Mr. TALLE. I ask unanimous consent to have inserted in the record three relatively brief letters, one addressed to Mr. Harl, Chairman of the FDIC, by Mr. E. E. Manuel, president of the Independent Bankers Association; one addressed by Mr. Harl to me; and the third one addressed to Mr. Harl by the same Mr. Manuel, in the capacity of president of the George State Bank, of George, Iowa. The CHAIRMAN. That will be done. (The letters referred to follow :) THE INDEPENDENT BANKERS ASSOCIATION, Mr. MAPLE T. HARL, Chairman, Federal Deposit Insurance Corporation, Washington, D. C. DEAR MR. HARL: It is with a deep and sincere pleasure that I acknowledge receipt of your nice letter of May 18, in which you handed me an orchid on the address delivered at the Independent Bankers Association convention in Des Moines, Iowa. Acknowledgments of this sort seem to reward one for the work done in these matters and gives one the incentive to do something for the preservation of the dual system of banking. It has been my opinion that too many of us country bankers are too complacent for our very preservation and the privilege of operating our own banks. When branch and group banking becomes established, it is too late to try to correct; and to continue to operate our own banks we must of necessity get out and fight now for the right and privilege. We independent bankers are surely grateful for the recognition given us by the Federal Deposit Insurance Corporation. We have a feeling that your organization is going down the line fighting for us against an organized group which is endeavoring to become our employers. In my opinion, the metropolitan banks are out in the field endeavoring to get the country banker to oppose the increase of insurance from $5,000 to $10,000. This is being advocated on the premises that it is giving the FDIC too much control over banking. However, it is my opinion that the increase should not give the FDIC any more control than the $5,000, but you would be surprised of the arguments being had on this feature. I have always felt that the coverage should be increased and that the fund could never become too large; therefore I thought the assessment rate should have been the same, but the coverage increased. Thanking you again for your letter; and if there is something that I could assist you or the Department, I would feel it a pleasure to do so. Yours very truly, E. E. MANUEL. FEDERAL DEPOSIT INSURANCE CORPORATION, Hon. HENRY O. TALLE, House of Representatives, Washington, D. C. DEAR CONGRESSMAN TALLE: With reference to the recent visit of Mr. L. L. Robertson at your office, at which time he left with you copy of a letter dated June 1, 1950, from Mr. E. E. Manuel, of George, Iowa, you are advised that we have received permission from Mr. Manuel to utilize his letter; therefore hasten to advise you accordingly. Copy of his letter giving such permission is attached for your full and complete information. Since Mr. Manuel is a true country banker and is past president of the Iudependent Bankers Association, his views, as well as his advice and counsel, have been of great help to the members of the Board of this Corporation. I am sure he would be glad to respond to any questions or views you might have regarding S. 2822 or this Corporation. Appreciating your many courtesies, and with kindest regards, I am, Cordially and sincerely, MAPLE T. HARL, Chairman Mr. MAPLE T. HARL, GEORGE STATE BANK, George, Iowa, June 6, 1950 Chairman, Federal Deposit Insurance Corporation, Washington, D. C. DEAR MR. HARL. At the time the new FDIC bill was written I did have an opportunity of reading the bill, but understand that some amendments have been promulgated subsequent to the hearings held in the Senate on it. However, I have not had an opportunity of reading the new bill, which I understand is scheduled for hearing before the House Banking Committee some time the latter part of this month. I also understand that on account of the death of Mrs. Spence that probably the contemplated hearings will be delayed somewhat. In compliance with the third paragraph of your letter of June 1, 1950, it surely would be agreeable to me for you to use the letter written you under date of May 23, 1950, as the convictions expressed in that letter are mine, and while I probably could be convinced they are perhaps wrong, I still think they are sound and predicated upon the thought that we in the banking business must be concerned about the ultimate success of the FDIC insurance. One of the paramount ideas in my mind is to have sufficient funds on hand in the FDIC to really be able to stand any kind of depression or emergency that may be a potential threat to the banking system. I would feel better if the FDIC had six billions instead of one, because as I understand we did sustain an approximate loss of 6.5 billions during the last panic and with substantially higher liabilities now in banks than at that time, I don't think this fund can get too large. I have on several occasions voiced my disagreement on the feature of the bill, which would organize a national bank when a bank got into trouble. I believe that if the failed bank was a State bank that a State bank should be organized and a national bank if the failed bank was a national. The only argument against my thought is that a national bank could be more quickly set up because the Comptroller is a Director of the FDIC. I can't go along with that thinking, because the new organization should be a permanent bank and it would have a tendency of nationalizing the banking system, because of convenience. If in your opinion I could do any good testifying on the bill I would be glad to do so; however, I am expecting to be gone the last 2 weeks in June, but as stated previously I am anxious to do anything which will make for better relationship between the supervising agencies and the banks generally. A better relationship will also make for better customer relations and community service all over the country. The dual system of banking in this country must be preserved and bankers generally must be concerned and we must lay aside partisan politics in favor of a workable plan of operation. Thanking you again for your consideration and assistance and with kind personal regards, I am Yours very truly, GEORGE STATE BANK, The CLERK. The next witness is R. E. Gormley, vice president of the Georgia Savings & Trust Co., of Atlanta, Ga. STATEMENT OF R. E. GORMLEY, CHAIRMAN OF THE LEGISLATIVE COMMITTEE OF THE GEORGIA BANKERS ASSOCIATION AND VICE PRESIDENT OF THE GEORGIA SAVINGS BANK & TRUST CO., ATLANTA, GA. Mr. BROWN. I have known Mr. Gormley throughout the years. He is now vice president of the Georgia Savings Bank & Trust Co., of Atlanta, Ga. For a number of years he was superintendent of banks of Georgia. He is honest, honorable, fearless, courageous, and very capable. That is evidenced by the fact that the Georgia Bankers Association selected him to represent them here at this hearing. He has full confidence of all of the banks in Georgia, and all of the depositors. The CHAIRMAN. I suppose that he reciprocates with regard to the Congressman from Georgia. Mr. GORMLEY. I am indeed grateful to you. Mr. TALLE. All you meant to say I think, Mr. Brown, was that he is a typical son of Georgia. Mr. GORMLEY. To add a little to the background Mr. Brown has given you, it is true that I work in a bank in the town of Atlanta. I guess because of the geography of my location, I might be classified as a city banker. Actually, I am a country banker. I grew up in a country bank. I operated a country bank for twenty-odd years before I came to Atlanta as superintendent of banks. I have been in my present connection with the Georgia Savings Bank & Trust Co. for some 10 years. As Mr. Brown told you, I feel that I come as near representing the sentiment and the feeling of the rank and file of bankers in the State of Georgia as possibly any other one single man. Gentlemen, in my capacity as chairman of the legislative committee of the Georgia Bankers Association, I have been asked by the president of the Georgia Bankers Association and the executive council to present to you the views of that body, the Georgia Bankers Association. I am going to try to be brief, because this hearing and the hearing on the bill in the Senate have brought out a quite voluminous amount of testimony, and I appreciate the facts that you gentlemen have other and more onerous duties. Briefly, to break the bill down into the several major points covered, I would say that primarily the rank and file banks of the State of Georgia are interested in the provision of the bill which increases the coverage from $5,000 to $10,000. For a number of years we have advocated that, and yet we have felt that before any move to increase the coverage should be made, that the investment of the Federal Treasury and that of the Federal Reserve banks should be returned. But successively, for the last half a dozen years, a resolution has been passed by the Georgia Bankers Association requesting an increase in coverage. Our feeling is that it will result in a better distribution of deposits, as Mr. Arthur, my friend from South Carolina, brought out, and therefore, a better balanced economy. I do not think that there is a great deal of argument on that point. The matter of rebate of assessment provided for in the bill, on that point we recognize it as being more or less a compromise. The larger banks in our State felt that there should be a definite cut in the rate of premium charged. It is human nature that all banks would like to get our for as low an expense on the premium as possible. I personally think that the compromise plan arrived at in this bill would be constructive. I am not prepared to say that the present surplus developed by the Corporation and accumulated by the Corporation is a sufficient one, and neither do I think anyone else can say that the $1,200,000,000 of surplus now accumulated in the Corporation is sufficient. My own personal idea has been that before any reduction of premium should take place, that probably a surplus of 212 billion dollars should be made. In stating that figure, probably as with the feeling that the present 114 billion dollars is sufficient, you might say that I plucked that figure out of the air. Yet, based on experience, if you will review the period between 1921 and 1933, inclusive, the 13-year period, there were contained in the banks closing in those years a total deposit of something like 812 billion dollars. There was, I believe, a net loss to the depositors of those banks amounting to approximately 212 billion dollars. Now, you will consider that statement also in line with the fact that the average deposits of banks in the United States during that period of time was only around $40,000,000,000 or $45,000,000,000. At the present time we have approximately $150,000,000,000 on deposit in the banks of the United States. In the light of our past experience, and admitting that the condition of the banks today is very much better than it was in 1921 or 1922, I do not believe anyone can say that the present surplus of 114 billion dollars is an adequate reserve. Of course, I recognize, in making a statement of this kind, that I am in disagreement with probably the majority of the bankers, and probably with the big bank element in the United States. The most of them say that you will never have a reversion back to conditions that developed in the deflationary period after the First World War. Well, gentlemen, I would like to believe that, and God knows, I hope we will never have a repetition of that. But if you proceed on the theory that history repeats itself, I do not thing that we have any assurance that we will not have a financial recession in this country that might call upon the guarantor of the deposits of these banks for an amount in excess of its 114 billion dollars. Now, it is true you have this much elasticity in your present bill. There is a proviso in there which would enable the Corporation to go to the Federal Treasury and borrow $3,000,000,000. I think Mr. Multer here has questioned Mr. Arthur quite extensively on that. Frankly, as a banker-as a little banker-in my profession that is the last thing in the world I would want to see happen. I think it would be disastrous to the private banking system, and also to private enterprise, for the banks of this country to ever have to go back to the Federal Treasury to call on 1 dollar of the $3,000,000,000. Now, I think the reason it was provided for and the reason it was written into the bill, and wisely, was because the framers of this act in the first place recognized that there was a possibility of an emergency arising that might strain the resources of this Corporation. I certainly would not be in favor of it being struck, and yet my position is that the surplus of this Corporation should be built up to where the banks of this country, through the FDIC, will never have to call upon the Federal Treasury for another dollar. Gentlemen, that covers my position on that. Now, to review very hurriedly some of the other provisions of the bill. We are very much in favor of the new method of determining your assessment base. The old method of determining the assessment base was rather laborious, and some of the larger banks, it meant that they had to set up a separate staff to keep up with it. We are very much in favor of that. On the matter of the payment of interest, as you may judge by my previous statement, I was one banker in the country that my conscience always hurt me over the fact that banking as an industry was more or less forced to go to the Federal Treasury and to the Reserve Board to request or require capital funds to set up a corporation to reestablish confidence of the banks in this country. My mind and my conscience, I might say and some of us bankers do have consciences-my conscience was never at ease until that money was repaid. Frankly, I was a little bit surprised when I saw all of this amendment tacked on that would require the Corporation to pay interest. However, if the Congress in its wisdom feels that we owe that interest, and I am frank to say that the gentleman who offered that amendment offered a very good and logical reason why it should be prepaid, we have no fault to find with that. We are very happy that that is a provision of the bill. I come to one other clause in the bill which I think is really practically the only argumentative provision of the bill, and that is the section of the original bill which was struck or eliminated by a Senate committee, striking the clause which would have given the FDIC the right to go into a Federal Reserve member bank, without the permission of the Federal Reserve bank or the Federal Reserve Board. I think that that is the largely argumentative clause in this bill. Frankly, I see no reason why it should not be granted to the FDIC. If I understand this clause of the bill, it does not contemplate that the FDIC is going to make a duplicate examination of every statement of a bank. They only are asking for this provision as an emergency power. The thing may not happen once in a generation that they would have occasion to go into a bank. I understand that the Federal Reserve Board itself has that power over national banks, and I believe Mr. Delano made the statement before the Senate committee that as far as he knew, the Federal Reserve Board or its examiners had never exercised that privilege at all. I was a little bit surprised to hear that, because in my position as State bank superintendent, I did on at least one occasion make an examination of a national bank, and I did it without asking the Comptroller's permission. Incidentally, the reason I went into that bank, one of my State banks had a good bit of investment in the stock of that national bank, and I wanted to know something about the national bank. Gentlemen, that concludes my testimony, my presentation of the views of the Georgia Bankers Association. I think that the bill is a good bill. We recognize that the matter of effecting some compromise in the method of levying the assessment of costs was necessary. The big banks felt for a number of years that they were being penalized unduly by reason of the fact that they have had to pay a premium cost on their entire deposits, whereas some of them have a very nominal amount of coverage. I think the compromise method, as I stated, is constructive, in that it will enable the Corporation to continue to build up its surplus and to take care of losses out of current income, rather than to establish those losses against the already accumulated surplus. Frankly, I am still of the opinion that this surplus should be built up and should continue to be built up. I hope that you gentlemen will give consideration to what I say, and there may be some compromise points in it that I would like to see changed, but in the main we would 68689-50-5 |