separate corporations-1 concerned with selecting persons or property for insurance, and the other concerned with the actual issuance of insurance and the payment of claims.

This has not been the business practice in the insurance field. Nor has it been Government practice in the savings and loan field for the last 22 years.

I am not concerned with the motives of the executive branch in suggesting this change. The suggestion is unsound.

My own views are precisely in accord with those of the administration itself, as expressed only last year by Mr. Walter W. McAllister, Chairman of the Home Loan Bank Board, who said, and I quote: We are not in agreement that a separate Board should be established to administer the affairs of the Federal Savings and Loan Insurance Corporation. That is quoted from a letter of September 1, 1955, from Mr. McAllister to Senator Fulbright.

Also last year, Mr. Albert M. Cole, Administrator of the Housing and Home Finance Agency, generally regarded as the chief administration spokesman on housing matters, told the House Committee on Government Operations, and I quote:

I do not agree that the Home Loan Bank Board should be separate and distinct from a board or other managerial body administering the affairs of the Federal Savings and Loan Insurance Corporation. Both the Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation are concerned with the operations of savings and loan associations, and the existence of two boards could result in conflicts of policy and confusion in the industry. Furthermore, such organization would be much less economical than the present one wherein the Home Loan Bank Board and Insurance Corporation have common administrative services utilize the services of one examining division, and accumulate jointly knowledge and information about the industry as a whole and about the operation of specific savings and loan associations.

That is taken from the House Committee on Government Operations, Hearing on Lending Agencies Report, page 393.

Moreover, private groups which must live with this setup are very much opposed to it.

The plan carries potential for considerable conflict between two Federal agencies with closely intertwined regulatory functions in the same basic economic area.

The plan entails confusion, duplication, potential waste and undoubted increase in cost of administration.

I therefore urge that the plan be disapproved.

Mr. Chairman, I want to qualify one statement that I made in the very early part of my statement. I said no experts in this field have ever suggested to the Banking and Currency Committee that such a basic change was necessary. I want to qualify that by saying that the General Accounting Office did make the suggestion in certain House documents, not to the Senate Banking and Currency Committee. The statement I made is technically correct, but it has been made to the House Committee, in certain documents from the General Accounting Office.

Senator KENNEDY. The Banking and Currency Committee, which has jurisdiction over this matter, has not held hearings upon it or considered it?

Senator SPARKMAN. Not specifically on this, although it has been touched upon, naturally, as other legislation has come up and the parts that I read from there last fall, had to do with more or less an

interim study of lending agencies, and the comment from the chairman of the Home Loan Bank Board, Mr. McAllister, and also the comment of Albert M. Cole, the head of the Housing and Home Finance Agency, both speaking for the administration, disapproved specifically any proposal to separate the Board into two bodies. We were not at that time considering legislation dealing with the subject matter of Reorganization Plan No. 2. If it was mentioned it was mentioned only incidentally.

Senator KENNEDY. I notice that it is the opinion of the General Accounting Office as well as the Committee on Banking and Currency of the House of Representatives which incorporated a provision in H. R. 11742, the housing bill, to prevent plan No. 2 from going into effect, that this matter, which affects important segments of the economy, should be considered in the normal legislative pattern, rather than through a reorganization plan.

Senator SPARKMAN. Mr. Chairman, I am glad that you brought out that point. I certainly feel, and I think it is rather significant, that this resolution, seeking disapproval, was sponsored-introducedfirst, by me, as chairman of the Housing Subcommittee, the subcommittee which has practically all of the legislative responsibility, initially dealing with this agency; joined in by the chairman of the full Banking and Currency Committee, which has jurisdiction over this field, generally, and also by the former chairman of that committee, the ranking Republican Member, Senator Capehart.

We all feel very definitely and very strongly that this is a matter of such a serious consequence, that it should receive the most careful study before any such change as this is made.

I will say to you that I was rather shocked when the proposal came in. I had no idea that such proposal was being contemplated. I certainly think that is true with reference to both Senator Fulbright and Senator Capehart, also. We feel very strongly that our committee should be given an opportunity to go into all of the many facets and the implications of such a change as this.

I may call your attention to the fact that, just last year, we dealt with one proposal affecting the Home Loan Bank Board. Several years ago, it was made a somewhat tenuous part-or there was a connection which was rather tenuous-between it and the Housing and Home Finance Agency. We decided in the Banking and Currency Committee of the Senate last year, that that tenuous connection should be broken, so that it might function purely as an independent agency, as was intended by Congress when it was originally set up. We went into that most thoroughly. We had hearings; we discussed the pros and cons; we heard those who objected to such a change, as well as those who were in favor of such a change. That particular proposal had nothing like the potential consequences that this would have.

I mention that just as an illustration of the study we gave to the kind of a problem, that certainly was not as important, with the potential consequences as this proposed change.

Senator KENNEDY. Senator Capehart, in his statement, used the word "drastic", in describing what this change would be. Therefore, it seemed to me appropriate for the Banking and Currency Committee to consider the matter as well as the Subcommittee on Reorganization and I was wondering whether if the subcommittee did not approve

the plan, we could anticipate that next year, the Banking and Currency Committee, if there were any impetus on the part of the administration, might give this matter some consideration and make a decision?

Senator SPARKMAN. Yes, and certainly, it seems to me that the administration could very well submit a recommendation, a legislative recommendation, relating to this; and of course, we would give it study. I will go further than that, Mr. Chairman, and say that I should be very glad on my own responsibility, to ask the staff of our subcommittee to study this during the adjournment of Congress.

Mr. Jack Carter is with me here, the staff director of the Housing Subcommittee, and Mr. James B. Cash, one of our able staff members from the full Banking and Currency Committee is with me. The staff of the full committee and the staff of the Housing Subcommittee all work together quite well on these problems, and while we do have some tasks already set up, I see no reason why we should not ask them to go in and gather all of the information that we can possibly get from the administration; from representatives out in the field who have given thought to this thing. This is a problem that I think we could very well seek the advice of some of the best known insurance executives throughout the country. As I pointed out in my statement, it seems to me what they are seeking to do is to divide a field --divide an agency-into 2; 1 of which will select the insurance risks and the other of which must write insurance on those risks, possibly without adequate information.

Now, I believe in the message of the President submitting this reorganization plan, he made reference to a parallel situation in the Federal Deposit Insurance Corporation. I want to say there, that the Comptroller of Currency, when it comes to national banks, has the right to say whether or not a bank shall be chartered, but the Federal Deposit Insurance Corporation has the right to say whether or not it will insure the deposits in that bank. A bank can go on and accept a charter if it wants to, but just as a practical matter, they don't do so. There the right to say who shall be insured is vested in the insuring agency.

If I understand correctly the proposed operation of this reorganization plan, such would not be true. An association which is chartered must be insured by the insurance corporation without it being given any right to pass upon the soundness of the risk. Just offhand, I will say this, Mr. Chairman; and I think that I am simply confirming what you have suggested, that this plan has not been sufficiently thought through to justify our endorsement.

Senator KENNEDY. The subcommittee is anxious to give full consideration to all the Hoover Commission recommendations. The General Accounting Office, while suggesting that perhaps this reorganization should be considered in the normal legislative way, does indicate the merits of the plan. If the subcommittee should not approve the plan, I am sure we would feel greatly reassured if we knew the Banking and Currency Committee, which does have direct responsibility, is going to make a staff study, as you suggested, and come to some decision next year.

Senator SPARKMAN. Mr. Chairman, I would like to say this to you. Of course, I recognize the responsibility of this subcommittee and the full committee with reference to the various reorganization plans

and I think most of us are rather sympathetic with what the Hoover Commission tried to do. As a matter of fact, I can say that I have a very strong record of support of the Hoover recommendations, particularly the old Hoover Commission. Most of those were enacted; a great many of these have not been. We in the Congress have not received all these proposals yet, but I have supported the overwhelming majority of the recommendations that have come out.

On this particular plan I want to make the point that it is not a Hoover Commission recommendation. It is contrary to the recommendation of the task force, and is not in line with the recommendation of the Hoover Commission. However, separate and apart from that, even if the Hoover Commission had made the recommendation, I would still say it has not received the careful and thorough going over that this kind of proposal ought to have.

Senator KENNEDY. Yes. I would agree also with the basic point that one of the fundamental concerns of the Hoover Commission was against establishing an additional independent agency unless the need was overwhelming, so we should be concerned about doing that regardless of the other arguments.

Senator COTTON. Senator, I join with the chairman in expressing our appreciation in having you here today.

You have indicated, you, the chairman of the subcommittee, and the distinguished chairman of the Banking and Currency Committee and the ranking minority member all join in this resolution of this group.

You have also indicated in your statement that the staff of the Banking and Currency Committee have helped in the preparation of these resolutions.

Would you be able to say, or would you feel at liberty to tell us, whether the other members of the Banking and Currency Committee have indicated their feeling about this matter?

Senator SPARKMAN. No, Senator Cotton, I cannot. I have notI do not recall that I have discussed it with a single member of the committee other than the chairman and the ranking minority member, It has not received consideration of the full committee.

Senator COTTON. Thank you.

Has it received the consideration of your own subcommittee? Senator SPARKMAN. Mr. Cash of our staff reminds me of something that I knew. The chairman, Mr. Kennedy, wrote a letter to Senator Fulbright regarding this, inviting comment. Senator Fulbright thereupon sent a copy of that letter to every member of the committee and suggested that the individual members might want to write letters to Senator Kennedy. I do not know how many responded to that. Senator KENNEDY. I am informed we received letters from Senators Fulbright, Capehart, Morse, Lehman, and Beall, opposing it.

Senator SPARKMAN. I would say this. I want to make it clear that it is based merely on opinion. I have not talked with them. I believe the Senate Banking and Currency Committee would be unanimous in feeling this matter should receive more careful consideration than it has yet received.

Senator COTTON. Has this been the subject of discussion, either formally or informally, in your own subcommittee?

Senator SPARKMAN. No. No. Of course, there, as to the full committee, I have not talked to one of them except Senator Capehart and

Senator Fulbright, who are members of the subcommittee, but I talked to nobody else.

Senator KENNEDY. Thank you very much.

Senator SPARKMAN. Thank you, Mr. Chairman and gentlemen of the committee.

(The prepared statements of Senators Fulbright and Capehart are as follows:)

STATEMENT OF HON. J. W. FULBRIGHT, A UNITED STATES SENATOR From the STATE OF ARKANSAS

Mr. Chairman, and members of the subcommittee, I appreciate this opportunity to express my views on Reorganization Plan No. 2 of 1956. As I stated in my letter of June 8, 1956, to the chairman, I recommend that this plan be disapproved by the Senate. Subsequent to that letter, I have joined Senators Sparkman and Capehart in a resolution to disapprove this plan.

I have studied the message from the President transmitting Reorganization Plan No. 2 of 1956. I find in this message only two reasons advanced in justification for the plan. The reasons given by the President are as follows:

(1) it is stated that the "authority to promote and charter Federal savings and loan associations" is "inherently conflicting" with the authority "to administer the insurance underwriting" of deposits in savings and loan associations, and

(2) it is stated that the plan "will enhance the quality of the management" of the Federal Savings and Loan Insurance Corporation.

Mr. Chairman, these reasons are rather boldly stated in the message, but neither reason is supported by even the briefest exposition to demonstrate their validity. My own feeling is that the reasons are not valid-are, in fact, insupportable and that this plan is the product of some overzealous officials who are anxious to give the appearance of responding to a suggestion by the second Hoover Commission.

In the first place, I am not aware that the Federal Home Loan Bank Board "promotes" Federal savings and loan associations in any noticeable degree. On the contrary, in recent years it has been my observation that the Board functions more as a brake upon, rather than an accelerator to, the establishment of new associations.

Furthermore, even if one accepts the premise of "inherently conflicting" functions-whatever that phrase may mean- the President's message is strangely incongruous on this reason for separation. The "promotional" aspects of the Board's activities, if there be any such aspects-and I hope these hearings will develop this point, would undoubtedly have been at their peak during the early years of the agency. And yet the President's message states that: "It may well be that this identity of management was useful during the formative years of the Federal Home Loan Bank System and of the program of the Federal Savings and Loan Insurance Corporation." Mr. Chairman, it seems to me that any "inherent conflict" should have been more pronounced in the "formative years", if in fact such a conflict existed then or now. And I am encouraged in my conclusion by the fact that, although the General Accounting Office recommended study of this question some years ago, it has not made such a recommendation since 1949-7 years ago. The "inherent conflict" is apparently quite dormant. Perhaps one reason for this is that I am told that no funds have been expended to promote new associations since about 1935.

In the second place, I am at a loss to understand the President's statement on enhancing the "quality of management." The Federal Home Loan Bank System and the Insurance Corporation are operated by a three-man Board of Presidential appointees. The present members were all appointed by President Eisenhower and were all confirmed by the Senate. This is the first indication I have had that the President was dissatisfied with the "quality of management" being provided by this three Board members. On the contrary, the President has recently complimented the current Chairman upon the occasion of accepting his resignation to be effective at a future date.

Mr. Chairman, this plan (1) would create an additional Federal agency resulting in an additional supervisory burden on the President, (2) would increase the operating expenses of the Federal Government, and (3) would probably cause duplication and overlapping activities between two separate agencies of the Government having supervisory relationships with member associations of the