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vested. That is approximately twice what they had invested a year ago. Last year it was about $11,000,000.

We feel that they have come in on the basis of the existing legislation, and unless there is some very strong reason, it should not be changed. I do not think the Federal Reserve precedent is compelling, Senator Bulkley, for this reason. In the case of the Federal Reserve banks, you have turned over to those banks—properly so, no doubt—a most important responsibility, namely, the control of the issue of the currency of this country. It is much more of a public function than it is a business function. These 12 home-loan banks function exclusively as business organizations under the supervision and control of a Federal board. The law gave very broad powers to the Federal board. As a matter of fact, they have more power over these twelve banks than any other financial board in Washington has over its constituent financial institutions around the country.

There are some who feel that perhaps we gave too much power, but I do not share that belief. I do feel, however, that the system would be best in the long run if we have a strong central board with broad powers, and ultimately get the control and management of these 12 banks predominantly in the hands of the membership of the system. I believe rather strongly in the decentralization of control of these things. You could spend 15 minutes here listing all the various powers the board has. They control the rate at which the banks lend. They can remove personnel. They have to approve the officers before we can finally appoint them. They select the chairman and a vice chairman the leaders of the board. They select two public-interest directors on each board, and they lay down the whole procedure for examination twice a year. I do not think they need any additional influence to coordinate and carry the system along. It would have a very bad psychological reaction among the membership of the system if a change were made.

With regard to the advisory council, we are very anxious for that statutory recognition of the principle that the membership of the system should have some orderly way in which to express its judg. ment as to the operations of the system. The proposal was originally made by our organization. Our original proposal was for a council which was selected by the membership of the system rather than from among the appointees of the central board. We patterned our proposal originally, and we do now on the Federal Reserve advisory council, in section 12 of the Federal Reserve act. As a matter of fact, we take practically the identical language regarding meetings and the set-up of the thing. We were very happy when the House concurred in our judgment on the matter, and we hope you will concur also.

The next section that probably merits any comment from me in this bill

Senator TOWNSEND. Referring now to the House bill? Mr. BODFISH. I am referring to the House bill. That is section 8. Mr. Friedlander discussed it briefly, and I would like to try, for the record, to further clarify our exact position. He brought out very satisfactorily the fact that we have no desire to place the examination


fees of this Board under the appropriation machinery. On the other hand, the board levies assessments on the 12 Home Loan Banks. This year they total $300,000 on these 12 banks, which are paid out of the earnings of the 12 banks. There is no variation, particularly, in those expenses, except as the Board expands its personnel and its activity, and we see no reason why they should not go through the regular routine or procedure of Congress. In fact, we would feel very much better if it did. We have no particular complaint regarding the assessments, but, as the banks have to pay the bill, we would feel a little better if we had an impartial place to go if we felt that the assessments were becoming unduly high in relation to the earning capacity of the banks. We have no taste, however, for the broad language in H. R. 16021. The House went too far on the question, in our judgment.

Commenting on section 10, involving further applications in the Home Owners' Loan Corporation, the only further comment that I should like to make there is this, gentlemen. It is impossible for private lending institutions to get borrowers when the Government is actively lending in the mortgage field. The public just will not apply, and sooner or later you have to say “ We are going to stop here, and let private institutions take it up." They cannot take up the load while you are still lending.

Senator BUCKLEY. Nobody is contesting the position that we are going to stop sooner or later, and say so. The most extreme suggestion that has been made is that there should be 60 days allowed for additional applications.

Mr. BODFISH. Ì think that should be considered very carefully. We enrolled all the man power of the country in 2 days for the draft once. I think, if you open it up for 60 days, the Corporation will take 2 or 3 billion dollars worth of applications, and you gentlemen will have to give them another one or one and a half billion to service them.

Senator BULKLEY. What do you say about the provision as it was written in the House ?

Mr. BoDFISH. I think the House attempted to do a middle ground, and rather fair thing. After all, if an applicant came and he said he wanted a loan, and the Corporation was out of money, it seems only fair to taper it off by giving him a further opportunity. People who were in distress would have 24 months' opportunity to make their applications. I think it is a middle-ground provision.

The State supervising authorities feel very strongly regarding section 16, and we do also. That provides for the purchase of shares in State-chartered institutions.

Senator TOWNSEND. As written in the House. Mr. Bodfish. As written in the House, it is entirely satisfactory. That was language that we worked out with that group.

In section 21 I want to invite your attention to the fact that the language providing for the original F. H. A. had an unwise and unsound provision in it that if an association had to make any charge-offs to its reserves that it had accumulated to pay losses, it could not pay any dividend. That might be all right in shares in a bank or something of that kind, but in our institutions they are all

small shares. If you have a $2,000,000 building and loan association, you have 2,000 or 2,200 shareholders, and even though you had accumulated 10-percent reserve, if you made a charge-off to those reserves you could not pay the 2,000 any earnings in that period.

Senator BULKLEY. As I understand it, you are for section 21 as it is written, and your remark is to stress the importance of it.

Mr. BODFISH. To stress the importance of it. The proposal in the administration bill is that an exception be made, and that you get your dividend approved in Washington in case you want to make a charge-off. We think that is entirely impracticable.

I think that on the other matters we are very much in agreement.

Section 24 is rather important, and the Federal Board has no objection to it, as I understand it. We are taking no position on the provisions dealing with the F. H. A.

There is one section that we would like to have added to the bill, and then I will terminate my testimony. The original title IV of the Housing Act, which provided for the insurance of shares, had a special provision with regard to withdrawals from the insurance. You had to pay three years additional premiums if you withdrew voluntarily, or if they ejected you for some reason you paid 5 years additional penalty premiums.

We are willing to concede that institutions should not be permitted to withdraw captiously. We are perfectly willing to pay a 1-year penalty premium for the privilege of withdrawing, or even 2 years would be better than 3 or 5.

I invite your attention to the fact that in the administration banking bill-supposed to be the administration bill—which provides for a 2-year withdrawal privilege or penalty if institutions desire to withdraw. We feel that institutions would be much more inclined to use the Savings and Loan Insurance Corporation if they felt that they could get out on a reasonable basis. We have had rather strennous objection to the 3- and 5-year provision, and we object even more strenuously to the rules and regulations the Board adopted carrying out the provisions of Congress.

Senator BULKLEY. You accept the principle, but you think the provision in the law is a little severe?

Mr. BODFISH. It is entirely too severe.

I think, Mr. Chairman, that Mr. Friedlander's statement, together with my own, put our views before the committee. We think that if we can have early passage of the bill in the House form our building and loan business will begin to get going. We have improved more in the last 4 or 5 months than in the previous 4 years. We feel that this legislation perfects the three existing statutes dealing with home mortgages, and that we can get going and make a creditable showing in the next 12 months if this legislation is passed. We feel that further applications to the Home Owners' Loan Corporation, if the thing is thrown open, will set us back very substantially.

Savings, building and loan associations in United States, 1933

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1. New Jersey 2. Pennsylvania 3. Ohio. 4. Massachusetts 5. Illinois. 6. New York 7. California 8. Indiana.. 9. Wisconsin. 10. Maryland 11. Missouri. 12. Louisiana. 13. Michigan 14. Nebraska. 15. Kentucky 16. Kansas 17. Texas. 18. Oklahoma 19. District of Columbia 20. North Carolina.. 21. Washington.. 22. Virginia 23. Iowa... 24. Minnesota.. 25. Colorado.. 26. Rhode Island 27. West Virginia. 28. Arkansas. 29. Connecticut. 30. Maine. 31. Alabama.. 32. Utah 33. South Carolina 1 34. Oregon.. 35. Tennessee, 36. Delaware. 37. Montana 38. New Hampshire. 39. Florida 40. North Dakota. 41. Mississippi.. 42. Wyoming 43. Georgia 44. Idaho. 45. South Dakota 46. Vermont. 47. Hawaii 48. New Mexico. 49. Nevada.. 50. Arizona hori

15, 470 57, 617 245, 402 39, 909 25, 500 49, 288 144,000 34,000 14, 535 17,000 29, 250 15, 234 32, 968 14, 100 11, 500 19, 330 19, 515 26,397 7, 715 5,038 3,000 2, 248

? 336 5,000 1, 601 3, 280 19, 787

842 1, 635 2, 750 40, 023 12,000

2, 400 ? 2, 170

1,070 6,967

461 1,030 2 2,601 18, 263 3,000

450 : 1, 900




5, 418, 676 76, 445
11 28, 012

5, 288, 989 2 79, 711

4, 316, 562 400, 927

2, 281 1, 246, 345 2 62, 415

1,600 600,000 3,647, 141 10, 727 9, 224, 105 6,977, 531, 676 772, 959, 408

463 2 15, 478

450 2616 4, 430 890, 687

1 Estimated.

? Increase.

February 13, 1935.


ASSEMBLED, RE H. R. 5531 AND S. 1771


The following suggestions for the amendment of H. R. 5531 and s. 1771 are submitted and their consideration respectfully urged on behalf of the savings, building and loan associations of the United States. Such amendments, in the judgment of the petitions, will not only perfect and make more useful existing legislation and administrative procedure, but will substantially aid in the encouragement of thrift and in making possible the building, owning, buying, and refinancing of homes.

This petition is presented by the United States Building and Loan League, a national organization founded in 1892, representing over 4,000 individual institutions, 46 State leagues and over 75 percent of the assets in this type

of thrift and home-financing institutions. These associations have 9,000,000 investing members and nearly 2,000,000 persons are acquiring homes through their facilities. Over 95 percent of the assets represented in the Home Loan Bank System are affiliated with the League. The League is joined in these recommendations by the national organization of State supervisory authorities, who have participated in their preparation. COMMENTS AND RECOMMENDATIONS Re: H. R. 5531 AND S. 1771 (SECTION BY



Satisfactory in present form.


Probably satisfactory in present form. This is proposed by the Federal Home Loan Bank Board and has not been discussed or considered by our organization or member associations. The initial reaction of the leaders of the organization is to prefer to continue to pay the Government for such funds as are made available to the system. If the Federal Home Loan Bank System is to succeed, it must be a financially-sound business operation and also must be able to pay the expenses of the supervisory board in Washington. To date the system has paid the Government over $2,600,000 for the use of the Government funds which are very safely invested. The amendment can be justified on an emergency basis.



Amend by striking out the entire section 3 of H. R. 5531 and S. 1771,


There are a number of compelling arguments against this proposal of the Federal Home Loan Bank Board.

1. The Government is represented now by two public interest directors on each board, selected by the Federal Home Loan Bank Board, which also appoints the chairman and vice chairman (who are, therefore, the leaders in the boards). In addition, the Federal Home Loan Bank Board itself is exclusively a Government-appointed and controlled board, which has as substantial control over the activities of the 12 banks as any other financial board in Washington has in its particular field. The Federal Home Loan Bank Board not only has complete powers of supervision, and broad powers of regulation, but it controls the banks even in some of their most detailed policies through approval of appointment and compensation of bank officers, power to remove directors and officers, power to assess the banks without limit and power to prescribe forms, routine and procedure. Recently the board has taken over the direct employment of the examining personnel of the banks.

2. The only argument for change at this time is that the Government has approximately $80,000,000 invested in stocks in the banks, while the members' investment now totals approximately $22,000,000. The facts are that the Government's capital has been carefully husbanded, thoroughly protected and honorably managed. It was contemplated in the original statute that the stork subscribed by members would continue to increase until the banks had a sufficiently strong structure to retire Government capital completely. In spite of the severest depression in history, not a month has passed in which the investment of members has not increased. As the volume of credit in the banks expands, this increase of members' capital should be accelerated.

3. Membership in the system is voluntary. Hundreds of institutions invested in the capital stock with both business and patriotic motives. Their rights to participate in management should not be changed without long and thoughtful study of the question.

4. It seems also, when the banks are being well managed, that it would be " bad psychology ” to make a change which eliminates three directors who have been elected by the members. After all, these are men who have taken

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