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institution, and to meet this requirement the Corporation must furnish cash to that institution to support the transferred accounts.

To date, cash in practical effect, has been used in all settlements by both insurance corporations. The amendment we propose, like the revision of the FDIC Act contained in the pending bill, will put an end to the misunderstandings which the alternatives in the present statutes governing settlements by both Corporations have caused the public.

The amendment we have proposed is substantially identical to the language contained in section 11 (f) of the pending bill, except for the omission of the words "subject to withdrawal on demand." ́As is well known, financial institutions of all types accepting savings or time moneys, including savings associations, cooperative banks, mutual savings banks and commercial banks, are operated under statutes which, almost without exception, contain provisions for deferring payment of withdrawals in time of emergency, or upon the initiative of the boards of directors of such institutions, or upon direction from the State or Federal supervisory authorities having jurisdiction. Thus, no financial institution is in a position where it may legally accept savings accounts or time deposits on the representation that such moneys are "subject to withdrawal on demand.'

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In constructive spirit, therefore, we suggest that the inclusion of those words in section 11 (f) would limit the number of instances where the Federal Deposit Insurance Corporation might make a settlement on the alternative basis of a transferred account, since, in the case of a closed savings bank or where the time moneys in a commercial bank are involved, it would not be able to provide such depositors with new accounts of the same type and in the same kind of institution, "subject to withdrawal on demand."

Effort is occasionally made by insured financial institutions of all types to demonstrate to the public that one or the other Insurance Corporation settlement, as the case may be, is more advantageous because of an assumed difference in the settlement provisions. For this reason, we regard it as particularly important that the committee provide for identical provisions in the settlement sections relating to the two corporations. Specifically, then, we urge that the phrase "subject to withdrawal on demand" be excluded in both cases.

We also draw the committee's attention to the provision contained in section 3 of the bill, beginning at line 24 on page 64, which would impose a criminal penalty on the use of the term "federally insured." This language would appear to prohibit savings associations whose accounts are insured by the Federal Savings and Loan Insurance Corporation from advertising that their accounts are "federally insured."

The Federal Savings and Loan Insurance Corporation, under its authority to regulate and supervise the advertising of institutions insured by it, has not heretofore listed the phrase "federally insured” as objectionable. Such insured savings associations as have used the phrase have done so in the belief that it is appropriate and in the public interest to let the people know that insurance of their accounts is under the sponsorship of the Federal Government.

Of the 2,800 savings associations presently insured, numbers of them have on hand inventories of advertising material containing the phrase, representing a substantial investment in their advertising

budgets. In other instances, this phrase appears on signs erected on the interior or on the exterior of their offices, the removal of which would entail considerable expense. Moreover, when H. R. 6743 was pending before the House of Representatives, a similar prohibition was offered and rejected by the House.

We, therefore, respectfully request that the committee amend the pending bill by striking out this clause. We submit, Mr. Chairman, pro forma amendments that would carry out the three petitions that we have addressed to your committee.

(The amendments referred to follow:

UNITED STATES SAVINGS AND LOAN LEAGUE PROPOSED AMENDMENTS TO S. 2822

(1) S. 2822 is amended by adding at the end thereof a new section as follows: "SEC. 5. Subsection (b) of section 405 of title IV of the National Housing Act, as amended, is amended to read as follows:

"In the event of a default by any insured institution, payment of each insured account in such insured institution which is surrendered and transferred to the Corporation shall be made by the Corporation as soon as possible either (1) by cash or (2) by making available to each insured member a transferred account in a new insured institution in the same community or in another insured institution in an amount equal to the insured account of such insured member: Provided, That the Corporation, in its discretion, may require proof of claims to be filed before paying the insured accounts, and that in any case where the Corporation is not satisfied as to the validity of a claim for an insured account, it may require the final determination of a court of competent jurisdiction before paying such claim.'"

(2) Subsection (f) of section 11, as contained in section 2 is amended by striking the following language therefrom: "and subject to withdrawal on demand." (3) Section 3 is amended by striking the following language therefrom: "Whoever advertises that his or its deposits, shares, or accounts are federally insured."

Mr. BROWN. Does that conclude your testimony?

Mr. BLISS. Yes, sir.

Mr. BROWN. We are very glad to have had you, Mr. Bliss.

Mr. GAMBLE. We are delighted to have you down here, Mr. Bliss. You are the head of one of the big institutions in New York and I know you are a very able banker and the statement that you have given

us is well worth our while.

Mr. BLISS. Thank you very much, Mr. Gamble.

Mr. BROWN. Will you please call the next witness?

The CLERK. Mr. Oscar R. Kreutz, executive manager, National Savings and Loan League.

STATEMENT OF OSCAR R. KREUTZ, EXECUTIVE MANAGER, NATIONAL SAVINGS AND LOAN LEAGUE

Mr. KREUTZ. My name is Oscar R. Kreutz. I am executive manager of the National Savings and Loan League.

I would like first to thank the committee formally for its action recently on the Spence bill, H. R. 6743, providing for some improvement in the statutes affecting savings and loan asociations. I want to thank you, too, for this opportunity to appear and make a brief statement on this bill, that is, certain phases of it which seem to affect

us.

It seems appropriate to us that consideration be given in the hearing on this bill to the broad relationship between the Federal Deposit Insurance Corporation which insures the deposits in banks and the

Federal Savings and Loan Insurance Corporation which insures the accounts of savings and loan associations. It is clear from the legislative history of these two agencies that the Federal Savings and Loan Insurance Corporation was established to protect the savings and investments of the public in savings and loan institutions after the success of the Federal Deposit Insurance Corporation in reestablishing confidence in the banking institutions of the country had been shown. It was felt that public confidence in thrift and home-financing institutions should likewise be strengthened.

That the purposes of the acts of Congress creating these two agencies have been fulfilled is clear from the success of both Corporations and of the institutions whose accounts they have insured.

In the savings and loan field large additional sums have become available for financing of home buying and home building as a result of the increased confidence of the public.

I would like to call your attention to some of the language in section 3 of S. 2822 and to point out the adverse effect which this would have on insured savings and loan associations. The objectionable language starts on line 5 of page 58 of the bill and reads, "or whoever advertises that his or its deposits, shares, or accounts are federally insured."

The effect of this language would be to prohibit under a severe penalty the advertising by any savings and loan institution or bank that its accounts are "federally insured."

An effort was made during the debate on the floor of the House on H. R. 6743 to obtain the enactment of a similar prohibition when an amendment was offered to this effect. The debate on this matter appears on page 1355 of the Congressional Record for February 1, 1950. As you know the amendment was voted down by a vote of 85 to 35.

In some areas, such as Massachusetts, the institutions whose accounts are insured by the Federal Savings and Loan Insurance Corporation have found it most desirable to advertise that their accounts are federally insured in order to distinguish between this insurance and that provided by the Cooperative Central Bank, a privately owned and run institution under State charter.

Moreover, the enforcement agencies of the Government would have a most difficult time enforcing any such provision in view of the amount of printed material, printers cuts, forms, and so forth, containing this phrase which have been in existence for many years. The existence of such material would, of course, be no compelling reason for not banning the use of the term if there were something basically wrong with the use of it. Actually the Federal Savings and Loan Insurance Corporation is a creature of the Congress and an instrumentality of the United States. It is wholly owned by the United States and it is operated by the United States.

Therefore, we recommend the deletion from section 21 of S. 2822 of the words "or whoever advertises that his or its deposits, shares, or accounts are federally insured."

We also believe that this bill should be amended to authorize the Federal Savings and Loan Insurance Corporation to make payment of insurance in cash as well as through the transfer of an account in a closed institution to another insured institution in the same community.

There have been some wholly unwarranted criticisms of the present insurance settlement provisions as set forth in section 405 (b) of the National Housing Act, as amended. Claims have been made that the insured member of an association which is placed in default would be unable under this provision to obtain his money without a long delay. Actually the Federal Savings and Loan Insurance Corporation, under the existing act, has an obligation to make prompt payment of insurance by offering the insured member either cash and debentures, or an account in another insured institution. Obviously the only way the Federal Savings and Loan Insurance Corporation can arrange for another association to open accounts for the insured members of a closed institution is by paying cash to the association in the amount of the account opened by it. Since practically all insured members of closed institutions elect to receive accounts in other associations rather than the cash and debentures settlement, the net effect upon the Insurance Corporation of the present method of settlement is exactly the same as if it paid cash directly to the insured member.

Sometimes, however, it is very difficult also for the Insurance Corporation to make the necessary arrangements for the transfer of accounts, particularly small ones held by people living a considerable distance away from available institutions willing to cooperate in the settlement of insurance. I speak from considerable experience for I was General Manager of the Federal Savings and Loan Insurance Corporation for several years.

As a matter of fact, this cash-and-debenture settlement provision of this statute is not justified in any way by the facts or experience of the Insurance Corporation. It serves no useful purpose whatever. It only serves to confuse the public in my judgment. There have been seven associations placed in liquidation with the members having their accounts paid off by the Insurance Corporation. The account holders in those seven institutions numbered, as I recall the figures, 7,705. Out of that number of account holders, only six elected to take the cash and debenture settlement. So it has been really only a nuisance and has served no good purpose.

Therefore, we recommend that subsection (b) of section 405 of the National Housing Act, as amended, be amended as follows:

In the event of a default by any insured institution, payment of each insured account in such insured institution which is surrendered and transferred to the Corporation shall be made by the Corporation as soon as possible, either (1) by cash, or (2) by making available to each insured member a transferred account in a new insured institution in the same community or in. another insured institution in an amount equal to the insured account of such insured member: Provided, That the Corporation, in its discretion, may require proof of claims to be filed before paying the insured accounts, and that in any case where the Corporation is not satisfied as to the validity of a claim for an insured account, it may require the final determination of a court of competent jurisdiction before paying such claim.

Mr. BROWN. We are very glad to have you with us.

Mr. KREUTZ. Thank you very much.

Mr. BROWN. Will you call the next witness?

The CLERK. Mr. Harold V. Amberg, representing the Association of Reserve City Bankers.

STATEMENT OF HAROLD V. AMBERG, VICE PRESIDENT AND GENERAL COUNSEL OF THE FIRST NATIONAL BANK OF CHICAGO, APPEARING ON BEHALF OF THE ASSOCIATION OF RESERVE CITY BANKERS

Mr. AMBERG. Mr. Brown and members of the committee, my name is Harold V. Amberg, vice president and general counsel of the First National Bank of Chicago. I appear on behalf of the Association of Reserve City Bankers at the direction of its president, being chairman of the association's committee on Federal relationships. The president of our association is Mr. Earl R. Muir, president of the Louisville Trust Co., of Louisville, Ky.

As you may recall, the Association of Reserve City Bankers is composed of 450 individuals who are executive officers of some 215 large commercial banks located in the numerous Reserve cities across the country who represent a worthy cross section of informed banking opinion and also banks which in the aggregate hold a very large percentage of all resources of National and State chartered commercial banks in the country.

I shall try to be brief. I have discarded most of my notes because the subjects have been covered so fully, gentlemen. However, I would like, if I may, as the last witness here, to end up on a pleasant note and say that there is plenty of praise to go around for everybody in connection with the present happy banking situation. I put not in the last pew of the church the Congress itself for passing laws in 1933, 1934, and 1935, and subsequently, such as:

(1) Snugging up real-estate-loan limits for banks.
(2) Snugging up limits on loans on stock collateral.

(3) Eliminating the devastating competition of competitive bidding for demand deposits which caused banks to compete with each other and then reach for speculative high-yield securities, which was one of those great reasons for our banking troubles.

(4) Eliminating security underwriting from the banks.

(5) Setting up the RFC to aid bank resuscitation. The RFC put in 6,000 banks capital of $1,170,000,000, which has been paid down with the exception of $119,000,000 now outstanding. They also made loans of $1,060,000,000, which has been repaid and captured with the exception of $194,000.

And last, but not least, setting up the Federal Deposit Insurance Corporation. I bow to no one in my regard for the way the FDIC has been operated. I have followed their operations very closely personally over the years.

The second contribution to the happy situation in the banking world today is the excellent performance of the 48 State supervisors who charter, examine, and supervise the practices and policies of State banks under improved State bank laws.

A third contribution is the excellent performance of the three Federal banking agencies which I like to envisage as a team. It is one Government operation with three agencies doing the job: First, the Comptroller of the Currency, whose primary job is the chartering, supervision of the practices and policies, and examination of national banks; secondly, the Reserve Board which, aside from its monetary

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