inclined to sponsor a larger study involving overall policy questions. But he is not unmindful of the fact that for 18 years Congress tried to get legislation on bank holding company laws, and only last year, when there was agreement between the American Bankers Association and the Independent Bankers Association did we get a bill through Congress.

There are over 14,000 bankers and nearly all of them except 500 are insured banks, nearly half of them members of the Federal Reserve System. If they can get together on a program, we can put it through the Congress. But if they cannot, just remember this. There are 2 Senators from each State, but only 15 on the Banking and Currency Committee. Unless the bankers of the home States show an interest in this program and ask our Senators to support it, the 15 members of the Banking and Currency Committee, even if they agree on everything-which is not too likely cannot put any bill through. We believe what we are trying to do is of great interest to all banks. As pointed out yesterday, this is not a program for any particular type of bank. We want to help the little country bank as well as the biggest city bank. We hope to have a program that will be fair and advance the interests of all bankers. But to put it through, we have got to have the help of the 17,000 members of the American Bankers Association, and of the Independent Bankers Association. We need them all.

I would be glad to recognize another Robertson to present the recommendations of his Board.

Senator DOUGLAS. Mr. Chairman, may I ask whether this peculiar predominance of the Robertsons in the affairs of this committee is purely coincidental, or whether it is due to the natural tendency of the Scotch to gravitate to positions where money is involved.

Senator ROBERTSON. A former colleague once told a story that he said he heard over in England. The Britisher told him this. He asked "I don't see how you all get along over there in the United States with about 57 different groups. We only have four groups over here." My friend said "What are they?" "Well," he said, "we have the Scotch and they won't wear rubber heels because they give. We have the Welsh who pray on their knees, and prey on everybody else. We have the Irish, who are always willing to fight, but don't know what to fight for. And we have the English, who are selfmade and worship their creator."

You may proceed.

STATEMENT OF ALBERT J. ROBERTSON, CHAIRMAN; ACCOMPANIED BY IRA DIXON AND WILLIAM HALLAHAN, MEMBERS; THOMAS H. CREIGHTON, GENERAL COUNSEL; JOHN M. WYMAN, DIRECTOR, DIVISION OF SUPERVISION; VERNE C. BONESTEEL, DIRECTOR, DIVISION OF EXAMINATIONS; AND DR. WILLIAM H. HUSBAND, GENERAL MANAGER, FEDERAL SAVINGS AND LOAN OPERATIONS, FEDERAL HOME LOAN BANK BOARD

Mr. ROBERTSON. Thank you, Mr. Chairman, gentlemen of the committee my name is Albert Robertson, and I am chairman of the Federal Home Loan Bank Board. As some of the members of the

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committee may know, I have been with the Board only a relatively short time. I have with me, however, Messrs. Ira Dixon and William Hallahan, who are the other two members of the Board; Thomas H. Creighton, General Counsel; John M. Wyman, Director of the Division of Supervisor; Verne C. Bonesteel, Director of the Division of Examinations; and Dr. William H. Husband, General Manager, Federal Savings and Loan Operations.

Senator ROBERTSON. Will the gentleman yield? You have a very interesting introduction in your written statement, but it is five pages long. Would you be willing to submit that for the record? All these gentlemen are going to read it. They have got to read all of it before they can recommend anything to us. Then we can get down to your recommendations.

Mr. ROBERTSON. Yes, sir.

Senator ROBERTSON. The record will include that, and also we will include in the record the original printed recommendations.

Mr. ROBERTSON. Before I go to the recommendations, I should like also to submit the specific language embodied in the recommendations which was requested by your office on October 4. That is embodied in this group of specific recommendations which has been delivered this morning.

(The material referred to follows:)

SPECIFIC LEGISLATIVE LANGUAGE EMBODYING RECOMMENDATIONS AND SUGGESTIONS IN SUBMISSION OF FEDERAL HOME LOAN BANK BOARD OF OCTOBER 1, 1956, for WHICH SPECIFIC LANGUAGE WAS NOT GIVEN IN SAID SUBMISSION

Pursuant to request in the letter of October 4, 1956, to the Chairman of the Federal Home Loan Bank Board from Donald L. Rogers, counsel, Committee on Banking and Currency, United States Senate, there is attached hereto specific legislative language embodying recommendations and suggestions in said Board's submission of October 1, 1956, for which specific language was not given in said submission. In the case of most of these recommendations and suggestions the specific language attached hereto represents only one of several possible ways In which the matter might be handled; however, pursuant to the request abovementioned, each recommendation and suggestion in the Board's submission of October 1, 1956, for which specific language was not given in said submission is included in the specific language attached hereto.

Relationships between savings and loan associations and affiliates

The Board's suggestion on this matter appears at page 148 of the committee's printed compilation of October 12, 1956. Specific language to implement this suggestion is included in amendment No. 1 attached hereto, in the form of a new subsection (d) of section 5 of the Federal Home Loan Bank Act.

Under this language, the Board would be expressly authorized to regulate the relationships between member or insured institutions and affiliates thereof, and business, financial, or other transactions between such institutions and their affiliates. The term "affiliate" would include officers, directors, and employees. It would also cover cases where there was direct or indirect ownership, holding with power to vote, or control (1) of more than 5 percent of the voting securities of the member or insured institution by the affiliate, (2) of more than that percentage of the voting securities of the affiliate by the member or insured institution, or (3) of more than 5 percent of the voting securities of the institution and more than 5 percent of the voting securities of the affiliate by a single corporation or other person.

In addition, the Board would be given power, under specified standards, to provide that other persons or classes of persons should be treated as affiliates and to exclude from the definition of “affiliate" any person or class as to which it determined that such exclusion was consistent with the protection of investors or borrowers and was necessary or appropriate in the public interest.

The suggestion by the Board on this matter also included the question of examination of affiliates and the furnishing of reports and information by them to the Board. This part of the suggestion is treated next hereinbelow, under the heading "Strengthening of Examination Powers."

Strengthening of examination powers

The Board's suggestion on this matter likewise appears at page 148 of the committee's printed compilation.

This suggestion would be implemented by amendment No. 3 attached hereto, which would add to section 8 of the Federal Home Loan Bank Act a new subsection (b) which, if enacted, would give the Board ample power to examine, and to require reports and information from, any Federal home loan bank member which is a savings and loan, building and loan, or homestead association, or a cooperative bank, or which is an institution the accounts of which are insured by the Federal Savings and Loan Insurance Corporation. At present, the Board would in general (in the absence of further legislation) have power to examine a member institution which was not so insured only where there was no State examination or where the Board might deem the State examination to be inadequate as set forth in section 8 of the Federal Home Loan Bank Act.

Also, the suggested new subsection would authorize the Board to examine, and to require reports and information from, affiliates of such member or insured institutions. The term "affiliate" would be defined in a manner similar to that suggested in the provisions discussed above under the heading "Relationships Between Savings and Loan Associations and Affiliates."

Regulation of Federal home loan bank members

The third recommendation or suggestion made in the Board's submission of October 1 which is not implemented by specific language is the suggestion (which appears at p. 149 of the committee's printed compilation) that serious consideration be given to the question whether uninsured members of the Federal Home Loan Bank System should not be subject to the same regulation with respect to advertising, sales plans and practices, and other operating practices as insured institutions. Language to implement this suggestion is contained in that portion of amendment No. 1 attached hereto which would add a new subsection (c) to section 5 of the Federal Home Loan Bank Act. It is believed that this language is self-explanatory.

Removal of officers or directors

The Board's suggestion on this matter appears at page 150 of the committee's printed compilation. It suggests that, in the consideration of that part of the Board's suggested amendment to subsection (d) of section 5 of the Home Owners' Loan Act of 1933 which would authorize the removal of directors of Federal associations for violation of law or regulation or other misconduct (this suggested amendment is item 144 beginning at p. 178 of the printed compilation), serious consideration be given to the question whether similar provision should not also be made with respect to directors and officers of member and insured institutions which are not federally chartered.

Language to implement this suggestion is contained in amendment No. 1 attached hereto, in the form of a new subsection (f) of section 5 of the Federal Home Loan Bank Act. The approach taken is similar to that suggested in item 144 with respect to directors and officers of Federal savings and loan associations; however, since there might be some question as to the power of the Federal Government to effect direct suspension or removal of a director or officer occupying a State-created corporate office of this nature, it is provided that the orders of suspension or removal shall be orders directing the director or officer to refrain from participating in the management of the institution or directing him to resign or otherwise cease to hold office, as distinguished from orders purporting to effect a direct suspension or removal.

Persons convicted of criminal offenses involving dishonesty or breach of trust The Board's suggestion on this matter appears at page 150 of the committee's printed compilation. Language to implement this suggestion is embodied in that part of amendment No. 1 attached hereto which would add to section 5 of the Federal Home Loan Bank Act a new subsection (b). It is believed that this language is self-explanatory.

Conversion of mutual savings and loan associations into stock companies

The Board's suggestion on this matter likewise appears at page 150 of the committee's printed compilation. It is there pointed out that the Board has under active consideration the adoption of regulations laying down procedures and standards for cases in which Federal savings and loan associations undertake to convert into State-chartered nonmutual institutions, variously known as stock companies, permanent-stock associations, and guaranty-stock associations. It is also pointed out that the same problem arises where the conversion is from a State-chartered mutual association into a State-chartered stock company. Accordingly, the Board suggested that consideration be given to the question whether it should not be given power to impose comparable regulations where the institution which proposes to convert from mutual to stock-type operation is not a Federal savings and loan association but is a State-chartered institution the accounts of which are insured by the Federal Savings and Loan Insurance Corporation. Language to implement this suggestion is embodied in that part of amendment No. 4 attached hereto which would add to section 403 of the National Housing Act a new subsection (e).

In the analysis of this matter with a view to the drafting of legislative language it was concluded that in the conversion of a State-chartered mutual savings and loan association into a nonmutual institution the conversion might take place in any of the following principal ways: (1) By the issuance of a new class of securities, either (a) under a method by which the new securities would be the permanent, guaranty, or management stock; or (b) under a method by which the new securities would have a lesser participation in earnings and lesser voting rights than outstanding securities, in which case the securities of the class already outstanding would become in fact or in effect the management stock; (2) by modifying the relative participation and voting rights of securities already outstanding or which the institution was already authorized to issue; or (3) by entering into a management contract, agreement, or arrangement, or a contract, agreement, or arrangement for the rendering to the institution of management or similar services, under which fees or earnings would be siphoned out of the institution for the benefit of the managers.

Language to meet each of these situations has been included in amendment No. 4 attached hereto, in the form of a new subsection (e) of section 403 of the National Housing Act, which would provide that no insured institution shall, in violation of regulations of the Federal Savings and Loan Insurance Corporation, (1) issue any security (a) not having the same characteristics as a security currently outstanding, or (b) the issue of which is contrary to any agreement with or condition imposed by the Corporation; (2) take specified action or any other action for modiffcation of, or which has the effect of modifying, any of the characteristics of any outstanding or authorized security of such institution, or (3) enter into any management contract, agreement, or arrangement, or any contract, agreement, or arrangement for the rendering to the institution of management or similar services. The Board would be authorized by a new subsection (h) of said section 403 to make such classifications as it might deem necessary or appropriate for the purposes of the new subsection (e) and to define the terms used therein.

Liquidity of Federal home loan bank members

The Board's recommendation on this matter appears as item 121 of the committee's printed compilation, and implementing language is embodied in amendment No. 2 attached hereto. The suggested language would apply not only to member institutions but also to insured institutions and would include provisions with respect to commitments, firm or otherwise, of such institutions to make or purchase loans, so that the concept of liquidity as an amount of liquid assets related to current obligations may be adequately carried out.

Regulation of insured institutions

The Board's submission of October 1 included under the above heading two recommendations for which specific legislative langnage was not included. These 2 recommendations, which appear in the committee's printed compilation as recommendations (1) and (2) of item 158 (at p. 196 of said compilation), are that subsection (b) of section 403 of the National Housing Act be amended (1) by adding a provision that the Board may establish conditions subject to which it will approve mergers or consolidations of, or the purchase or sale of assets by, insured institutions, and (2) by adding a provision that the Federal Savings and

Loan Insurance Corporation shall have power to regulate retirement, pension, and deferred compensation contracts and arrangements of insured institutions. Specific language to implement these 2 recommendations is included in amendment No. 4 of the amendments attached hereto, in the form of a new subsection (f) and a new subsection (g) of section 403 of the National Housing Act. When the drafting of specific language was undertaken it was found that it would be difficult to fit the new provisions into the context of existing subsection (b) of section 403, and it is for this reason that they have been cast in the form of suggested new subsections.

The suggested new subsection (f) would provide that, except with the prior approval of the Federal Savings and Loan Insurance Corporation by regulations or otherwise, no insured institution shall (1) be a party to any merger or consolidation; (2) purchase assets from or sell assets to any savings and loan, building and loan, or homestead association or cooperative bank, or any savings bank; or (3) increase its accounts of an insurable type through or in connection with any purchase of assets.

The suggested new subsection (g) would provide in effect that, except with such approval, no insured institution shall enter into any retirement, pension, or deferred compensation contract, agreement, or arrangement, or consent to any extension, renewal, or alteration thereof except an alteration, extension, or renewal of a preexisting contract, agreement, or arrangement where the institution's consent is not legally needed or the institution is under a valid and binding obligation to give the consent.

1. Section 5 of the Federal Home Loan Bank Act, as amended, is hereby amended by inserting immediately before the first sentence thereof the language (a)" and by adding thereto at the end thereof the following new subsections: "(b) Except with the written consent of the Board, no person shall serve as a director, officer, or employee of a member or of an insured institution who has been convicted, or who is hereafter convicted, of any criminal offense involving dishonesty or breach of trust. For each willful violation of this prohibition the member or insured institution involved shall be subject to a penalty of not more than $100 for each day this prohibition is violated, which the Board may recover by suit or otherwise for its own use.

"(c) No member shall carry on any sales plans or practices, any advertising, or any other operating practice, in violation of regulations of the Board: Provided, That this subsection shall not authorize the Board to impose any greater limitations or restrictions on members than the Board or the Federal Savings and Loan Insurance Corporation may from time to time have power to impose on insured institutions under title IV of the National Housing Act as now or hereafter in force (including agreements therein provided for) or otherwise.

"(d) The Board is hereby authorized, in such manner and to such extent as it may deem necessary or appropriate in the public interest or for the protection of investors or borrowers, to regulate relationships between members or insured institutions and affiliates thereof, and to regulate business, financial, or other transactions between members or insured institutions and affiliates thereof, or between such affiliates and investors in or borrowers from such members or such institutions.

"As used in this subsection, the term 'person' includes individuals, corporations, and organized groups of persons (including any of the foregoing occupying or acting in a fiduciary capacity or otherwise than in their own right), and any conservator, receiver, or other legal custodian of or for any of the same, and the terms 'investors' and 'borrowers' include applicants and prospective investors or borrowers. For the purposes of this subsection or any application thereof, the term 'affiliate' as used in this subsection means

"(1) Any person who is a director, officer, or employee of a member or an insured institution;

"(2) Any person directly or indirectly owning, controlling, or holding with power to vote more than 5 per centum of the outstanding voting securities of a member or an insured institution;

"(3) Any person more than 5 per centum of whose outstanding voting securities is directly or indirectly owned, controlled, or held with power to vote by (i) a member or insured institution or (ii) a person directly or indirectly owning, controlling, or holding with power to vote more than 5 per centum of the outstanding voting securities of a member or an insured institution; or

"(4) Any person or class of persons with respect to which there is outstanding a determination by the Board, by regulations or otherwise, that