as those provided by section 17 (c) (5) of regulation F of the Board of Governors of the Federal Reserve System which sets forth miscellaneous limitations on investment of common trust funds. Fundamentally, it is contrary to sound fiduciary practice to engage in self-dealing, particularly where the trustor and trustee are essentially the same. We also regard it to be inappropriate for an employee's pension to be substantially dependent upon the continued success of his employer. In any case where it is necessary for a bank to increase its capital stock by means of a sale of new shares, ownership of a major portion of the existing capital stock by an employees' trust fund, which may not be in a position to purchase more stock, could impede if not prevent an increase in capital which might be necessary for the continued welfare of the bank and the protection of the interests of its depositors. Furthermore, if the bank is sole trustee, it is prohibited by title 12, United States Code, section 61 (U. S. R. S., sec. 5144), from voting such shares held in trust in the election of directors, except under certain circumstances. If these circumstances are met and a substantial portion of the stock of the bank is held in trust, it may become possible for the management of the bank to perpetuate itself in office. This perpetuation of management could also occur through the influence of directors and officers upon employees, if they, instead of the bank, are trustees of the fund.

(5) Statutory authority exists under which the Comptroller of the Currency may examine trust departments of national banks and in any case where such a department is acting as trustees of an employees' pension, profit-sharing, welfare or benefit trust, the administration of such trust funds may be examined. However, when the bank is not trustee and such funds are under a trusteeship composed of directors, officers, employees, or others, statutory authority does not exist which would permit examination into the administration of such trusts. Even though under these circumstances the administration of the trust is not a direct responsibility of the bank, because of the fact that its trustees (other than an independent corporate trustee) are closely connected with the bank and in a position to be influenced by those who formulate and administer its policies, the bank might be held liable for any loss which may occur in such a trust fund by reason of unsound acts of its directors, officers, or employees who also serve as trustees and whose interest is divided between the bank and the trusteeship. The probability or likelihood that under adverse circumstances the trustees may be charged with self-dealing and the bank held liable make it advisable that statutory authority be provided under which the affairs of such trust may be supervised.

Senator ROBERTSON. The Chair is glad to recognize his distinguished colleague from Maryland, Mr. Beall, if he wishes to ask any questions. Senator BEALL. Thank you, Mr. Chairman. There are a couple of questions I would like to ask Mr. Gidney.

First, have any of the State bank supervisors objected to your recommendation No. 5, which would prohibit State banking authorities from examining and licensing national banks?

Mr. GIDNEY. Mr. Beall, I think no one has sent any objection to us. As noted in my remarks the superintendent of banks of New York wrote us a letter saying he had recognized it would not be necessary to license a national bank in New York State for this purpose. We have the question under discussion with another State superintendent. I think up to now the State bank supervisor has not been willing to accept our assurances that we would do an adequate job of examination, and to withdraw his request to have his people go in. We have not up to now indicated we would consent to having his people go in. That is at issue.

Mr. JENNINGS. I might point out that the matter has arisen in the following States: New York State, Pennsylvania, Kansas, Indiana, Michigan, Wisconsin, New Mexico, Nebraska, and Iowa. In a majority of such cases our national banks have paid the license fee. In only one instance are we faced with at least the possibility of the State insisting its examiners be permitted to go into the national banks to examine that particular phase of the national banks' activities.

Senator BEALL. Thank you. This is a question that might not be unusual, particularly at this time of the year. Could the language of recommendation No. 6 be interpreted to permit use of bank funds for contributions to political organizations?

Mr. GIDNEY. Mr. Chairman, I have never known it to happen. Probably I should refer that to counsel, but there is a specific prohibition in the National Bank Act against national banks making contributions for political purposes, and I do not believe that this could be interpreted to authorize such contributions.

Senator BEALL. Do you feel that section 610 of title 18 should be made more restrictive?

Mr. GIDNEY. This would make it less restrictive.
Senator BEALL. Less restrictive?

Mr. GIDNEY. Yes. I am particularly hopeful we could have the amendment for the educational institutions. As you know, corporations have awakened to their responsibilities in that field, and have made generous contributions and are doing so. I think the banks ought to be or ought to keep abreast of the other corporations in that

matter.

Mr. ROGERS. Mr. Gidney, I think you inadvertently made a misstatement. Your recommendation does not amend section 610. Section 610 is the general section against political contributions by national banks.

Mr. GIDNEY. That is right. Mr. Jennings says it does not.

Mr. ROGERS. The question was whether section 610 should be made more restrictive.

Mr. GIDNEY. Oh, I did not get that. No, I do not think that it needs to be any more restrictive. Judging from some things I have heard recently maybe there should be corresponding restrictions on State institutions, but I think the provision on national banks is clear. Senator BEALL. Are State banks prohibited from doing it? Mr. GIDNEY. I do not know.

Senator BEALL. I never heard of any.

Will you explain the relationship between the provisions regarding bank mergers contained in recommendation No. 8 with recommendation No. 42, which also deals with bank mergers? Is there any conflict between the language of the two recommendations?

Mr. GIDNEY. I think not. No. 8 deals with the technical provisions. No. 42 has to do with the competitive or antitrust aspects.

Senator BEALL. There is no conflict.

Mr. GIDNEY. I should say that is right. No. 8 provides improvement and uniformity in the technical provisions, and that is all we are asking for there, is it not?

Mr. JENNINGS. That is correct, Mr. Gidney. It deals with things like the appraisal procedure. The sale of the shares that have been turned in by dissenters; preemptive rights, and matters like that. They are all technical and the two statutes would not conflict.

Senator BEALL. In regard to the second part of recommendation 17, has there been any occasion where the right of shareholders to inspect shareholders' lists has been abused since banks became subject to regulation in the public interest? Do you know who all of the stockholders are?

Mr. GIDNEY. Yes. I think there have been cases. I could not give you a full citation of them but I could illustrate by recent contacts with

certain very good and quite large banks, where I believe a certain gentleman bought 1 share of each and demanded the list. They asked him why he wanted the list and he said he wanted to arrange the sale of the bank. They put in a lot of time in one of the banks permitting him access to the records and making up his list.

Senator BEALL. They did give it to him?

Mr. GIDNEY. Well, they did not stop him. The list was so big that I do not think he ever got it completely. I think the other bank managed to persuade him not to go through with it. I would say that that was clearly an improper desire to use the list. He was less than a real stockholder. I guess he is a real stockholder as soon as he gets one share, but I do not think he was a stockholder of such standing that he should have been able to obtain the list.

Now, he might have had quite a few more shares than that and the request still would have been improper because his purpose, as he explained it, was to arrange the sale of the bank. Neither bank was for sale and neither bank needed to be or should be sold. It was a completely unreal explanation of his wish to examine the records and to have the list. What other reason he may have had, no one knows. Senator BEALL. Mr. Chairman, that is all for the moment. Thank you.

Senator ROBERTSON. Mr. Gidney, with respect to your recommendation No. 17, would you object to a provision requiring the banks to notify you when there is a change in the ownership of a substantial amount of stock, or a change in the control of the bank?

Mr. GIDNEY. A change in the control would be practical. I think a change of an important amount might be practical. All changes would be of so large a volume that there is no way in the world that we could use it effectively. We do, Senator, acquire knowledge of those things in the course of our examinations.

Unhappily, when changes are in the wrong direction we do learn of them all too soon-all too soon for comfort, not all too soon for practical purposes.

Senator ROBERTSON. Do you believe that your recommendation No. 28 should be amended to include recommendation No. 58 of the Federal Reserve Board, so that the reporting requirements of the Comptroller and the Federal Reserve Board would be uniform?

Mr. GIDNEY. That is No. 28. I would have to go-I do not know. Do we have a discussion on that?

Mr. JENNINGS. That is the change from 5 to 10 days for all reports of condition.

Mr. GIDNEY. We did not put that in the ones I discussed. I think the recommendation referred

Mr. JENNINGS. I can say this: We do not believe that No. 28 would be in conflict with the suggestion made by the Board of Governors of the Federal Reserve System. This is merely a matter that provides the national banks of the country 10 days in which to submit their call reports of conditions to the Comptroller, rather than 5 days. We do not believe there is anything in the Board of Governors' suggestion that would conflict with it.

Mr. GIDNEY. Yes, sir. No. 28 has simply deleted the word "five" and substituted the word "ten." You recognize that in present-day times with Saturdays, holidays, and all that kind of thing, they need 10 days.

Senator ROBERTSON. The Chair will let the counsel ask a question. Mr. ROGERS. Mr. Gidney, Senator Robertson's point there is that recommendation 58 provides for a new standardization of forms for different classes of banks.

Mr. GIDNEY. Yes, sir.

Mr. ROGERS. So that you would not require the same type of a report for a large city bank as for a rural bank?

Mr. GIDNEY. I do not think it is our recommendation.

Mr. ROGERS. No, it is not. Your recommendation is simply on the call report.

Mr. GIDNEY. And No. 29 is on the report of dividends and net earnings.

Mr. ROGERS. Yes, but what we want to know is whether we should make your report uniform with the report required from the Federal Reserve State member banks.

Mr. JENNINGS. We have always been able to work out on a uniform basis, in cooperation with the Board of Governors, reports that satisfy us and satisfy them. We would not anticipate any problem on that score.

Mr. ROGERS. You would have no objection then to the Federal Reserve's recommendation?

Mr. JENNINGS. We would want to have a very definite part in the picture in deciding the form. We would not want them to be in complete charge of it, but I do not believe that would ever arise.

Mr. GIDNEY. We have been able to coordinate and to come out with a uniform call report. I think our examination reports are practically uniform, but we would not like to be under their absolute domination on that, because sometimes we have ideas a little different. Mr. ROGERS. Your recommendation is to provide for 10 days. The Federal Reserve Board has no time limit. It is purely in their discretion. Would that be more satisfactory?

Mr. JENNINGS. Not in my opinion. We believe that the 10-day rule serves a definite purpose. We need the reports after the call datevery soon after the call date-and if no date was set and the number of days not established, some of them would be dragging in for possibly weeks and months.

Mr. ROGERS. If you had discretion within 10 days or 15 days, without having it written in the statute as the Federal Reserve Board has it, is what I mean.

Mr. JENNING. I think that would be satisfactory.

Mr. ROGERS. What I want to point out is, all through this we are attempting to make the regulations of the various agencies, the three agencies, as uniform as possible on similar points.

Mr. JENNINGS. Yes.

Mr. GIDNEY. I think that would be better, in fact. This 5-day rule is a pretty cramping limitation and we know perfectly well in many cases the banks cannot prepare the reports in 5 days. So that would be a good change.

Senator ROBERTSON. Mr. Gidney, would you prefer a change in the law so a deputy could serve for you on the Federal Deposit Insurance Corporation Board, when you are out of town, or a change in the law to have just a one-man FDIC?

Mr. GIDNEY. Could you give me notice of that question?

Senator ROBERTSON. I think as we used to do in the House, you can extend your remarks on the record, I am quite sure, if it is embarrassing to you.

As to the technical drafting of a banking code, would you prefer all of the national banking laws to be taken out of the Federal Reserve Act, and all of the Federal Reserve laws taken out of the Banking Act, and have a separate Banking Act and a separate Federal Reserve Act? It would be a part of the Banking Code?

Mr. JENNINGS. Yes.

Mr. GIDNEY. I think I would prefer that, but I recognize it as a considerable additional task, I assume. Mr. Rogers would know better than I. Of course, we, in working up our material, have gone along the line of amending the existing statutes and not trying to change their location. We have grown used to existing references and know where to find them, and for a time we might be less happy with the codified job than we are at present, but in principle I think it would be desirable.

Senator ROBERTSON. You are, of course, aware of the fact that in selecting an advisory committee I limited the committee to commercial banks and those closely related agencies like the Federal home loan banks and the credit unions. I did not select any representative of investment bankers. They thought I had overlooked them because they anticipated that sooner or later a proposal would be made to insure that we include in the new code a provision for banks to underwrite general revenue bonds.

Do you wish to make any comment on that? You did not make that recommendation. A number of the Federal agencies made that recommendation, but I see some investment bankers in the audience and I think they are listening very intently to see what you have in mind on that subject.

Mr. GIDNEY. Mr. Chairman, I would not feel that I could make a recommendation on that unless and until the Treasury Department had gone over it and adopted a Treasury Department position. It has been considered a great deal. We have set down the considerations which are favorable to the proposal and the considerations which are advanced against it. We think the factors are rather closely in balance and we have not up to now been able to persuade our colleagues in the Treasury Department to take a position on it.

If the committee should wish it, I think we could endeavor to come to a conclusion, but I think I should not take a position at this time. Senator ROBERTSON. The Chair is glad to recognize our distinguished colleague from Illinois, Senator Douglas.

Senator DOUGLAS. Section 610 of the National Banking Act, Mr. Gidney, prohibits political contributions by national banks. Mr. GIDNEY. I believe so. Yes, sir.

Senator DOUGLAS. Do your examiners examine the national banks to see whether or not this provision is being violated?

Mr. GIDNEY. Their examination should.

Senator DOUGLAS. Have they found any instances of where it is being violated?

Mr. GIDNEY. We have found some contributions in small amounts to so-called welfare funds which are questionable.