be subject to the restrictions or limitations of this section upon loans secured by real estate. Recommendations (1) Amend the statute to enable national banks to make loans to finance the construction of industrial or commercial buildings for terms of not more than 18 months where there is a valid and binding agreement entered into by a financially responsible lender to advance the full amount of the bank's loan upon completion of the buildings, without such loans being regarded as real estate loans, and to increase the aggregate limit on construction loans from 50 percent of capital to 50 percent of capital and surplus. (2) Amend the statute to permit national banks to make loans on leaseholds which have at least 10 years to run beyond the maturity date of the loan. (3) Amend the statute to permit national banks to make loans to finance the construction of buildings upon the security of purchase contracts entered into pursuant to the provisions of the Public Buildings Purchase Act of 1954 or the Post Office Department Property Act of 1954, without regard to the provisions of the section concerning loans on real estate. (4) Amend the statute to permit national banks to make working capital loans to manufacturing or industrial enterprises secured by liens on the physical properties of the enterprise, including plant real estate, without such loans being regarded as real estate loans. Loans for the purpose of financing the construction of such plants, or to refinance existing mortgage indebtedness on such plants, must be regarded as subject to all pertinent provisions of this section. Reasons (1) Loans to finance the construction of industrial or commercial facilities having maturities of not more than 18 months where there is a valid and binding agreement entered into by a financially responsible lender to advance the full amount of the bank's loan upon the completion of the buildings are safe and desirable loans which national banks are now unable to make. Permitting them to make such loans would enable them to better compete with State banks in the financing of the construction of industrial and commercial facilities. If this legislation is enacted it will be desirable and necessary to raise the aggregate limits on construction loans. (2) Present restrictions on leasehold loans have proven unrealistic and the present provision of law has been of little benefit either to national banks or to prospective borrowers. It is believed the restrictions can be liberalized without danger to the banks. (3) Enactment of this legislation is necessary to aid the General Services Administration and the Post Office Department in securing financing for the construction of public buildings. (4) Manufacturing and industrial companies or firms regularly borrow money for working capital purposes from national banks. In some cases, because of moderate credit weaknesses which must be assessed with great care because of the size of the loan and its repayment terms, and which could become more acute under adverse conditions or circumstances, it is considered prudent judgment on the part of bankers to require a collateral mortgage on the actual plant of the bor rower. The loan is based on the premise that it will be used for normal working capital purposes and will be repaid from profitable operations, the liquidation of inventory or receivables, etc. The plant has, in most instances, salvage value only if it cannot be operated on a profitable basis. Such loans are in reality commercial loans and represent ordinary business financing. Such loans should not be treated as real-estate loans subject to the provisions of section 24 of the Federal Reserve Act (12 U. S. C. 371). The reasons behind that statute and the purpose for which the statute was deemed desirable do not apply in the case of this type of loan which will be liquidated in a normal business way, barring unforeseen reverses. 36. DEPOSITS BY PERSONS OR CORPORATIONS NOT SUPERVISED BY ANY STATE AUTHORITY Existing law Title 12, U.S. C., sec. 378 (Banking Act of 1933, sec. 12, as amended by Banking Act of 1935, sec. 303).-(a) After the expiration of one year after the date of enactment of this Act it shall be unlawful (1) For any person, firm, corporation, association, business trust, or other similar organization, engaged in the business of issuing, underwriting, selling, or distributing, at wholesale or retail, or through syndicate participation, stocks, bonds, debentures, notes, or other securities, to engage at the same time to any extent whatever in the business of receiving deposits subject to check or to repayment upon presentation of a pass book, certificate of deposit, or other evidence of debt, or upon request of the depositor: Provided, That the provisions of this paragraph shall not prohibit national banks or State banks or trust companies (whether or not members of the Federal Reserve System) or other financial institutions or private bankers from dealing in, underwriting, purchasing, and selling investment securities to the extent permitted to national banking associations by the provisions of section 5136 of the Revised Statutes, as amended (U. S. C., Title 12, sec. 24; Supp. VII, Title 12, sec. 24): Provided further, That nothing in this paragraph shall be construed as affecting in any way such right as any bank, banking association, savings bank, trust company, or other banking institution, may otherwise possess to sell, without recourse or agreement to repurchase, obligations evidencing loans on real estate; or (2) For any person, firm, corporation, association, business trust, or other similar organization to engage, to any extent whatever with others than his or its officers, agents or employees, in the business of receiving deposits subject to check or to repayment upon presentation of a pass book, certificate of deposit, or other evidence of debt, or upon request of the depositor, unless such person, firm, corporation, association, business trust, or other similar organization (A) shall be incorporated under, and authorized to engage in such business by, the laws of the United States or of any State, Territory, or District, or (B) shall be permitted by any State, Territory, or District to engage in such business and shall be subjected by the law of such State, Territory, or District to examination and regulation, or (C) shall submit to periodic examination by the banking authority of the State, Territory, or District where such business is carried on and shall make and publish periodic reports of its condition, exhibiting in detail its resources and liabilities, such examination and reports to be made and published at the same times and in the same manner and under the same conditions as required by the law of such State, Territory, or District in the case of incorporated banking institutions engaged in such business in the same locality. (b) Whoever shall willfully violate any of the provisions of this section shall upon conviction be fined not more than $5,000 or imprisoned not more than five years, or both, and any officer, director, employee, or agent of any person, firm, corporation, association, business trust, or other similar organization who knowingly participates in any such violation shall be punished by a like fine or imprisonment, or both. Recommendation This section should be amended to prohibit the receipt of deposits by any person, corporation, etc., even though incorporated under, and authorized to engage in the business of receiving deposits by, the laws of any State, Territory, or district, unless subjected to the banking laws of such State, Territory, or district. Reason Recently a corporation incorporated under the laws of Texas was engaged in receiving deposits and was offering to pay 5 percent interest on such deposits. Upon investigation the Comptroller found that while this corporation was duly incorporated under the laws of the State of Texas its deposit activities were not supervised or regulated. The banking commissioner of Texas disclaimed jurisdiction on grounds that the company was incorporated under the insurance laws of Texas. The insurance commissioner stated that his jurisdiction was limited to regulating the insurance activities of this company and did not extend to regulation of its deposit activities. The Comptroller submitted the matter to the Department of Justice for a determination of whether this statute was being violated, and was advised that there was no violation. Subsequently, this company became bankrupt with loss to its depositors. Amendment of this statute in the manner suggested would prevent a recurrence of this situation. 37. CONTRIBUTIONS BY THE FEDERAL DEPOSIT INSURANCE CORPORATION AND THE FEDERAL RESERVE BOARD TO THE COMPTROLLER Existing law Title 12, U. S. C., sec. 482.-The Comptroller of the Currency shall fix the salaries of all bank examiners and make report thereof to Congress. The expense of the examinations herein provided for shall be assessed by the Comptroller of the Currency upon national banks in proportion to their assets or resources. The assessments may be made more frequently than annually at the discretion of the Comptroller of the Currency. The annual rate of such assessment shall be the same for all national banks, except that banks examined more frequently than twice in one calendar year shall, in addition, be assessed the expense of these additional examinations. In addition to the expense of examination to be assessed by the Comptroller of the Currency as heretofore provided, all national banks exercising fiduciary powers and all banks or trust companies in the District of Columbia exercising fiduciary powers shall be assessed by the Comptroller of the Currency for the examination of their fiduciary activities a fee adequate to cover the expense thereof. Recommendation It is recommended that this statute be amended to provide that the Federal Deposit Insurance Corporation shall pay to the Comptroller of the Currency annually an amount equal to 50 percent of the expense incurred by it in examining State nonmember insured banks, and the Board of Governors of the Federal Reserve System shall pay to the Comptroller of the Currency annually an amount equal to 50 percent of the expense incurred by it and by the Federal Reserve banks in examining State member banks, and that the expenses of the Comptroller of the Currency not otherwise provided for shall be assessed by the Comptroller of the Currency upon the national banks in proportion to their assets and resources. Reasons National banks now bear the full expense of the supervision and the examinations which they receive from the Comptroller's Office. The entire expenses of the Comptroller's Office are paid out of assessments levied on national banks. State banks, on the contrary, which are supervised and examined by the Board of Governors of the Federal Reserve System, or the Federal Deposit Insurance Corporation, do not bear directly any of the expense of such Federal supervision and examination. In the vast majority of cases State banks are examined jointly by the State authorities and by the examiners of the Federal Reserve banks or the Federal Deposit Insurance Corporation. In many States such examinations are conducted only once a year. By conducting joint examinations with Federal examiners State banking departments are enabled to operate with substantially smaller staffs. and at less expense to the banks. Thus State banks are to some extent subsidized by the Federal Government through the Federal Reserve System and the Federal Deposit Insurance Corporation, and they get the benefits of Federal supervision and examination at no direct cost to them. All national banks in the continental United States are members of the Federal Reserve System and are insured by the Federal Deposit Insurance Corporation. All of the funds of the Federal Deposit Insurance Corporation are derived from insurance assessments on insured banks including national banks. Thus national banks through their payments to the Federal Deposit Insurance Corporation are paying part of the cost of examining State banks. This inequity should be eliminated. In some States the examination fees are very much less for State banks than for national banks particularly in the case of larger banks. This is an incentive for national banks to leave the national system and convert into State banks. Through the payments suggested in the proposed amendment the examination fees assessed to the national banks by the Comptroller of the Currency could be reduced, thus restoring a more equitable balance between the State and National systems. 38. FURNISHING CONFIDENTIAL INFORMATION TO FEDERAL Existing law Title 12, U. S. C., sec. 1091.-In order to enable each Federal intermediate credit bank to carry out the purpose of this subchapter, the Comptroller of the Currency is hereby authorized and directed, upon the request of any Federal intermediate credit bank, (1) to furnish for the confidential use of such bank such reports, records, and other information as he may have available relating to the financial condition of national banks through or for which the Federal intermediate credit bank has made or contemplates making discounts, and (2) to make through his examiners, for the confidential use of the Federal intermediate credit bank, examinations of organizations through or for which the Federal intermediate credit bank has made or contemplates making discounts or loans: Provided, That no such examination shall be made without the consent of such organization except where such examination is required by law: Provided, That any organization, except State banks, trust companies, and savings associations, shall, as a condition precedent to securing rediscount privileges with the Federal intermediate credit bank of its district, file with such bank its written consent to its examination as may be directed by the Farm Credit Administration by farm credit examiners; and State banks, trust companies, and savings associations may be in like manner required to file their written consent that reports of their examination by constituted authorities may be furnished by such authorities upon request to the Federal intermediate credit bank of their district. Each Federal intermediate credit bank shall be examined and audited at least once each year by the Farm Credit Administration, and the results of such examination and audit shall be made public by the administration. Recommendation It is recommended that the first part of the first sentence through the words "required by law" be repealed. Reasons Federal intermediate credit banks are chartered and supervised by the Farm Credit Administration which under 12 U. S. C. 1095 is presently authorized to call upon the Comptroller of the Currency to make available in confidence reports and information relating to the condition of any national banking association to which the Administration or Federal intermediate credit bank contemplates making a loan or for which it has discounted or contemplates discounting paper, or which it is using or contemplates using as a custodian of securities or other credit instruments, or as a depositary. The individual Federal intermediate credit banks from time to time request the Farm Credit Administration to obtain from the Comptroller of the Currency the type of information referred to in 12 U. S. C. 1091 and 1095 and such necessary information is made available to the Farm Credit Administration. The Comptroller of the Currency prefers to make such confidential information available to the supervisory authority, the Farm Credit Administration, rather than to the individual Federal intermediate credit banks, and as this practice has been followed administratively, it is recommended that 12 U. S. C. 1091 be amended as recommended above. |