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It is timely that legislation should bring the situation under control and in line with what has been done in other instances, notably by securities and exchange legislation.

STERNS DEPARTMENT STORES, INC.,
Waterville, Maine, August 7, 1957.

Hon. BRENT SPENCE,

Chairman, House Banking and Currency Committee,

Washington, D. C.

DEAR MR. CHAIRMAN: I hereby wish to enter my protest against the provision of the Financial Institutions Act of 1957 which provides for the elimination of mandatory cumulative voting.

I am and have been for many years an investor in stock of national banks. I have also invested in such stocks for my children and my grandchildren.

It seems to me grossly unfair to us investors to eliminate any provision of the law relative to mandatory cumulative voting which will diminish the value of our investment.

It also seems to me in all fairness that minority stockholders should have the right to representation on the directorate of a bank if they so desire, a 51 percent majority should not be able to disenfrancise 49 percent.

In New England, I fail to find one case where mandatory cumulative voting has done any harm; in fact, I feel it has been a good check on complete domination of bank stockholders by bank management.

Very truly yours,

GEORGE H. STERNS.

Hon. BRENT SPENCE,

THE CHASE MANHATTAN BANK,
New York, N. Y., July 22, 1957.

Chairman, Committee on Banking and Currency,
House of Representatives, Washington, D. C.

DEAR CONGRESSMAN SPENCE: In response to the letter of July 9, 1957, from Mr. Robert L. Cardon, clerk and counsel of the Committee on Banking and Currency, I should like to submit this statement for the consideration of the committee in connection with its study of section 23 of title I, section 23 (g) of title II, an dsection 27 (b) of title III of the Financial Institutions Act of 1957 (H. R. 7026).

These provisions would impose various reporting and other requirements with respect to the ownership of bank stocks. I believe that if eacted in their present form these provisions would not only impose a substantial burden on brokers and other nominee holders of bank stocks, but also, by making transfers of bank stocks much more cumbersome and expensive, would impair the marketability of bank stocks.

I think I am aware of the situation and the reasoning which provoked the insertion of such measures by the Senate. I urge, however, that the desired purposes be accomplished without imposing an undue burden on the holding and transfer of bank stocks. By impairing the marketability of bank stocks, such legislation would have a detrimental effect on the capacity of banks to raise additional equity capital as required and, thus, would affect adversely the soundness of the banking structure and its ability to lend essential support to a growing economy.

The problems which would be created by the present provisions can be avoided, I believe, and adequate disclosure obtained by requirements following the pattern of section 16 of the Securities Exchange Act of 1934. This section, which, as you know, regulates equity securities registered on national security exchanges, imposes the burden of reporting on the beneficial owners rather than the record holders. I see no reason why bank stocks should be discriminated against in this respect and an added burden imposed upon the holding and transfer of bank stocks. A suggested text of provision modeled after section 16 is set forth below. This provision would require beneficial owners (whether officers, directors, or other persons) of 5 percent or more of the outstanding shares of the stock of a bank to report such ownership. Section 16 imposes this requirement on the beneficial owners of 10 percent or more, and on all officers and directors of the issuers who are beneficial owners regardless of amount. I suggest a more limited requirement in respect of bank officials for the reason

that banks customarily have a far greater number of officers than other corporations and it would seem unnecessary to require this larger number of officers to report when their respective holdings do not exceed 5 perecnt. The text of the suggested provision to which I have referred is as follows:

"Every person who is directly or indirectly the beneficial owner (but not the holder of record of more than five per centum of the outstanding shares of stock in any national bank (or in any State member bank or insured nonmember bank, as the case may be) shall, within ninety days after the enactment of the Financial Institutions Act of 1957 or within thirty days after becoming such beneficial owner, whichever is later, notify the Comptroller (or the Board) in writing of such ownership. Every person required to give such notice shall, within ten days after the close of each calendar month after the month in which such notice was given by him, notify the Comptroller (or the Board) in writing of changes in such beneficial ownership during such calendar month. Any person convicted of any willful violation of this subsection shall be fined not more than $5,000."

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DEAR JOHN: Serious objection is taken by the Arizona Association of Insurance Agents in connection with the nationwide objection of the National Association of Insurance Agents to that feature of the above act which proposes to allow that: "National banks be permitted to act as insurance agents and write insurance in cities of over 5,000 population."

Specifically, implementation of this recommendation is contained on page 37, section 45, of the 253-page committee print of a proposed Senate bill to amend and revise the statutes governing financial institutions and credit. The author of this bill is the chairman of the subcommittee, Senator A. Willis Robertson of Virginia. (No number, as yet, has been assigned to the bill.)

Title 12, section 92, United States Code, permits a national bank to act as an insurance agent in those towns where the population is 5,000 or under, the original purpose of which was to enable national banks to procure needed insurance covering the subject of the loan in those areas where insurance facilities may have been lacking. There is no solid basis for extending that authorization to cities and towns with a population greater than 5,000 as coverages to protect any mortgagee interest are readily available through established insurance agencies.

The Arizona Association of Insurance Agents firmly believes that it is detrimental to the best interests of the public to further extend the rights of national banks to carry on an insurance business. The power of credit has a tendency to influence, if not at times to coerce; to deter the borrower of his right of selection of a qualified agent of his own choice, and competitive benefits.

Like banking, insurance is a highly technical business. True insurance protection is best attained through those persons who make a specialty of the insurance business.

While we are urging our two Senators to use their influence in having the objectionable section deleted from the Financial Institutions Act of 1957, we are acquainting you with our position as a matter of information.

Respectfully,

H. W. NASON, Executive Secretary.

MILLER INSURANCE AGENCY,
Phoenix, Ariz., March 1, 1957.

FINANCIAL INSTITUTIONS ACT OF 1957

Hon. JOHN J. RHODES,

House of Representatives, Washington, D. C.

DEAR JOHN: At the present time I understand the Senate Banking and Currency Committee has under consideration a proposal to amend the Federal banking laws which would permit national banks to write insurance in cities over 5,000 population.

Under our present-day economy, insurance has become a highly technical and complex business which requires that any person, in order to do a worthwhile job for the public, must spend his full time handling insurance, and from your own personal experience, I am sure you realize they have to be highly qualified and experienced agents. Therefore, I would like to add my objection to that part of the bill which is to be found on page 37, section 45, of the committee's print of the proposed Senate bill to recommend and revise the statutes covering financial institutions and credit members.

Experience has proved that those are in a position to influence placing of insurance through the powers of credit may have the tendency to influence, or even coerce, the borrower to place insurance covering the security of a loan through a particular channel. I believe that this is not in the public interest and, therefore, this portion of the bill should definitely be deleted. Although you are not on the committee that is handling this bill, I strongly urge that you use your influence to protect the public by the deletion of section 45 of title I, chapter I, in the enactment of the Financial Institutions Act of 1957. Thank you for your help in this matter. Respectfully yours,

J. C. MILLER.

STANDARD INSURANCE AGENCY,
Phoenix, Ariz., March 1, 1957.

FINANCIAL INSTITUTIONS ACT OF 1957

Hon. JOHN J. RHODES,

House of Representatives, Washington, D. C.

DEAR JOHN: At the present time I understand the Senate Banking and Currency Committee has under consideration a proposal to amend the Federal banking laws which would permit national banks to write insurance in cities over 5,000 population.

Under our present-day economy, insurance has become a highly technical and complex business which requires that any person, in order to do a worthwhile job for the public, must spend his full time handling insurance, and from your own personal experience, I am sure you realize they have to be highly qualified and experienced agents. Therefore, I would like to add my objection to that part of the bill which is to be found on page 37, section 45, of the committee's print of the proposed Senate bill to amend and revise the statutes covering financial institutions and credit members.

Experience has proved that those who are in a position to influence placing of insurance through the powers of credit may have the tendency to influence, or even coerce, the borrower to place insurance covering the security of a loan through a particular channel. I believe that this is not in the public interest and, therefore, this portion of the bill should definitely be deleted. Although you are not on the committee that is handling this bill, I strongly urge that you use your influence to protect the public by the deletion of section 45 of title I, chapter 1, in the enactment of the Financial Institutions Act of 1957. Thank you for your help in this matter. Respectfully yours,

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