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STUDY OF BANKING LAWS

FRIDAY, NOVEMBER 9, 1956

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met, pursuant to call, in room 318, Senate Office Building, at 9:35 a. m., Senator A. Willis Robertson, acting chairman, presiding.

Present: Senators Robertson, Douglas, and Beall.

Also present: Donald L. Rogers, counsel, Banking and Currency Committee.

Senator ROBERTSON. The committee will please come to order.

We expect to have four other members of our committee here, but they are delayed. Pending their arrival we will take care of several preliminary matters.

First, I want to thank this splendid group of bankers and those interested in credit affairs for their willingness to serve on this advisory committee. We feel that we are particularly fortunate in prevailing on my good friend, Kenton Cravens, to serve as chairman of the Advisory Committee, and I feel highly gratified at the way he has organized the work and broken it down into subcommittees, so that those who are specialists in the various fields can center on proposals that they want the full advisory committee to act on at their next meeting in December.

Last July I was designated by Senator Fulbright to serve as acting chairman of the Senate Banking and Currency Committee for a study of the Federal statutes governing financial institutions and credit. The need for such an inquiry was evidenced by the fact that there had been no major revision of these laws in over 20 years. At the outset, I requested the Federal agencies concerned to review their statutory authority for the purpose of deleting obsolete provisions and adding new authority where needed. Trade associations in the financial field were also contacted and were requested to prepare appropriate recommendations.

In September, a 27-man advisory committee was selected to assist the Banking and Currency Committee. The recommendations of this highly competent group will make an important contribution to the study.

The committee counsel, Donald L. Rogers, was directed to prepare, with the assistance of the Federal supervisory agencies, all the necessary background information. In this connection, a compilation of the Federal statutes relating to banks, savings and loan associations, and credit unions has been prepared and published. In addition, the 176 legislative recommendations of the Federal supervisory agencies have been printed in book form.

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The purpose of our hearings today and tomorrow is to receive an oral explanation of the agencies' recommendations. I am happy to have the members of the advisory committee present to participate in these hearings.

It should be kept in mind during the course of this study that the major objective of the committee is to compile and clarify the Federal statutes governing financial institutions and credit. With that purpose in mind, the study will be addressed to a consideration of such matters as the elimination of obsolete provisions and the addition of such new provisions as may seem desirable in order to modernize and streamline the banking laws. These matters, largely of a technical and noncontroversial nature, will relate primarily to the administrative functions of the banking agencies and to operational details of institutions affected.

I may add there, these recommendations, as submitted, were supposed to be largely of a noncontroversial nature. I find they are not quite as noncontroversial as I had been led to believe. I may be in another fight reminiscent of our efforts to get a bank holding company bill through. We tried to make that as fair as possible, but never did succeed in pleasing everyone.

The committee will, of course, stand ready to consider any changes in the laws which may be needed at this time if such changes will enable federally regulated institutions to serve the people of our country more effectively or will aid in the efficient functioning of the Federal supervisory agencies. However, it is not intended to encroach on the field of credit and monetary policies, which were the subject of several congressional committee studies in recent years. Likewise it is not intended to consider fundamental changes in the law with respect to the structure of the supervisory agencies or of other lending and guaranty agencies, or the scope of their authority, or other questions of that character. Fundamental questions of this nature will be deferred until a later date so that the committee may presently proceed expeditiously with consideration of the more immediate needs. to which its study is now directed.

I may pause there again and say a distinguished student of finance made a very fine speech at the American Bankers Association meeting in Los Angeles. He proposed some radical overall changes to give the administration the final veto power or control, if you please, over the credit policies of the Federal Reserve Board. I think Mr. Bell has since found that that was a little more controversial than he thought when he presented the issue to the bankers in California.

After the completion of the hearings tomorrow, the members of the Advisory Committee will meet to draw up their recommendations. We hope to receive the Advisory Committee's report by the middle of December. On the basis of this report, together with the recommendations of the agencies, the interested trade associations, and individuals, tentative legislation will be drawn up in the form of a committee-print bill.

I want to emphasize that word "tentative." We have to have a basis for public hearings and in the bill which the chairman with the help of the members of the committee acting on the advice that you gentlemen give us, will present, it does not mean that we are committed to any particular thing in that bill, but that it is a basis for public hear

ings. Of necessity we are going to put some controversial matters in that bill, but whether or not they are in the bill that we finally propose and hope to get congressional action on is another question. We will have before us, though, we hope, when Congress convenes on January 3, a bill known as a tentative bill or committee print, which will not be an official bill in the sense that it is what we are trying to put through, or that we are committed to the various provisions of. It has been more or less a similar practice on the House side-and I served 10 years on the Ways and Means Committee there to have tentative proposals on tax changes presented to the committee, and then they conducted hearings and received testimony and then in executive session they wrote the bill they were really going to act on. The bill will be prepared by the committee counsel in consultation with myself and other members of the Banking and Currency Committee. We expect to hold extensive public hearings on the committee print bill in January and February of next year. All interested sons will be given an opportunity to present their views at that time. Before we introduce the first witness, Mr. Ray Gidney, the Comptroller of the Currency, I would like to recognize the chairman of the Advisory Committee, my friend and your friend from St. Louis.

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Mr. CRAVENS. Thank you, Senator. I might just add my word of thanks for the fine turnout and the many members who are willing to serve. I think I might mention this too: That our procedure is to have our subcommittee chairmen at this table and also the members of that subcommittee who are directly interested in the testimony being given at a particular time. We have the members of the committee looking at the national banking laws and the Comptroller of the Currency situation up here now.

I do not have anything more to say, Senator, other than to ask our members to participate freely in the discussion.

Senator ROBERTSON. Thank you Mr. Cravens.

Senator Beall has suggested that it would be a good thing if at this time we would insert in the record the names of the members of the Advisory Committee. Without objection, the Chair will present that list to the reported to be inserted in the record.

(The list of the members of the Advisory Committee follows:)

1. Chairman: Kenton R. Cravens, president, Mercantile Trust Co., St. Louis, Mo.

2. Joseph A. Broderick, chairman of the board, East River Savings Bank, New York, N. Y.

3. W. J. Bryan, vice president, Third National Bank, Nashville, Tenn.

4. Henry A. Bubb, president, Capital Federal Savings & Loan Association, Topeka, Kans.

5. Lester V. Chandler, professor, department of economics, Princeton University, Princeton, N. J.

6. C. Francis Cocke, chairman of the board, First National Exchange Bank of Roanoke, Va.

7. Maxwell F. Eveleth, Sr., vice president and cashier, Ocean National Bank, Kennebunk, Maine.

8. Reese H. Harris, Jr., senior vice president, Connecticut Bank & Trust Co., Hartford, Conn.

9. Theodore Herz, partner, Price Waterhouse & Co., Washington, D. C.

10. Reed E. Holt, executive vice president, Walker Bank & Trust Co., Salt Lake City, Utah.

11. Norris O. Johnson, vice president, First National City Bank, New York, N. Y.

12. Vivian Johnson, president, First National Bank, Cedar Falls, Iowa.

13. Homer J. Livingston, president, First National Bank of Chicago, Chicago, Ill.

14. C. Ward Macy, chairman, department of economics, University of Oregon, Eugene, Oreg.

15. John J. McCloy, chairman of the board, Chase-Manhattan Bank, New York, N. Y.

16. Edwin P. Messick, executive vice president, First National Bank & Trust Co. of Milford, Milford, Del.

17. W. Franklin Morrison, executive vice president, First Federal Savings & Loan Association, Washington, D. C.

18. Joseph M. Naughton, president, Second National Bank of Cumberland, Cumberland, Md.

19. Robert L. Oare, chairman of the board, First Bank & Trust Co. of South Bend, South Bend, Ind.

20. William W. Pratt, executive director, Pennsylvania Credit Union League, Harrisburg, Pa.

21. Everett D. Reese, chairman of the board, the Park National Bank of Newark, Newark, Ohio, and the First National Bank of Cambridge, Cambridge, Ohio.

22. J. V. Satterfield, Jr., president, First National Bank of Little Rock, Little Rock, Ark.; director, Little Rock branch, Federal Reserve Bank of St. Louis. 23. James E. Shelton, chairman of the board, Security-First National Bank of Los Angeles, Los Angeles, Calif.

24. M. B. Spragins, president, First National Bank of Huntsville, Huntsville, Ala.

25. J. Cameron Thomson, chairman of the board, Northwest Bancorporation, Minneapolis, Minn.

26. William W. Whiteman, Jr., president, Oklahoma Industrial Finance Corporation and Credit Service Loans Co., Oklahoma City, Okla.

27. Ben Wooten, president, First National Bank in Dallas, Dallas, Tex. Senator ROBERTSON. The Chair will recognize Mr. Ray Gidney, the Comptroller of the Currency. Mr. Gidney.

STATEMENT OF RAY M. GIDNEY, COMPTROLLER OF THE CURRENCY, ACCOMPANIED BY L. A. JENNINGS, FIRST DEPUTY COMPTROLLER OF THE CURRENCY

Mr. GIDNEY. Mr. Chairman and members of the committee, I am very pleased to have this opportunity to come before your committee and to discuss the recommendations for changes in laws affecting national banks which we have made to the Senate Committee on Banking and Currency and which are contained in the committee print, Legislative Recommendations of the Federal Supervisory Agencies, issued October 12, 1956.

The National Bank Act represents legislation of long standing, of clear purpose, and of great value. It has proved to be an excellent statute, and the national banks which operate under it are a very important part of our banking system. Their assets are equal to approximately 46 percent of all bank assets in the United States, and about 54 percent of all commercial bank assets. Naturally, in a law of this kind, some provisions may become obsolete, or changing conditions and the public interest may require amendments or additions to the law. The majority of the changes we have suggested are of minor, corrective or technical nature. Others involve changes which are thought to be desirable in the interest of national banks and of the American public. They should be given full consideration before enactment. In this statement I wish to discuss this latter type of change but shall be pleased to answer questions concerning any of the proposals we have made. Some of the proposals involve percentage limitations of vary

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