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Under existing law a national bank may be permitted to open for business when 50 percent of the capital stock has been paid in, but for many years it has been the practice of the Comptroller to require that 100 percent must be paid in before a bank may be permitted to commence business.

No requests for authority to pay in less than 100 percent of subscribed capital have been made in many years.

Section 9 provides that if the date set in the articles of association of a national bank for holding the election of directors falls on a legal holiday, the shareholders meeting shall be held on the next following business day. Present law is silent on this situation and the practice has been to hold a brief shareholders meeting at which no business is transacted and the meeting adjourned until some subsequent date. It is preferable to cover this situation by legislation.

Section 12 would change from 5 to 10 days the time within which national banks must transmit required reports of condition to the Comptroller of the Currency. It is difficult for banks to compile the necessary information and furnish it within the 5 days allowed. A 10-day period would be more reasonable and equally satisfactory to our Office.

Section 14 provides a general procedure for amending the articles of association of a national bank. There is no such provision in existing law.

Section 15 would extend the territorial applicability of the national banking laws throughout the United States and all of its possessions. Enactment of this section will eliminate any doubt as to whether national banks may be chartered in possessions outside of the continental United States.

Section 16 adds a new requirement that if a voluntary liquidation of a national bank involves the sale of its assets to another bank the purchase and sale agreement must be approved by two-thirds of the shareholders of the bank except in emergencies in which the Comptroller may waive the requirement for shareholder approval.

Section 19 transfers from the Comptroller of the Currency to the Federal Deposit Insurance Corporation certain specified functions in connection with national bank receiverships where the Federal Deposit Insurance Corporation has been appointed receiver. Since the Comptroller does not supervise or direct the actions of the Federal Deposit Insurance Corporation as receiver of an insured national bank, the supervising duties of the Comptroller should be transferred to the Federal Deposit Insurance Corporation.

Section 20 provides that in the case of the inability of the Comptroller of the Currency to act, through illness or otherwise, as a member of the Board of Directors of the Federal Deposit Insurance Corporation, the Acting Comptroller of the Currency shall be a member of the Board in his place. While the statute now provides that the Acting Comptroller of the Currency shall serve as a member of the Board in the event of a vacancy in the Office of the Comptroller and during the absence of the Comptroller from Washington, it says nothing about the Acting Comptroller of the Currency acting as such Director in the event of the illness of the Comptroller.

While it would be assumed that the Acting Comptroller of the Currency shall serve as a Director during the illness of the Comptroller, the matter should be made statutory.


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Section 21 rewrites the existing statutes on consolidations and mergers of State and national banks in order to make uniform the provisions of the various statutes.

There would be eliminated the existing differences in legal requirements such as the requirement for publication, the requirement of notice of shareholders' meetings, the waiver of such notice, the procedure to be followed in determining dissenters' rights, the payments for the expense of appraisal or reappraisal made by the Comptroller, etc.

It would also clarify existing ambiguities as to how long a dissenter may delay before proceeding with an appraisal, the time within which a dissenter's stock must be surrendered, the length of time which must elapse before the Comptroller can be asked to make a reappraisal, the disposition of the stock of dissenters, etc.

Section 22 would permit the directors of national banks to declare dividends on a quarterly basis as well as semiannually or annually. It would also require the approval of the Comptroller before the directors of any bank may declare and pay to shareholders dividends in excess of retained net profits over a 3-year period. This section will prevent excessive dividends to shareholders where such payments would result in the dissipation of needed captial funds.

Section 23 eliminates the requirement that reports of declarations of dividends must be furnished to the Comptroller, and adds a requirement that reports of payments of dividends shall be made to the Comptroller. The requiring of the reports of declaration of dividends no longer serves any useful purposes.

The specific requirement of a report of payments of dividends merely conforms to the existing practice of the Comptroller of requiring reports of earnings and dividends at periodic intervals.

Section 24 would prevent any person from receiving deposits unless subjected to examination and regulation by banking laws of the United States or of the State where located.

Section 25 repeals obsolete provisions of law relating to agricultural credit corporations. The last such corporation was liquidated in 1938 and no such corporation may now be formed.

This completes our comments on the provisions of H.R. 6093. We should like to recommend one additional provision in the nature of a clarification of existing law. Existing criminal statutes prohibit the use of the word "national” by corporations organized under the laws of the United States, but this provision was dropped in the codification of the criminal statutes in 1948.

It has always been the policy of the Comptroller's Office to insist that the name of every national bank contain the word "national," but there is now no statute which expressly so provides.

In order to remove the possibility of questions arising with respect to this matter we recommend that section 5134 of the Revised Statutes (12 U.S.C. 22) be amended by inserting after the words “which name shall” the words "include the word 'national and." This would provide express statutory authority for the use of the word “national” by national banks.

We believe that the provisions of H.R. 6093 are in the aggregate important. The national banking laws have not been revised with a view toward bringing them up to date from a technical standpoint for


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many years. This bill is important and accomplishes this purpose and we believe that it should be enacted.

That completes my statement.

Mr. Brown. Mr. Gidney, I believe you have to make a plane this morning.

Mr. GIDNEY. I have to appear in Arkansas, and I hope I can make it, Mr. Chairman.

Mr. Brown. I notice that in Mr. Wolcott's statement that he reccommends the words “during the inability of the Comptroller to act, through absence for the city, illness, or otherwise," or the words "during the absence or inability to act of the Camptroller" be used in both section 1 of H.R. 6092 and section 20 of H.R. 6093. Do you agree with Mr. Wolcott's recommendations and, if so, which phrase would be preferable ?

Mr. GIDNEY. That would be through absence from the city, through illness, or otherwise. That is fine. I think that is all right. And the words “during the absence or inability of the Comptroller," that would be the better one.

I believe that is what Mr. Wolcott recommends, "during the absence or inability to act of the Comptroller."

Mr. BROWN. I have also noticed in Mr. Wolcott's statement, on page 5, that he recommends the words found on line 16, "sale of its assets" be changed to the words “sale of any of its assets." What is your position on this recommendation?

Mr. GIDNEY. We had a little conference yesterday afternoon and we agreed we would accept that.

Mr. Brown. Can you give us your justification for two more Deputy Comptrollers ?

Mr. GIDNEY. Can I give justification?
Mr. Brown. What is your justification of that?

Mr. GIDNEY. Well, the business of the Office is growing to such an extent that we need more men who can see people in the status of a Deputy Comptroller, who can sign correspondence, who can take assignments and then function in that way.

These matters come so fast, and the number of conferences is so great, that we very much need the additional strength in that regard.

Mr. Brown. Under section 3 of H.R. 6092, subsection 1, and so forth, relating to lending limitations: Are such lending limitations under State law more or less liberal? Don't you think there would be a conflict ?

Mr. GIDNEY. I don't know all about every law of the States, but I think as a generality you would find they have more liberal provisions than that.

For example, in a certain State not long ago there was a little controversy about whether a bank should be National or State and it was pointed out to them by State authorities that as a State bank they would have a 15 percent loan limit instead of 10 on everything.

în another State that I have in mind, a very large one, I think their loan limit is 25 percent on everything. Mr. Brown. It seems to me there shouldn't be


conflict. Mr. GIDNEY. The ideal would be to get us just alike, but that isn't too easy to do. The ideal would be to get on an even foot ing. But I think we can assure you that we are not stepping out in front of them on liberality.

Mr. Brown. Mr. Multer, do you have questions?
Mr. MULTER. Thank you, Mr. Chairman.

Mr. Gidney, would there be any objection to writing into this bill a provision that would require or provide that these increased percentages would not apply in any State where the State law set a lower limitation, so that this would apply except where a State law required or provided for a limitation up to, say, 20 percent, that then this would apply only to the 20 percent instead of the 25 percent.

Mr. GIDNEY. Now, can I throw myself on the mercy of the court on that?

I think that would throw us into a tremendously difficult position, because State laws are many and varied, they change from time to time, and I think we would have an almost unsuperable task keeping up with them. I think that I can assure you, Mr. Multer, that we are not going to be out in front of the States on percentages allowed.

Mr. MULTER. Could you, without too much difficulty, submit to us a statement showing what the limitations are in the various States as to these various categories which are being changed by this bill ?

Mr. GIDNEY. I think we would like to do something of that kind. It is a big job to get around and find out everything about the States, but, I think that would be quite worth while and we shall endeavor to assemble information. am quite certain that in the State of Texas, the regular loan limit is 25 percent. I also recall that they can lend on unimproved real estate.

Mr. MULTER. I think that would be very helpful if you could give us that information as to the four categories in section 3, and also as to the category in subdivision 2 of section 4. (The data referred to above is as follows:)


Washington, June 1, 1959.
Chairman, Subcommittee No. 2 of House Banking and Currency Committee,
Washington, D.C.

MY DEAR MR. CHAIRMAN: At the hearings on H.R. 6092 Representative Multer requested that we submit information concerning the limitations contained in State Law in the various States with respect to the categories of loans referred to in section 3 of the bill.

Mr. Multer also requested that we furnish to the committee a statement of the laws of the various States with respect to the percentage of appraised value which State banks may lend against real-estate security.

The information requested is enclosed herewith. While we have made every attempt to make it as accurate as possible, the 1959 enactments of some of the States are as yet unavailable to us. Very truly yours,

RAY M. GIDNEY, Comptroller of the Currency.



Ten percent of the capital stock actually paid in and 10 percent of the unimpaired surplus fund. Limitation does not apply to

(1) Obligations arising out of the discount of commercial or business paper actually owned by the person negotiating same.

(2) Obligations secured by shipping documents, warehouse receipts, or other such documents transferring or securing title covering readily marketable nonperishable staples, fully insured. An additional 15 percent may be loaned when the value is 115 percent. An additional 5 percent may be loaned for each 5 percent increase in value, with the total limit of 50 percent.

(3) Obligations secured by shipping documents or instruments transferring or securing title covering livestock the market value of which is 115 percent of the notes. Loans so secured may be made for an additional 15 percent.



Alabama.-Twenty percent of capital, unimpaired surplus, and undivided profits. Limitation does not apply to

(1) Commercial or business paper actually owned by the person negotiating same;

(2) Agricultural, manufactured, and industrial products, livestock, and other liquid securities having a market value and for which there is a ready

sale in the open market. Arizona.—Fifteen percent of capital stock paid in and surplus earned and set aside; 25 percent when secured by readily marketable nonperishable staple commodities in warehouse or in transit. Limitation does not apply to discounts of commercial or business paper actually owned by the person negotiating same.

Arkansas.-Twenty percent of capital stock actually paid in and unimpaired. Surplus fund is considered as capital. Limitation does not include

(1) The purchase or discount of notes actually owned by the person negotiating same;

(2) Advances by overdraft, note, or otherwise secured by warehouse receipts covering agricultural or manufactured products stored in elevators or warehouses the value of which is at least 10 percent in excess of the

loan and the item is insured. California.Twenty-five percent of capital and surplus when secured by personal property; 15 percent when secured by real property ; 10 percent when unsecured ; 25 percent limit of secured and unsecured. Limitation does not apply to a warehouse receipt conveying or securing title covering readily marketable staples.

Obligations arising out of discount of business or commercial paper actually owned by the person negotiating same together with secured and unsecured obligations shall not exceed 40 percent.

Colorado.-Fifteen percent of its unimpaired capital stock and surplus. Limitation does not apply to

(1) Notes and drafts secured by shịpping documents transferring and securing title covering livestock or giving a lien thereon when the market value is not less than 115 percent of the value of the loan. Loans may be made based on these for an additional 10 percent;

(2) Obligations upon notes or drafts securing title to readily marketable nonperishable staples may be made up to 40 percent of capital and surplus;

(3) Loan on commercial and business paper executed by a third party and purchased and owned outright by the bank shall not exceed 15 percent

of the surplus and capital. Connecticut.Ten percent of capital and surplus. Limitation does not apply to business paper owned by person negotiating same. Loans secured by this may be made up to 50 percent of capital and surplus.

Delaware.—Ten percent capital, surplus, and undivided profits if without collateral security; 25 percent upon collateral security worth at least 15 percent more and no aggregate amount loan to any one person with or without collateral shall exceed this 25 percent.

Florida.--Ten percent of the aggregate capital and unimpaired surplus: 25 percent if all loans are amply and entirely secured. Limitation does not apply to loans secured by shipping documents and warehouse receipts transferring title covering readily marketable nonperishable staples fully insured : An additional 25 percent may be loaned when the value is 115 percent, an additional 30 percent may be loaned when the value is 120 percent, an additional 35 percent may be loaned when the value is 125 percent, an additional 40 percent may be loaned when the value is 130 percent, an additional 45 percent may be loaned when the value is 135 percent, an additional 50 percent may he loaned when the value is 140 percent.

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