who thereafter participates in any manner in the management of such association, or any such director or officer who participates in any manner in the management of such association during his suspension as herein provided, shall be fined not more than $5,000 or imprisoned for not more than 5 years, or both, in the discretion of the court.

"(3) The grounds for the appointment of a conservator or a receiver for an association shall be one or more of the following: (i) insolvency in that the assets of such association are less than its obligations to its creditors and others, including its members; (ii) violation of law or of a regulation; (iii) the concealment of its books, papers, records, or assets or the refusal to submit its books, papers, records, or affairs for inspection to any examiner or lawful agent appointed by the Board; (iv) unsafe or unsound operation; (v) failure or refusal to obey an order issued pursuant to subdivision (1) hereof. The Board shall have exclusive power and jurisdiction to appoint a Supervisory Representative in Charge, a conservator, or a receiver for an association. If, in the opinion of the Board, a ground for the appointment of a conservator or receiver as herein provided exists and the Board determines that an emergency exists requiring immediate action, the Board is authorized to appoint ex parte and without notice a Supervisory Representative in Charge to take charge of such association and its affairs, who shall have and exercise all the powers herein provided for conservators. Unless sooner removed by the Board, such Supervisory Representative in Charge shall hold office until a conservator or receiver, appointed by the Board as herein provided, takes charge of such association and its affairs, or for six months, or until thirty days after the termination of the administrative hearing on the appointment of a conservator or receiver and final proceedings thereon as herein provided, whichever is longest. No appointment of a conservator or receiver shall be made until notice thereof is given to the association stating the grounds therefor and until an opportunity for a hearing thereon before the Board, a member thereof, or a person designated by the Board is afforded to such association. A conservator shall have all the powers of the members, the directors, and the officers of the association and shall be authorized to operate it in its own name or conserve its assets in the manner and to the extent authorized by the Board. The Board shall appoint only the Federal Savings and Loan Insurance Corporation as a receiver for the association. With the consent of the association expressed by a resolution of its board of directors or of its members, the Board is authorized to appoint a conservator or receiver for an association without any requirement of notice or hearing. Such action to appoint a conservator may be taken regardless of whether a Supervisory Representative in Charge has been appointed, and such action to appoint a receiver may be taken regardless of whether a Supervisory Representative in Charge or a conservator has been appointed. The Board may replace a conservator with a receiver without any requirement of notice or hearing. The Board shall have power to make rules and regulations for the reorganization, merger, and liquidation of associations and for associations in conservatorship and receivership and for the conduct of conservatorships and receiverships and shall have power by regulation or otherwise to define, for the purpose of this subsection, what constitutes unsafe or unsound practices and unsafe or

unsound operation. In the event that an association's Federal Home Loan Bank membership or its status as an insured institution as defined in section 401 of the National Housing Act is terminated, the Board shall, simultaneously with such termination or promptly thereafter, and without any requirement of notice or hearing, appoint a conservator or appoint the Federal Savings and Loan Insurance Corporation as receiver for such association, and such an appointment of said Corporation as receiver shall be deemed to constitute a default within the meaning of title IV of the National Housing Act. "Whenever a Supervisory Representative in Charge, a conservator, or a receiver appointed by the Board demands possession of the property, business, and assets of any association, the refusal of any director, officer, employee, or agent of such association to comply with the demand shall be punishable by a fine of not more than $5,000 or by imprisonment for not more than one year, or by both such fine and. imprisonment.

(4) All hearings under the provisions of subdivisions (1), (2), and (3) hereof shall be conducted in accordance with the provisions of the Administrative Procedure Act and shall be held in the Federal judicial district in which the principal office of the association affected is located unless it consents to another place. The Board or any member thereof or its designated representative shall have power to administer oaths and affirmations and to take or cause depositions to be taken and shall have power to issue subpenas and subpenas duces tecum and shall issue such at the request of any interested party, and the Board or any interested party may apply to the United States District Court of the district where such hearing is designated for the enforcement of such subpenas or subpenas duces tecum and such court shall have power to order and require compliance therewith. "Any association aggrieved by a final order of the Board entered pursuant to any such hearing or any officer or director against whom an order of removal has been issued pursuant to subdivision (2) hereof after hearing may obtain a review of such order in the United States Court of Appeals in the circuit in which the hearing was held by filing in such court within thirty days after the issuance of such order a written petition praying that the order of the Board be set aside. A copy of such petition shall be forthwith served upon the Board by serving a copy thereof on any of its agents and mailing a copy by registered mail to the Federal Home Loan Bank Board, Washington, District of Columbia.

"Within thirty days after the service of such petition upon it or such further time as the court shall allow, the Board shall file with the court a copy of the order complained of and the originals or certified copies of all papers and evidence presented to and considered by it in entering said order. The record and briefs upon which any such review shall be held and determined by the court shall contain such information and material and shall be prepared within such time and in such manner as the court may by rule or order prescribe. At the earliest convenient time the court shall determine the matter upon the record before it in the manner prescribed by subsection (e) of section 10 of the Administrative Procedure Act. The court shall not stay, or enjoin the operation of, the order of the Board pending its final judgment. The court may in its discretion enter judgment

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for costs against the petitioner. The court's judgment shall be final, subject, however, to review by the Supreme Court of the United States upon writ of certiorari upon petition therefor under section 1254 of title 28 of the United States Code by the petitioner or by the Board, or by certification by the court pursuant to the provisions of that section.

"(5) The Board shall have power to sue, complain, and defend in any court of competent jurisdiction. In any action, suit, or other proceeding to which it is a party, and in the administration of conservatorships and receiverships, the Board is authorized to act in its own name and through its own attorneys.

"(6) All expenses of the Board or of the Federal Savings and Loan Insurance Corporation in connection with the preparation for or conduct of proceedings under this subsection shall be considered as nonadministrative expenses."

Reasons

The existing provisions of subsection (d) are complicated and involved, in some respects self-contradictory, and capable of causing needless delays in the process of judicial review. The suggested revision would, it is believed, remedy these defects and provide a speedy and effective means of judicial review on the basis provided in the Administrative Procedure Act, as distinguished from review on the weight of the evidence as provided in the existing subsection.

The revision contains provisions for removal of a director or officer who is guilty of violation of law or regulation or of engaging in unsafe or unsound practices in conducting the business of the associations. These provisions are similar to those of section 77 of title 12 of the United States Code, which is applicable to directors and officers of national banks and of State member banks of the Federal Reserve System.

In addition, the revision would require the Board to appoint a conservator or receiver for a Federal savings and loan association in the event that such association's Federal home loan bank membership or its status as an insured institution under title IV of the National Housing Act is terminated. The existing law requires that each Federal savings and loan association have such membership and insurance, but does not make clear what is to happen when a situation arises involving termination of a Federal association's Federal home loan bank membership or its insured status.

145. INVESTMENTS BY SECRETARY OF THE TREASURY IN FEDERAL SAVINGS AND LOAN ASSOCIATIONS

Existing law

Subsections (g) and (j) of section 5 of the Home Owner's Loan Act of 1933, as amended:

"(g) The Secretary of the Treasury is authorized on behalf of the United States to subscribe for preferred shares in such associations which shall be preferred as to the assets of the association and which shall be entitled to a dividend, if earned, after payment of expenses and provisions for reasonable reserves, to the same extent as other shareholders. It shall be the duty of the Secretary of the Treasury to subscribe for such preferred shares upon the request of

the Board; but the subscription by him to the shares of any one association shall not exceed $100,000, and no such subscription shall be called for unless in the judgment of the Board the funds are necessary for the encouragement of local home financing in the community to be served and for the reasonable financing of homes in such community. Payment on such shares may be called from time to time by the association, subject to the approval of the Board and the Secretary of the Treasury; but the amount paid in by the Secretary of the Treasury shall at no time exceed the amount paid in by all other shareholders, and the aggregate amount of shares held by the Secretary of the Treasury shall not exceed at any time the aggregate amount of shares held by all other shareholders. To enable the Secretary of the Treasury to make such subscriptions when called there is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $100,000,000, to be immediately available and to remain available until expended. Each such association shall issue receipts for such payments by the Secretary of the Treasury in such form as may be approved by the Board, and such receipts shall be evidence of the interest of the United States in such preferred shares to the extent of the amount so paid. Each such association shall make provision for the retirement of its preferred shares held by the Secretary of the Treasury, and beginning at the expiration of five years from the time of the investment in such shares, the association shall set aside one third of the receipts from its investing and borrowing shareholders to be used for the purpose of such retirement. In case of the liquidation of any such association the shares held by the Secretary of the Treasury shall be retired at par before any payments are made to any other shareholders.

"(j) In addition to the authority to subscribe for preferred shares in Federal Savings and Loan Association, the Secretary of the Treasury is authorized on behalf of the United States to subscribe for any amount of full paid income shares in such associations, and it shall be the duty of the Secretary of the Treasury to subscribe for such full paid income shares upon the request of the Federal Home Loan Bank Board. Payment on such shares may be called from time to time by the association, subject to the approval of said Board and the Secretary of the Treasury, and such payments shall be made from the funds appropriated pursuant to subsection (g) of this section; but the amount paid in by the Secretary of the Treasury for shares under this subsection and such subsection (g), together shall at no time exceed 75 per centum of the total investment in the shares of such association by the Secretary of the Treasury and other shareholders. Each such association shall issue receipts for such payments by the Secretary of the Treasury in such form as may be approved by said Board and such receipts shall be evidence of the interest of the United States in such full paid income shares to the extent of the amount so paid. No request for the repurchase of the full paid income shares purchased by the Secretary of the Treasury shall be made for a period of five years from the date of such purchase, and thereafter requests by the Secretary of the Treasury for the repurchase of such shares by such associations shall be made at the discretion of the Board: but no such association shall be requested to repurchase any such shares in any one year in an amount in excess of 10 per centum of the total amount invested in

such shares by the Secretary of the Treasury. Such repurchases shall be made in accordance with the rules and regulations prescribed by the Board for such associations."

Recommenation

Repeal subsections (g) and (j), and reletter subsections (h), (i), and (k) as subsections (g), (h), and (i), respectively.

Reason

These subsections are now obsolete. All investments made under said subsections have been liquidated, and no further funds are currently available thereunder.

Existing law

146. CONVERSIONS

Subsection (i) of section 5 of the Home Owners' Loan Act of 1933, as amended:

"(i) Any member of a Federal Home Loan Bank may convert itself into a Federal Savings and Loan Association under this Act upon a vote of 51 per centum or more of the votes cast at a legal meeting called to consider such action; but such conversion shall be subject to such rules and regulations as the Board may prescribe, and thereafter the converted association shall be entitled to all the benefits of this section and shall be subject to examination and regulation to the same extent as other associations incorporated pursuant to this Act.

"Any Federal savings and loan association may convert itself into a savings and loan type of institution organized pursuant to the laws of the State, District, or Territory (hereinafter referred to in this section as the State) in which the principal office of such Federal association is located: Provided, (1) That the State permits the conversion of any savings and loan type of institution of such State into a Federal savings and loan association; (2) that such conversion of a Federal savings and loan association into such a State institution is determined upon the vote in favor of such conversion cast in person or by proxy at a special meeting of members called to consider such action, specified by the law of the State in which the home office of the Federal association is located, as required by such law for a Statechartered institution to convert itself into a Federal association, but in no event upon a vote of less than 51 per centum of all the votes cast at such meeting, and upon compliance with other requirements reciprocally equivalent to the requirements of such State law for the conversion of a State-chartered institution into a Federal association; (3) that notice of the meeting to vote on conversion shall be given as herein provided and no other notice thereof shall be necessary; the notice shall expressly state that such meeting is called to vote thereon, as well as the time and place thereof, and such notice shall be mailed, postage prepaid, at least twenty and not more than thirty days prior to the date of the meeting, to each member of record of the Federal association at his last address as shown on the books of the Federal association and to the General Manager of the Federal Savings and Loan Insurance Corporation, Washington, District of Columbia; (4) that, upon the effective date of the conversion, the association has repurchased the total amount invested in its shares by the Secretary of