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have wrecked an association in a different way without ever having a legal determination of what the directors or officers were doing. Mr. HORNE. Let me say this, if I may, sir

Senator ALLOTT. There is a similar provision, by the way, made in the Banking and Currency Committee

Mr. HORNE. The Federal Reserve Board and the Comptroller of the Currency presently both have the authority to remove officers. What would happen in the case you are talking about most of the time, practically all of the time, is that we anticipate that we would use the cease-and-desist authority.

The cease-and-desist authority has two parts, and counsel can explain it better than I. One would be a temporary cease-and-desist; and if the association or person disagreed with us, he could go to court within 10 days' time and the court could either stay our hand or take sides with us, until we went through the administrative procedure process. Under the other part, we would issue a permanent order at which time it would go to the appellate court if the association wanted to take it there, and the final determination would be made by the appellate court.

Senator Allott. Well, I don't want anything I say to be construed as indicating an opinion that the meanderings of officers or directors should be tolerated.

Mr. Horne. I know that, sir.

Senator Allott. But on the other hand, in all fairness, we realize that many situations arise, the personal equation can never be eliminated completely and it seems to me that if there were an immediateand I mean immediate-recourse to the courts then it takes away a lot of the other sting from it.

Mr. HORNE. Yes, it does, and can happen.

You are completely right also, when you say that if some tool is not provided for us, the regulatory agency, also, to take quick action, a person can ruin an association before we can ever get to him. And that is exactly what has happened in recent years. That is the reason we asked for this intermediate authority, so as to enable us to get into the situation more directly, to keep anyone from milking an association dry as some of them have done-very few, I want to stress,

very few.

Senator ALLOTT. Just by way of illustration, this type of action would not, in your mind, as I get what you are saying, be used so much as to differences of policy, but only where it was bordering upon the illegal.

Mr. HORNE. Yes, sir-
Senator Allott. Or illegal, actually illegal.

Mr. HORNE (continuing). And in the case of removal of officers and directors, it is much more restricted. The authority for doing so would be much more hedged in and restricted than it would be in the case of cease-and-desist. Senator ELLENDER. You may proceed.

THE 1967 BUDGET REQUEST Mr. Horne. Now, I should like to address myself directly to the budget estimates which we have submitted to you.

The agency's 1967 budget estimates, submitted as business-type budget in three parts, consist of:

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The estimates are based upon the need to keep all workloads in a current status, and on the assumption that present economic conditions will prevail during the budget year.

Senator ELLENDER. How many of these 1,326 are actually stationed on a permanent basis in Washington, about what percentage?

Mr. HORNE. Of the number given, I should think about 400.
Do you know?

Mr. TREVAS. Less than 400; about 365, sir. The rest are the field examiners, the men who examine savings and loan associations.

Mr. HORNE. Well, 367; is that rigbt?
Mr. TREVAS. Yes, about that.
Senator ELLENDER. All together?
Mr. HORNE. Yes, sir.


Senator ALLOTT. Just a moment please, Mr. Horne.
The House in its report said:

As a minimum requirement, the Committee for many years has insisted that the Board make examinations of member institutions no less frequently than annually, and that a thorough job be done. It can do no less than this in the public interest. The committee is of the opinion that as an additional precautionary measure, the time is ripe for the appraisal in depth of the effectiveness of the Board's supervision of the entire system, to assure its healthy continued growth in the future, and is pleased that plans are being developed for such a study.

I presume you are coming to the latter part of this report later?
Mr. HORNE. No, sir; that is not covered in my statement.
Senator AllOTT. Well, let us talk about it now, then.
Mr. HORNE. All right, sir.

This is a matter, so far as the authorization for the study is concerned, that has been resolved now by the two Houses of Congress. We now have the way clear to develop detailed plans for the study to which the House report made reference.

Senator Allott. When will that study be completed?

Mr. HORNE. It will probably take a couple of years to complete the study.

Mr. Scott. Our authorization requires that it be completed by December 31, 1968.

Mr. HORNE. Yes, this is the point I wanted to get to, 1968.


Senator ALLOTT. Now, what is the situation with respect to your examinations? Have you hit an annual basis

Mr. HORNE. Yes.
Senator ALLOTT. With all institutions covered?

Mr. HORNE. Yes, sir. And sometimes we go in more frequently, depending on what we find the first time.

Mr. TREVAS. They are examined at least once a year in the regular examinations. We have reached the point now where there are examinations made annually of all these insured institutions and, on some occasions, more than one examination in a year, of those institutions in which there was an indication that we had to keep a closer watch.

Senator ALLOTT. Are you satisfied with the--and I use the word that the House used—thoroughness of these examinations?

Mr. HORNE. We are satisfied reasonably well. I wouldn't say that we aren't trying to improve them. We are. We think we have made a lot of improvement in the last 2 or 3 years.

We are dealing with people. Some, of course, have better qualifications, are better trained in the business of examining, than others. But on the whole we think we have a very able examining and supervisory staff.

AUTHORIZED PERSONNEL Senator Allott. Now, in 1965, you had 311 permanent positions in administration, 310 in 1966; and you are asking for 333 in 1967. So you are asking for an increase there of 23 permanent positions in administrative.

Mr. HORNE. Yes, sir. I will comment on that in the rest of my testimony. However, we can discuss it now if you want to.

Senator ALLOTT. Let me read the rest of these figures into the record then.

Mr. HORNE. All right, sir.

Senator ALLOTT. In nonadministrative, 954 in 1965; 953 in 1966; and 953 in 1967.

Then in the FSLIC, 16 in 1965; 16 in 1966; and 19 in 1967.
So in the FSLIC you are asking for four additional
Mr. HORNE. Three, sir.

Senator Allott. All right-for 3 additional; and in the administrative staff, general administrative, you are asking for 23 additional positions.

Mr. HORNE. Yes, sir.
Senator ALLOTT. All right, sir.

OBJECTIVE OF SPECIAL STUDY Senator ELLENDER. You obtained last year, in your supplement for 1966, $500,000 to make this study.

Mr. HORNE. Yes.

Senator ELLENDER. Was there any opposition at all from the association?

Mr. HORNE. Yes. The National League objected to it and this provided a point of difficulty so far as the Senate side was concerned. The other league expressed no opposition to it, but did not support it. However, they expressed no opposition to it. The U.S. League is by far the larger league of the two.

Senator ELLENDER. Can you tell us in a nutshell the objective of the study?

Mr. HORNE. The objective of it is to make a study, a constructive, objective study, which will hopefully enhance the ability of the savings and loan industry to do an even better job under the authorities granted to it by Congress than it is presently doing.

Also, the objective is to make a study of our supervisory and regulatory and legal framework with which we carry out our duties, to see what overall improvements might be made in how we do our job.

Senator ELLENDER. Would that in any manner contemplate additional legislation?

Mr. HORNE. It might, sir. It might, sir, down the road.
Senator ELLENDER. Depending on what you find?

Mr. HORNE. Yes, sir.. And on the recommendations that are made. Then we could presumably come to Congress with additional legislative recommendations. Senator ELLENDER. Have you started that investigation yet?

Mr. HORNE. We haven't started the study, so far as details are concerned. We do have the top four people selected, three of whom will make up an advisory panel, and one will be the director of the study. I will ask Mr. Schwartz to give you their names if you want them, sir, and their present locations.


Mr. Schwartz. The chairman of the advisory panel, Senator, is Prof. Fred Balderston of the University of California, Berkeley.

Another member of the advisory panel is Prof. John Lintner of the Harvard Business School.

The third member of the panel is Mr. Kermit Gordon, vice president of the Brookings Institution, and former Director of the Budget.

The director of research is Prof. Irwin Friend of the University of Pennsylvania who has worked on a number of comparable projects for the Government.

Because of the fact that the money has not been approved, we have only proceeded so far as preliminary discussions of the shape of the study. We are going to try to get to the final stages of that in the month of June and have the study get underway in July.

Senator ELLENDER. Now, what is the state of the appropriations? Mr. HORNE. It has been cleared up, sir. Everything is in the clear.

ORIGIN OF SPECIAL STUDY Senator ELLENDER. What provoked this study? Who advocated it?

Mr. HORNE. President Johnson first suggested the study to me on December 26, 1964. We wanted to come to Congress with the request earlier than we did but there have been so many other matters that we simply were more delayed than we had hoped in finally getting to Congress with the request.

In the meantime, of course, we not only were doing other things but we did go immediately to the Bureau of the Budget after I was sworn in as Chairman, told them about our plans, and of the President's request, and from there proceeded to get the matter sufficiently along to come to Congress, which we did a few weeks ago.

Senator ELLENDER. There was no intention of keeping this secret?
Mr. HORNE. No, sir.
Senator ELLENDER. When did the public first become aware of it?

Mr. HORNE. When I was called before Senator Pastore's subcommittee, I think they became aware of it.

Senator ELLENDER. You mean here recently?
Mr. HORNE. Yes, sir.
Now, the Bureau of the Budget, of course, knew about it.
Senator ELLENDER. I know that, but-

Mr. HORNE. But it never occurred to me, Senator, to be perfectly honest, that because of the nature of the study, because of what we had in mind, it was an appropriate thing either to publicize or to deny. It just didn't cross my mind.

Senator ELLENDER. The thing is, I have received quite a few letters and telephone calls to the effect that it was brought into being overnight

Mr. HORNE. No, sir.
Senator ELLENDER (continuing). Nobody knew about it, and

Mr. HORNE. Senator, if the people who called you had taken the time to get in touch with the appropriate personnel in Government to have inquired as to the facts

Senator ELLENDER. And who would that be? The Budget Bureau? Mr. HORNE. It could have been the Board or the Budget Bureau.

Senator ELLENDER. But that is not the way things are done, you know. It is usually done by someone before Congress. The thing that caused this little flutter, I believe, was that it was put in a supplemental appropriation bill without the knowledge of anybody. Even the lobbyists of these associations on the Washington level didn't know a thing about it. They seem to have been asleep at the wheel.

Mr. HORNE. And the lobbyists after they learned about it, before making any investigation as to what the facts were, began to create opposition to it.

Senator ELLENDER. Anyhow, I know I got quite a few letters on the subject, and I am sure that other Members of Congress did, too.

You have stated what your objective is, that it is really to better the operations of the agency.

Mr. HORNE. Yes, sir.

You know also, Senator, as I told some of the lobbyists, once they finally got around to saying something to me about it, I said

Congress has full authority to investigate anything it wants. If Congress wants to investigate anything, they have already held investigations about this, and could even get one under way now. We aren't trying to make an investigation. We are trying to make a constructive study.

Senator ELLENDER. Usually, you see a lot of that in the newspaper before anything is accomplished.

Here, it was not publicized. The first thing we knew the subject matter was put in the supplemental and the $500,000 was appropriated.

Mr. HORNE. Yes, sir.
Senator ELLENDER. You may proceed.
Mr. Horne. Fine, sir.

I may duplicate two or three points you have made, sir, because they are included in my testimony. Senator ELLENDER. We are anticipating you today.

INCREASES IN STAFF Mr. HORNE. The estimates provide for an increase in overall employment over the current fiscal year, as the Senator pointed out, of 26 positions. Of these, 23 are in the Board and staff offices, and 3

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