National branches and States rights If a national bank acquires another bank located within the same county, the purchasing bank should be governed by its State law in regard to the operation of branches. Postal savings The Postal Savings System should be abandoned as early as practicable. Equal taxes In any revenue measure, or otherwise, provision should be made for at least approximate equal taxation of all financial institutions regardless of their corporate nature. The same principle should apply to other fields of business. MAURICE S. BRODY ASSOCIATES, Hon. BRENT SPENCE, Chairman, House Banking and Currency Committee, House Office Building, Washington, D. C. DEAR CONGRESSMAN SPENCE: The purpose of this letter is to put you on guard and thereby alert you against the danger of removing the present basic safeguards protecting our national banks in the interest of millions of depositors and 500,000 public stockholders. Senate bill 1451, camouflaged by hundreds of technical changes, adroitly uproots and discards these basic safeguards which during the last 24 years have proven to be of tremendous and lasting value in the interest of sound banking. The provisions of S. 1451 concerning our national banking system which---(1) Eliminate mandatory cumulative voting; (2) Permit the issuance of preferred stock; (3) Allow stock options for bank officials; and (4) Increase the borrowing ability of national banks by 21⁄2 times. All operate to remove the present basic safeguards protecting depositors and stockholders alike. This is done by sharply downgrading the rights of depositors and stockholders and at the same time upgrading the power and privileges of the few professional bankers who manage our banks. 1. The elimination of mandatory cumulative voting removes the present right of stockholder representation on the boards of these national banks in order to independently supervise internally the activity of bank managements and thereby prevent these managements from engaging in practices detrimental to the interest of depositors and stockholders. External supervision by the Comptroller's Office alone, 6 months or a year later, is woefully inadequate. I ask you, Congressman Spence, do you think that in view of the vast expansion of credit that has taken place that we should at this time unceremoniously dump the valued safeguard of independent internal supervision? 2. The issuance of preferred stock as a normal and regular method of raising capital has the same effect as the placing of a mortgage ahead of all the present stockholders of a national bank. This method of financing endangers the safety of the stockholders' investment and thereby will tend to discourage the common stockholders from periodically adding to their present investment in the bank. The Federal Reserve Board believes that the issuance of preferred stock would tend to make the financing of our national banks difficult and arduous and thereby would impede the effective expansion of our national banks such as they have experienced during the last 24 years. 3. The allowance of stock-purchase options for bank officials will turn the attention of these bank managers from soundness to fantastic growth in order that they might thereby profit from their stock options. This change of emphasis is both unsound and hazardous for our national banks. 4. The increase in the borrowing ability of our national banks by 21⁄2 times by permitting a substantial increase in the ability of the banks to borrow from one another promotes an expansion by our national banks which is strongly condemned by the Federal Reserve Board as being both unnecessary and undesirable. Here again safety is discarded in order to bring about undue and unnecessary expansion. It is of significant interest to note that each one of the aforementioned provisions were strongly opposed by the independent and nonpartisan Federal Reserve Board in the hearings held by the Senate Banking and Currency Committee concerning S. 1451. These provisions were strongly resisted by the Federal Reserve Board on the ground that they were detrimental to the maintenance of a sound national banking system. It would be folly to fly in the face of the expert opposition of the Federal Reserve Board charged with the responsibility of maintaining a sound banking system. Furthermore, insult is added to injury by incorporating in S. 1451 a weak and wobbly merger provision. Neither the feeble and ambiguous wording of the provision nor the agencies entrusted in enforcing the provision are at all likely to even slow down the present strong trend toward concentration into huge banking units. The Department of Justice is not even permitted to act against the formation of vast banking mergers. As the director of a large national bank, I speak from a background of experience when I strongly urge you not to abandon valuable banking safeguards which have stood the test of time. |