FINANCIAL INSTITUTIONS AND THE NATION'S ECONOMY (FINE) DISCUSSION PRINCIPLES TITLE I: DEPOSITORY INSTITUTIONS A coordinated approach is needed to strengthen our depository institutions. Artificial ceilings on interest rates paid to depositors reduce the incentive for Americans to save, discriminate against small savers, and have not succeeded in preventing disintermediation. All forms of depository institutions need broader and clearer powers with respect to both sources and uses of funds. More competition, and better informed depositors, borrowers, and investors, could provide an appropriate bicentennial for Adam Smith. Regulation, examination and supervision of depository institutions must be coordinated to protect depositor and stockholder interests; to provide equitable treatment of prospective borrowers; and to prevent laxity and waste of government personnel. The reformed depository institutions should be treated equally from the standpoint of taxation. All this requires that the reform of depository institutions be viewed as a totality, and not a set of disparate actions. 1. Chartering and Conversion Any federally-chartered savings and loan association that wishes to convert to a national bank charter would be permitted to do so, provided capital and other requirements are met. Any mutual savings and loan association would be permitted to convert to a stock savings and loan chartered under regulations similar to those adopted by the Federal Home Loan Bank Board pursuant to the legislation enacted by Congress in 1974. Mutual savings banks would be permitted to convert to a national bank, savings and loan, or be permitted to obtain original chartering from the federal government. Each of these permitted conversions would be supervised by the Federal Depository Institutions Commission (See Title IV-Regulatory Agencies) to assure that there would be no special advantages to insiders or other abuses arising from the conversion. In order to encourage competition, any new depository institutions would be chartered if capital and other requirements are met. 2. Sources of Funds All Regulation Q ceiling rates and the prohibition against paying interest on demand deposits would be removed by the direction of the Federal Depository Institutions Commission, according to a schedule which would avoid injury to the depository institutions affected and to the flow of capital necessary for housing, and accompanied by a method of continuing to attract deposits in a period of (1) |