The next few months were spent in getting financing for the bank both for fiscal year 1979 and fiscal year 1980. We received confirmation of the bank's board of directors in September 1979. On September 25, 1979, the bank board held its first meeting, and the National Consumer Cooperative Bank, which many people worked so hard and so long for, became a reality.

During the period of the transition we operated on a bare-bones budget. It was OMB's position that only the board could obligate and spend appropriated funds. Thus, I was forced to get President Carter's office and OMB to allow us access to the President's Special Fund.

With the personnel we had on board from other agencies and the limited staff we could hire, we had about 30 employees at the time of the first board meeting in September. At that meeting I was elected the acting president. I required all new staff to sign a temporary employment agreement, which I also signed and which is in the rear of my testimony, which assured the permanent president that he or she would have total control over personnel and staff. In putting the staff together, I recognized that while we had a mandate to develop a bank that would eventually borrow in the private markets, there was a great pressure to make the bank into a Federal agency. Each board member, co-op organization, and the White House, were recommending staff. The appointments I made were on an interim basis, and it was my own feeling that just about every staff member I hired, myself included, was operating a few levels above where they should be if we were operating in the private sector.

In the area of housing, Mr. Chairman, if any sector of the cooperative economy had developed in 1979, it was the housing sector. This fact was evident in the legislation through the limitation of housing loans a few years down the road. However, real property is and was the best security for any loan. It was clear that housing was where the demand was going to be.

This demand, coupled with the capital intensity of housing, placed an unreal demand on the bank's resources. My position was that we had to utilize the organized secondary market, FHLMC's and the FNMA as well as create new and nontraditional secondary markets.

In the fall of 1980 I proposed that we begin a program of participations with local financial institutions which would allow those institutions and their business development arms to originate real property-secured loans, with the bank having final approval of these applications.

This would allow the co-ops to apply locally for a loan working with their own bank and would allow the cooperative bank to buy a significant share of the loan, 50 to 75 percent. Most of the underwriting would be done by the local bank, which would also have a piece of the loan in its portfolio, and the local bank would be able to service the loan and provide the co-op with other banking-related services.

I undertook to develop this project in late 1980 and had meetings with the senior management of a number of west coast banks as well as participating in the Mortgage Bankers Conference in November 1980.

On the matter of regional offices, the establishment and staffing of eight regional offices and a couple of local offices was a costly mistake of the bank. By and large, a group of nonbankers was put in the field with little training and told to develop good loan prospects. They were given little in the way of professionally trained staff, and quite large geographical regions to cover. From the salary structure on down, this operation was run like a Government Agency and not a profitmaking bank.

My own feelings on regional offices came from conversations with people in the cooperative movement and from Stan Dryer, then our senior credit person. I felt we should open an office on the west coast on a test basis. This office would have certain credit approval limits and would function in a limited geographic area, perhaps five or six States. The rest of the country would be covered by young, educated, entrepreneurs who would be like the circuit riders of the rural electrification and rural telephone days. They would be paid a small salary with limited expenses. Through the production of good-quality loans and the provision of technical assistance, their compensation and chances of promotion within the bank. would rise.

In fact, it was recommended to the board that we do a study and we talked to a number of firms about doing a study of regional offices. However, that was not initiated. The most recent change in the bank policy regarding the regional offices is good news, good news because it is clear, and was clear, that the regional office structure was not working and it was too costly to justify.

However, the great fear is that the decrease in field personnel, with dramatic increase in territory size, would further constrain the bank's ability to be organized in a decentralized manner. Very few new credit staff have been added to the three offices. This may result in longer delays in loan processing and less contact between the bank and the borrower.

My written testimony, Mr. Chairman, covers a great deal of information about my own feelings on personnel staffing and what I call the "revolving door." Some effort must be made to reach out to those former employees as well as to those smaller cooperatives that feel betrayed by the revocation of the one-member, one-vote cooperative principle.

In my current business I travel all over the United States. Not a week goes by that I do not meet a former staffer or co-op activist, and they all have the same feeling: concern for the bank. They want to see the bank working properly.

Concerning the Development Corporation, now that it has been established, I feel the Corporation should have a degree of autonomy from the bank. My vision of title II is as a venture capital fund where the fund would take subordinated positions and provide seed capital to cooperatives that showed signs of promise.

Properly used, title II could provide the bank with many healthy borrowers and provide the corporation with larger returns through successful management. I hope the bank will make every effort to deal with the corporation at arm's length once policies and procedures have been established.

It causes me some worry that the CEO of the foundation is the president of the bank, since the bank will be contracting with the

Development Corporation for financial and management services as well as being in the position of senior lender on some projects. I would much prefer to see a more independent corporation headed by its own CEO.

In conclusion, Mr. Chairman, let me state my strong belief that the bank must have a strong chief executive officer, which I now believe it has, 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-this is something I support in my written testimony-as well as Federal insurance on those depositsproviding low-cost capital to make loans.

The bank, through the use of a nationwide electronic transfer network, can service 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 qualified officials and staff, and lending authority for staff and officers given to the regional offi

cers.

Again, Mr. Chairman, thank you for the time. I look forward to answering any questions you have.

[The prepared statement with attached appendixes of Mr. Comerford follows:]

MR CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:

I VERY MUCH APPRECIATE YOUR KIND INVITATION TO PARTICIPATE IN YOUR OVERSIGHT HEARINGS ON THE NATIONAL CONSUMER COOPERATIVE BANK, AN INSTITUTION OF WHICH I HAVE BOTH A GREAT DEAL OF INTEREST AND CONCERN.

BEFORE I BEGIN MY TESTIMONY, I WOULD LIKE TO FIRST ACKNOWLEDGE THE GREAT AND LONG STANDING SUPPORT OF THE CHAIRMAN AND HIS STAFF, PARTICULIARLY JAKE LEWIS, PEGGY RAYHAWK, AND DICK STILL. WITHOUT YOU THERE WOULD BE NO NATIONAL CONSUMER COOPERATIVE BANK, AND WE WOULD NOT BE HERE TODAY. DURING MY TWO AND A HALF YEAR INVOLVEMENT, MR. CHAIRMAN, YOU AND YOUR STAFF PROVIDED MUCH OF THE NEEDED INSIGHT AND GUIDENCE NECESSARY FOR GETTING THE BANK OFF THE GROUND. FOR THIS I AM PERSONALLY GRATEFUL. "

SECONDLY, MR. CHAIRMAN, I WOULD LIKE TO SAY THAT MANY OF MY REMARKS HERE TODAY MAY BE CONSTRUED AS ATTACKS ON PRESENT AND PAST BANK MANAGEMENT NOTHING COULD BE FURTHER FROM THE TRUTH. WHEN I LEFT THE BANK IN FEBRUARY 1981, I DID SO ON POSITIVE TERMS TO ACQUIRE MY OWN COMMERCIAL BANK, AND HAVE REMAINED FREINDLY WITH BANK MANAGEMENT SINCE THAT TIME. MOST EVERY COMMENT I MAKE TODAY HAS BEEN MADE TO MANAGEMENT IN THE PAST. I HAVE A GREAT DEAL OF PERSONAL ADMIRATION FOR BANK MANAGEMENT, BUT FEEL THAT MANY ISSUES MUST BE HIGHLIGHTED DURING THIS HEARING IN ORDER TO BRING ABOUT A STRONG, HEALTHY, AND VIABLE FINANCIAL INSTITUTION THAT CAN WITHSTAND THE DUAL CHALLENGES OF FINANCIAL DEREGULATION AND AN UNCERTAIN ECONOMY.

MY FIRST INVOLVEMENT WITH THE BANK CAME IN THE SUMMER OF 1978, WHEN I WAS SERVING ON THE STAFF OF ASSISTANT SECRETARY GENO BARONI. MSGR. BARONI HAD BEEN A LEADER IN CREATING AND SEEKING PASSAGE OF THE NCCB ACT, AND HIS ORGANIZATIONAL INVOLVEMENT ON BEHALF OF HUD WAS PRESUMED. MY FIRST ASSIGNMENT WAS TO MONITOR FINAL PASSAGE OF THE ACT. AS YOU KNOW, MR. CHAIRMAN, THIS OCCURED IN AUGUST OF 1978, AND THE LEGISLATION WAS SIGNED INTO LAW BY PRESEDENT CARTER SHORTLY THERAFTER. ON SEPTEMBER 6, 1978, STU EIZENSTAT, THE ASSISTANT TO THE PRESIDENT FOR DOMESTIC AFFAIRS, SENT A MEMORANDUM TO THE VARIOUS CABINET SECRETARIES AND WHITE HOUSE STAFF THAT WOULD HAVE INVOLVEMENT IN THE BANK. THE MEMORANDUM, WHICH IS APPENDIX A. IN THE REAR OF MY TESTIMONY, SET UP AN INTERAGENCY TASK FORCE TO IMPLEMENT THE BANK ACT. SECRETARY HARRIS ASSIGNED MSGR. BARONT LEAD RESPONSIBILITY FOR REPRESENTING HUD ON THE TASK FORCE.

AT THE FIRST MEETING OF THE TASK FORCE ON SEPTEMBER, 15, 1978, IT WAS DETERMINED THAT THE GROUP WOULD BREAK ITSELF DOWN INTO FIVE SUBGROUPS: A. MANAGEMENT AND ADMINISTRATION B. PUBLIC AND COOPERATIVE PARTICIPATION C. CREDIT AND LENDING D. TECHNICAL ASSISTANCE E. SELF HELP DEVELOPMENT. HUD, ESTHER PETERSON, TREASURY, ACTION, AND THE COMMUNITY SERVICES ADMINISTRATION WERE GIVEN COORDINATIONAL RESPONSIBILITY FOR THESE RESPECTIVE SUB GROUPS. FROM SEPTEMBER UNTIL JANUARY WE MET ALMOST EVERY OTHER DAY IN THE SUBGROUPS AND EVERY FEW WEEKS AS A TASK FORCE. PUBLIC HEARINGS WERE HELD AROUND THE COUNTRY IN DECEMBER of 1978. IN EARLY FEBRUARY EACH SUB-GROUP PRESENTED ITS RECOMMENDATIONS TO THE TASK FORCE AND DIFFERENCES WERE WORKED OUT.

AT THIS POINT, THE MAJOR ASSIGNMENT FOR THE TASK FORCE WAS OVER, BUT BOTH APPROPRIATIONS AND BOARD MEMBERSHIP HAD YET TO BE ADDRESSED. A SMALI GROUP OF THREE OF US WAS GIVEN THE RESPONSIBILITY OF SECURING ADEQUATE