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that time savings and loan associations had found that the postWorld War I demands for credit had in many instances dried up customary sources of borrowing through commercial banking channels. In subsequent years down to 1928 similar unsuccessful attempts were repeated. However, the prosperity of the twenties and the ready availability of credit permitted savings and loan associations to fiil their credit needs through dependence upon the commercial banking system. The drive for a reserve credit system was slowed.

The financial crisis at the end of the twenties, and the general economic depression that ensued, again brought this issue into view as attention was focused on the need for both long-range reform and emergency relief actions. Following extensive hearings and debate, the Federal Home Loan Bank Act was passed by the Congress on July 22, 1932.

Under the authority of this act, 12 (reduced to 11 in 1946) district Federal home-loan banks were organized with capital subscribed both by member savings and home-financing institutions and by the United States Treasury. In addition to these stock subscriptions, funds for lending were to be obtained principally from borrowings on the open market, and from retained earnings of the banks. By the device of interbank deposits, funds could be transferred as required throughout the country

The banks were authorized to lend limited amounts without collateral and could make short- or long-term advances against prime home mortgage loan security. Total borrowing authority of member institutions was limited to 50 percent of savings in order to reserve adequate borrowing capacity to meet emergency withdrawal requirements. The 12 original banks opened during October of 1932. By the end of the year the bank system was comprised of 101 member institutions, and had made advances which totaled $837,500.

Created in a time of economic crisis, the Federal Home Loan Bank System was fundamentally designed as a reserve credit pool to free savings and home mortgage credit institutions from complete dependence upon the commercial banking system. Although certain direct loan powers had been incorporated in the act as originally passed, they proved to be difficult to administer through the Federal homeloan banks which had been conceived as a reserve credit system for savings and loan associations, savings banks, and insurance companies. Although these banks served the primary purpose for which they were fashioned, having made almost $50 million in advances by the end of 1933, they were not able to cope with the rising tide of home mortgage foreclosures within the fundamentally conservative lending powers contained in the act.

Establishment of the Home Owners' Loan Corporation.—Direct relief to those facing home-mortgage foreclosure was provided by the Home Owners' Loan Act of 1933. That act authorized establishment of the Home Owners' Loan Corporation by the Federal Home Loan Bank Board, to give direct loan assistance to individual borrowers in danger of losing their homes through foreclosure, and provided the authority in the Board for the chartering and supervision of Federal savings and loan associations.

Home Owners' Loan Corporation was a mortgage-relief operation. At the time of its creation on June 13, 1933, the rate of home mortgage foreclosures throughout the country was approximately 1,000 per day. With a capitalization of up to $200 million to be subscribed by the United States Treasury, and authority to issue bonds up to $4,750 million, exclusive of bonds for refunding, HOLC refinanced 1,017,821 loans during the statutory lending period—June 13, 1933, through June 12, 1936—in the amount of $3,093,451,321. This emergencyrelief corporation was finally liquidated in March of 1951, by which time there had been paid into the United States Treasury $14,068,589 of net earnings. Establishment of Federal savings and loan system.

The same act which created HOLC also authorized a system of Federal savings and loan associations, applying to the savings-and-loan business the principles of a dual system

similar to that of the commercial banking system. Section 5 of the Home Owners' Loan Act lodged in the Board authority to charter and regulate such Federal associations, each to be created to meet the need for mutual savings and home-financing facilities in its respective locality.

By the end of 1933 only 6 Federal associations had been chartered, with less than $200,000 combined assets. Three years later, by the end of 1936, there were 1,200 Federal associations, over two-thirds of the number now existing, with combined assets of $783 million. These did not all represent new institutions, for more than 45 percent of the Federal associations had been previously existing institutions which availed themselves of that provision of the law permitting them to convert from State to Federal charter.

Direct Government investment also was provided to assist in the organization and operation of Federal associations and to give like aid to insured State institutions and members of the bank system. The Secretary of the Treasury in 1933 was authorized to invest up to $100 million in shares of Federal associations. In 1935 Congress continued this form of aid when the HOLC was authorized to invest up to $300 million in Federal associations or in any association which was either a member of the Federal Home Loan Bank System or whose accounts were insured by the Federal Savings and Loan Insurance Corporation. Actual investments so made by the Treasury and HOLC totaled $273,157,000. Of this amount, $227,716,000 was invested in Federal associations. Investment of Government capital had been authorized to make funds readily available for mortgage lending at a time when the flow of private funds had virtually ceased. It had been authorized, also, in the expectation that it would restore confidence and encourage placement of private savings in these institutions. Much of the investment by HOLC was in conjunction with rehabilitation of the associations concerned. Retirement of this Government investment was completed after World War II.

Establishment of Federal Savings and Loan Insurance Corporation.As the economic depression deepened in 1933, Federal insurance of deposits had been devised for the commercial-banking system. One year later the principles of insurance protection were extended to accounts in savings and loan associations by title IV of the National Housing Act. That act, in 1934, authorized creation of the Federal Savings and Loan Insurance Corporation, to provide up to $5,000 protection per insured account in insured savings and loan type institutions. This form of account insurance was mandatory by law for all federally chartered savings and loan associations; State chartered associations could obtain such coverage at their own'option, provided they qualified.

By the end of 1934, or 6 months after insurance of accounts was authorized, there were 541 insured associations, most of them Federals, with combined assets of $150 million. Two years later, at the end of 1936, there were 1,575 insured associations, all but 375 being federally chartered institutions. Their combined assets totaled $1,281 million.

By this same time, the end of 1936, members of the 4-year-old Federal Home Loan Bank System accounted for more than half of the assets of all operating associations, while insured State-chartered and Federal associations, protected under the then 30-month-old program of account insurance, represented over one-fifth of the assets of all savings and loan associations. Federals alone then accounted for almost oneseventh of the assets of all associations.

DEVELOPMENT OF THE HOME-LOAN BANKS

Services of the Federal home-loan banks were required on an increasing scale as membership in the system rose throughout the thirties and member institutions grew in size and volume of business. This membership has been comprised predominantly of savings and loan associations with a few savings banks and insurance companies participating. The annual volume of bank advances mounted from $78,195,224 in fiscal year 1936 to $105,432,158 in the fiscal year 1938. By the end of the latter fiscal year, advances outstanding stood at $196,224,937, a year-end high that was not to be surpassed until after World War II. The number of borrowing institutions was then 2,682, an alltime high for the end of any fiscal year. There was a continued rise in Federal home-loan-bank membership until 1938 when membership reached 3,903 associations. Numerically this was not to be surpassed until 1950, although members' assets were to increase in absolute amount as well as in relation to combined assets of all associations.

Deposits by members in the Federal home-loan banks also increased throughout the thirties, totaling over $29,617,000 by the end of 1939.

With the growth of the Bank System and the growing demands for advances to its member institutions, the Federal hone-loan banks, in 1937, for the first time found it necessary to borrow on the open market, making offerings of consolidated obligations of all of the Federal home-loan banks. At the end of calendar 1937 consoldiated obligations outstanding amounted to $77,700,000, and by the close of 1938 totaled $90 million.

In 1946, the merger of the Portland and Los Angeles banks to form the new Federal Home Loan Bank of San Francisco, reduced the number of Federal home-loan-bank districts from 12 to 11.

As new home-building volume increased rapidly following the war, member institutions made increased use of the services of their district banks. Between 1945 and 1950 member deposits increased from $45,697,000 to $224,097,000 while the volume of advances outstanding rose from $194,872,000_to $815,957,000. To finance this increased scale of advances the Federal home-loan banks turned increasingly to offerings of their consolidated obligations on the open market. The balance of these obligations, which at the end of 1945 had been $68,500,000, had increased to $561 million by the end of 1950. Also reflecting the rapid growth of member assets, United States Treasury stock had been completely retired from the capital structure of the Federal Home Loan Bank of Indianapolis in 1949. This pattern was followed in other districts, and by 1951 Treasury holdings were retired entirely by all banks.

With the rapid growth of industry assets and the high rate of construction activity, deposits of member institutions in the Federal home-loan banks rose to a record high of over $802 million in 1954, and Federal home-loan bank advances outstanding by the end of 1955 had reached a high of over $1,400 million. To finance the large volume of advances made during the 1950's an increasing volume of consolidated obligations of the banks was offered on the open market, and as of June 30, 1956, over $929 million in such securities were outstanding

Cumulative since 1932, the Federal home-loan banks had made a total of over $7,606,500,000 in advances to member savings and loan associations and had received repayments aggregating over $6,433,100,000. No losses had been experienced on any of these advances.

DEVELOPMENT OF FEDERAL SAVINGS AND LOAN ASSOCIATIONS

By the end of 1940, savings and loan associations were enjoying a comparatively thriving business both as to savings and mortgage lending. Home building was striking a pace of slightly over 600,000 new nonfarm units a year, being considerably improved by comparison with

any of the preceding 10 years. United States entry into World War II placed the savings-and-loan business in a significant role in a war economy. As new mortgage-loan opportunities were curtailed by limitations on materials use, member institutions diverted much of their new savings growth to investment in United States Government securities. Members' holdings of Government securities and cash amounted to 33.4 percent of their combined assets by the end of 1945.

The Federal home-loan banks, which had become increasingly active through 1941 when advances outstanding totaled over $219 million, experienced a reduced demand for borrowing during the war years when materials controls limited new construction.

The 5 years after World War II and prior to the outbreak of hostilities in Korea was one of rapid growth for the savings-and-loan business. Assets already larger than ever before due to wartime savings expansion, doubled in size, reflecting the heavy inflow of savings. Despite the fact that the total number of institutions in operation continued to diminish gradually, the number of Bank System members began to increase, reversing a downward trend noted from 1938 through 1945.

Federal associations in 1950 for the first time represented over half of all association assets. Although Federals showed a moderate increase in the number of new institutions, 23 in 1949 being the largest net gain for any of the first 5 postwar years, there was growing interest in branch activities by existing associations.

The growing interest in branch operation is attributed to the growth and decentralization of cities and the desire of established institutions to expand into these new areas. At the end of 1947 there were 1,478 Federal associations. Of these institutions, 43 throughout the country operated 53 branches. By 1950 there were 79 Federal associations operating 100 branches.

In brief, the 5 years between the end of World War II and the conflict in Korea had seen savings and loan associations enter a period of unprecedented growth as the revival of home building offered renewed investment opportunities. Increased use was made of both the deposit and reserve credit facilities of the Federal home-loan banks which in turn found occasion to increase their borrowings on the open market. . A gradual net increase in the number of insured associations during these years was accompanied by rapid expansion in size so that they accounted for over four-fifths of the industry's resources by 1950. Although there was but a mild increase in the rate of new Federal charters issued, an interest in branch operations by these institutions was beginning

DEVELOPMENT OF THE INSURANCE CORPORATION

Throughout the late thirties there also was a rapid increase in institutions covered by the new program of account insurance. By the end of 1939 the Federal Savings and Loan Insurance Corporation was extending its protection to 2,199 institutions with combined assets of approximately $2,509 million, or almost 45 percent of the resources of all associations.

The program of account insurance experienced a more rapid growth following the war. In 1945 there was a net increase of only nine in the number of insured associations. In the year 1949 the net increase was 140, the highest of any year since 1938. Insured institutions by 1950 accounted for over four-fifths of the resources of all savings and loan associations.

Assets of the savings and loan business as a whole, which had been increasing rapidly and which at the end of 1950 totaled $16,893 million greatly accelerated their rate of expansion. Also beginning in 1950 the total number of all savings and loan associations began to increase, reversing a long-term decline that, with the single exception of 1934, had prevailed since 1927. The spread of account insurance by the Federal Savings and Loan Insurance Corporation, which had been retarded during the war years, progressed at a rapid rate subsequent to 1950. Between 1950 and June 30, 1956, the number of insured associations increased from 2,860 to 3,600. In the same interval the proportion of total industry assets represented by these associations rose from 81 to 90.8 percent. Insured share liability of the Corporation in these institutions amounted to $30,672 million by mid-1956.

SIGNIFICANT STATUTORY CHANGES

Basic statutory changes from 1945 through 1950 in the permanent or long-range programs administered by the Board consisted of liberalization of the investment powers of the Federal home-loan banks to allow collateralization of advances with mortgages bearing terms up to 25 years; standby authorization to the Secretary of the Treasury to invest up to $1 billion in obligations of the Federal home-loan banks; the increase in protection afforded by the Federal Savings and Loan Insurance Corporation from $5,000 to $10,000 per insured account; the transfer of stock of the Insurance Corporation from HOLC to

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