Chart 25 DEFICIENCIES IN WAGES AND SALARIES ARE LARGE SHARE OF DEFICIENCIES IN TOTAL CONSUMER INCOMES BEFORE TAXES Chart 26 THE LAG IN WAGES AND SALARIES BEHIND PRODUCTIVITY GAINS, 1960-1975 (Average Annual Increases, Constant Dollars) NATIONAL ASSOCIATION OF MUTUAL SAVINGS BANKS (By Grover W. Ensley*) The 1976 Economic Report of the President and accompanying Annual Report of the Council of Economic Advisers emphasize the need for a durable economic recovery. No industry has a greater stake in government policies to restore and maintain economic and financial stability than savings banking. Hopefully, it will be possible for the Administration and the Congress to reach an accommodation this year on the proper degree of economic stimulus needed to place the economy on the path to sustainable, non-inflationary growth, reduced unemployment and increased real incomes. We hope, too, that it will be possible for the Administration and the Congress to reach an accommodation this year in the vitally important area of financial restructuring legislation. We were pleased to see the President reaffirm his support for the Senate-passed Financial Institutions Act of 1975 (S. 1267) in his 1976 State of the Union Message and fiscal 1977 budget. While not specifically mentioned in the President's and Council's Reports, financial restructuring legislation clearly remains a high-priority concern of the Administration. We have also been highly encouraged by recent developments in the Congress. On December 11, 1975, the Senate passed, by an overwhelming vote, the Financial Institutions Act of 1975 (S. 1267). The savings bank industry strongly supports this legislation. The focus of attention has now shifted to the House of Representatives, where hearings are currently in progress on a Committee Print of the proposed Financial Reform Act of 1976. The need for financial restructuring legislation to strengthen thrift institutions and the flow of housing credit has become increasingly recognized as evidence has accumulated over the past decade on the extreme cyclical sensitivity of deposit flows at thrift institutions and their growing long-run competitive weakness in household savings account markets relative to commercial banks. Achieving and maintaining better-balanced federal economic policies to promote economic and financial stability will be the single most effective means of meeting the short-run problems of thrift institutions and housing and mortgage markets. Enacting financial restrueturing legislation will also be helpful, by increasing the short-run flexibility and earning power of thrift institutions. The major benefit of financial restructuring legislation, however, will be its long-run effect in preserving the competitive ability of thrift institutions to generate an adequate volume of funds for housing credit. * Executive vice president, National Association of Mutual Savings Banks. Providing thrift institutions with modern third party payment, consumer loan and other consumer service powers and increased investment flexibility will help achieve this result, by increasing their ability to compete for lendable funds on both a price and service-convenience basis. Numerous public and private studies have concluded that modernized powers for thrift institutions will benefit housing, by contributing to an increased flow of housing credit, a more stable flow of housing credit, or both. A number of these studies are included in the list attached to this statement. No less important than modernized powers will be the continuation of federal deposit interest rate control authority, with meaningful differentials for mortgage-oriented thrift institutions. The need for differentials would not likely be reduced by the consumer service and investment powers that would be provided thrift institutions in S. 1267 or in the proposed Financial Reform Act of 1976. Commercial banks would still retain significant competitive advantages which must be offset by the deposit rate differential, including the ability to make a full range of short-term business loans, a much more numerous and geographically dispersed network of offices, and substantially lower effective federal income tax rates than thrift institutions. The savings bank industry believes that the Senate-passed S. 1267 and the proposed Financial Reform Act of 1976 now being considered in the House provide a sound basis for the Congress to enact financial restructuring legislation this year. We stand ready to cooperate in every way with the Congress, the Administration and other industry groups to help achieve this public-interest goal. STUDIES WHICH CONSIDER THE IMPACT OF BROADENED THRIFT INSTITUTION POWERS ON MORTGAGE CREDIT AND HOUSING Patric H. Hendershott, The Impact of the Financial Institutions Act of 1975, August 1975. (This study was undertaken for HUD). Department of the Treasury, The Financial Institutions Act of 1975, March 19, 1975. The Federal Home Loan Bank Board, A Financial Institution for the FutureSavings, Housing Finance, Consumer Services-An Examination of the Restructuring of the Savings and Loan Industry, March 1975. Leonard Lapidus, et al., Public Policy Toward Mutual Savings Banks in New York State: Proposals for Change, Federal Reserve Bank of New York and New York State Banking Department, June 1974. National Association of Mutual Savings Banks, "The Case for Broadened Powers and Federal Charters for Savings Banks: A Detailed Analysis," in Financing Institutions Act-1973, Hearings on S. 2591 before the Subcommittee on Financial Institutions of the Senate Committee on Banking, Housing and Urban Affairs, United States Senate, 93rd Congress, 2nd Session, May 13-17, 1974, pp. 852-985. Department of the Treasury, Recommendations for Change in the U.S. Financial Dwight M. Jaffee, "The Extended Lending, Borrowing and Service Function George J. Benston, Savings Banking and the Public Interest, A Study Commis sioned by the Savings Banks Association of New York State, December 14, 1971. (This study was published in full in Journal of Money, Credit and Banking, Ohio State University Press, Vol. IV., No. 1, Part II, February 1972.) Irwin Friend, "Summary and Recommendations," in Study of the Savings and Loan Industry, Prepared for the Federal Home Loan Bank Board at The Wharton School, University of Pennsylvania, July 31, 1969, Volume I. Leo Grebler, The Future of Thrift Institutions: A Study of Diversification Versus Specialization, Joint Savings and Loan and Mutual Savings Bank Exchange Groups, Danville, Illinois, June 1969. Arnold W. Sametz, "Cyclical Problems Facing S&L's in the Next Decade and Suggested Reforms," in Cyclical and Growth Problems Facing the Savings and Loan Industry-Policy Implications and Suggested Reforms. Arnold W. Sametz, editor, New York University Graduate School of Business Administration, Institute of Finance, The Bulletin, No. 46-47, March 1968. |