HEADED BY ITS OWN QUALIFIED CEO.

MR CHAIRMAN AS WE ENTER THE LAST HALF OF 1983, WE ARE SEEING MANY CHANGES IN THE FINANCIAL SERVICES INDUSTRY. YOUR OWN BILL OF LAST SUMMER, IS BUT ONE OF THE MANY FACTORS THAT ARE CAUSING THESE CHANGES. WE HAVE BANKS AND THRIFTS FAILING ALL OVER THE COUNTRY, WE HAVE INSURANCE COMPANIES ACQUIRING BROKERAGE FIRMS, WHO HAVE ACQUIRED BANKS. WE HAVE S&L's AND

BANKS SETTING UP BROKERAGE FIRMS. IN MOST ALL OF THESE TRANSACTIONS THE
KEY HAS BEEN THE ABILITY OT THE INSTITUTION TO OFFER FEDERALLY INSURED
DEPOSIT ACCOUNTS. THE COOP BANK CAN NOT ACCEPT DEPOSITS. WHEN IT PASSED
THIS HOUSE FIVE YEARS AGO, IT WOULD HAVE DIED IF DEPOSIT TAKING ABILITY
HAD BEEN INCLUDED IN THE LEGISLATION. IT IS A NEW BALL GAME. IF THE
COOP BANK IS GOING TO HAVE ACCESS TO LESS COSTLY CAPITAL, IT MUST HAVE THE
ABILITY TO COMPETE FOR IT WITH THE OTHER FINANCIAL INSTITUTIONS. THUS, YOU
SHOULD LOOK AT THE POSSIBILITY OF AUTHORIZING THE BANK TO APPLY FOR FEDERAL
DEPOSIT INSURANCE COVERAGE.

WHEN WE WERE TALKING TO THE FEDERAL REGULATORY AGENCIES, WE NEVER LOOKE TO THE DAY WHEN WE WOULD NEED DEPOSIT INSURANCE. WE HAD A NUMBER OF MEETING WITH THE COMPTROLLER OF THE CURRENCY, AND I FELT THAT WE HAD AN AGREEMENT WITH THE COMPTROLLER TO CONDUCT OUR SUPERVISORY EXAMINATION. I DO NOT KNOW WHAT HAPPENED TO THAT AGREEMENT, BUT IT IS CLEAR THAT IF WE ARE TO ACCEPT DEPOSITS FROM COOPERATIVES,WE WILL NEED TO HAVE THE EXAMINATION CONDUCTED BY EITHER THE COMPTROLLER OR FDIC. HAVING HAD EXPERIENCE WITH BOTH AGENCIES I CAN ATTEST TO THEIR WILLINGNESS TO BE COOPERATIVE AND UNDERSTANDING WITH A SMALL OR NEW INSTITUTION, WHILE REMAINING STEADFAST IN THEIR ADHERENCE TO FUNDAMENTAL BANKING PRINCIPALS. THIS IS CERTAINLY NOT A CRITICISM OF THE FARM CREDIT ADMINISTRATION, BUT A RECOGNITION THAT THE BANKING INDUSTRY HAS CHANGED DRAMATICLY OVER THE PAST FIVE YEARS, AND IN ORDER TO BE ON A PAR WITH OTHER PRIVATE SECTOR FINANCIAL INSTITUTIONS THE BANK MUST MEET WHAT ARE JUDGED TO BE SIMILIAR STANDARDS.

DURING THE PAST FIVE MONTHS, OVER A BILLION DOLLARS OF CAPITAL HAS BEEN RAISED ON THE PRIVATE MARKETS FOR THE CONVERSION OF THRIFT INSTITUTIONS THIS COMPARES WITH LESS THAN SIX HUNDRED MILLION IN THE PREVIOUS SIX YEARS. THE MARKET IS HUNGRY FOR FAIRLY PRICED ISSUES OF FINANCIAL INSTITUTIONS, AND IS WILLING TO ADD CAPITAL TO THIS MOST UNDERCAPITALIZED SECTOR OF OUR ECONOMY. THERE IS EVERY INDICATION THAT THRIFTS WILL CONTINUE TO CONVERT AT A CONTINUED HIGH RATE, AND THAT THE DAY OF THE DEPOSITOR OR MUTUALLY OWNED INSTITUTION MAY SOON BE OVER. LEGISLATION THAT HAS COME OUT OF THIS COMMITTEE, AND YOUR COUNTERPART ACROSS THE CAPITOL, HAVE HASTENED THAT DAY, AND THE ACTION OF THE FEDERAL REGULATORS TO ENCOURAGE CONVERSION HAS ALSO BEEN RESPONSIBLE FOR THIS RECENT ACTIVITY. WHEN INITIAL PUBLIC OFFERIN LIKE COMMONWEALTH FEDERAL, IN MASSACHUSETTS, GO OFF AT $13 AND REACH $34 WITHIN FOUR WEEKS THERE CAN BE NO QUESTION OF THE MARKET'S WILLIGNESS TO GAMBLE ON THE FINANCIAL SERVICES INDUSTRY. MOST ALL CONVERSION OFFERINGS HAVE BEEN OVER SUBSCRIBED, AND HAVE DONE VERY WELL IN THE SECONDARY MARKET.

I USE THIS EXAMPLE, MR. CHAIRMAN, TO ILLUSTRATE THE COOP BANK'S POTENTIAL ATTRACTIVNESS TO INVESTORS IN BOTH DEBT AND EQUITY PLACEMENTS. I BELIEVE THAT THE BANK COULD STRUCTURE AN EQUITY STOCK ISSUE THAT WOULD NOT DISTURB ITS COOPERATIVE NATURE, YET WOULD HASTEN THE DAY WHEN THE BANK WILL BE A >SELF SUPPORTING PRIVATE SECTOR INSTITUTION, WITH NO DIRECT GOVERNMENT INVOLV MENT.

IN CONCLUSION, LET ME RESTATE MY STRONG BELIEF THAT THE BANK MUST HAVE

A STRONG CHIEF EXECUTIVE OFFICER, WHO IS ABLE TO OPERATE WITHIN THE POLICY GUIDELINES SET FORTH BY A PART-TIME BOARD OF DIRECTORS. THE BANK MUST HAVE THE ABILITY TO ACCEPT DEPOSITS, AS WELL AS FEDERAL INSURANCE ON THOSE DEPOSIT ACCOUNTS. THE BANK, THROUGH THE USE OF NATIONWIDE ELECTRONIC TRANSFER NETWORKS, CAN SERVE ITS NATIONAL CONSTITUENCY ON THE DEPOSIT SIDE, WHILE SERVING THEM ON THE LOAN SIDE THROUGH THE INCREASED USE OF LOCAL BANKS FOR ORIGINATING, PROCESSING AND SERVICING. PAY MUST BE INCREASED TO ATTRACT A QUALIFIED PROFESSIONAL STAFF, AND LENDING AUTHORITY, MORE STAFF, AND OFFICER POSITIONS, GIVEN TO THE REGIONAL OFFICES, IF THEY ARE TO CONTINUE.

I THANK YOU FOR YOU PATIENCE WITH MY ELONGATED TESTIMONY THIS MORNING, BUT I FELT THAT IT WAS IMPORTANT TO BUILD A RECORD FOR THE FUTURE, AND PROVIDE THE SUBCOMMITTEE WITH MY THOUGHTS ON THE BANK AND THE INDUSTRY IN GENERAL.

AGAIN, THANK YOU MR. CHAIRMAN, AND I'LL BE HAPPY TO ANSWER ANY QUESTIONS.

In order to meet the objectives of the National Consumer Cooperative Bank Act, expedite the implementation of the Bank, and utilize the diverse experience and expertise of the federal agencies, Esther Peterson and I have asked the Treasury Department to convene an interagency task force to oversee the implementation of the National Consumer Cooperative Bank.

The first meeting is scheduled for 3:30 p.m., September 15 in Room 208 of the Old Executive Office Building. I would appreciate it if you would select a lead agency representative and no more than two support staff for the meeting. The agenda for the first meeting will include discussion of the nominations process, draft policy guidelines for Bank operations, liaison with outside interest groups, agency coordination issues, task force procedures, and other implementation issues members of the task force may wish to consider.

Please call

ancy Mason at 456-6557 to confirm your agency's attendance. I appreciate your assistance in creating a smooth transition period for the Bank, and Esther and I look forward to working closely with you.

I understand that the term of my employment with the National Consumer
Cooperative Bank by this Agreement is limited and will not exceed
January 31, 1980.

:

I also understand that my employment can be terminated before
January 31, 1980 for any reason if I am given fourteen calendar days
notice in writing. If my employment is terminated without fourteen
days notice, I will receive two weeks normal base salary following
the day my employment is terminated, for any reason, in writing.
At any time requested, or upon termination of my employment, I agree
to deliver to my supervisor all memoranda, letters, financial documents,
notes, records, files, plans or other documents made, compiled or
delivered to me concerning the National Consumer Cooperative Bank's
business.

My salary during the term of my employment will be $ 50 000,
per annum, payable biweekly. During the terror, this for
of the

this Agreement, I will

be assigned to the Office
where I will perform general duties required to implement the require-
ments of the National. Consumer Cooperative Bank Act (P,L. 95-351). My
immediate supervisor will be Chairman of the Board

During my period of employment I will be covered under the District of
Columbia's Wage and Hours Law and the Bank's Interim Personnel Policy.

I acknowledge that no representation has been made to me concerning long
term or permanent employment with the National Consumer Cooperative Bank.
It is also my understanding that by signing this Agreement, I will not
be precluded from consideration for possible future employment with the
National Consumer Cooperative Bank.

(APPENDIX C.)

U.S. DEPARTMENT OF HOUSING AND UNDAN DEVELUTY.

HOUSING

APPLICATION FOR APPROVAL AS MORTGAGEE

(For Use by Government Supervised and Non-Supervised Organizations)

NO APPROVAL MAY BE GRANTED UNLESS A COMPLETED APPLICATION HAS BEEN RECEIVED (24 CFR 203.4)

1. NAME AND STREET ADDRESS OF MAIN OFFICE (include ZIP Code)

2. DATE INCORPORATED

September 25, 1979

26. UNDER LAWS OF:

United States

3. OFFICER TO CONTACT ABOUT THIS APPLICATION

Frederick H. Leaffer

4. TELEPHONE NUMBER OF OFFICER TO CONTACT WITH AREA CODE 202-376-0382

multifamily mortgages

LIST OFFICERS AND DIRECTORS

both.

(Also List Any Stockholder Owning More Than 50% of Stock)
SOCIAL SECURITY

NUMBER

POSITION

DATE EMPLOYED

BY APPLICANT

085-34-3473

b.

John P. Comerford.

028-34-8422

7. The following employees, working at the above address, may subinit applications to HUD/FHA for insurance of mortgages and bind the corporation:

a. It will comply with the provisions of the HUD Regulations and other requirements of the Secretary of HUD;

b. It will notify the Office of Mortgagee Activities, HUD, Washington, D.C. of all institution changes including but not limited to: Name, Location, Mergers, Termination, Character of Business or Control of Ownership within 10 days;

c. It will submit at any time to such examination of its records and accounts as the Secretary may require; and

d. It has and will maintain a net worth acceptable to HUD.

9. NONSUPERVISED MORTGAGEES ONLY: The undersigned further agrees that:

a. Its principal activity will be the lending or investment of funds under its own control in real estate mortgages;

b. It will comply with HUD Annual Recertification Requirements;

- it will submit Annual Financial Statements within 75 days following the end of its fiscal year; and

d. It has and will maintain a warehouse line of credit (or other financial sources acceptable to HUD) of at least $250,000.

10. SUPERVISED MORTGAGEES ONLY: The undersigned further agrees that:

It will notify the Secretary of HUD in the event of termination of its supervision by the governmental agency.