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issues, particularly in response to Farm Credit's criticisms. I expect this task to occupy an additional 25% of his tiine. Another 15% will be allocated to miscellaneous loan work on projects such as Blatz Brewery District, where special problems require attention. This means that Ken is half-tine committed to commercial activities for 1983.

In addition, there is a substantial amount of loan-related work that has and will continue to remain "in-house". For example, amendments of existing notes and loan agreements (wheatsville, COS/CSI, Group Health) are handled without charge to existing borrowers. Moreover, the syndication work has consumed a great amount of time and effort because we are in a new area and the work is complex. Town Center and The Parkshore have involved a tremendous commitment of time of the staff. notably Debbi.

b) Loan Administration

Alan is primarily responsible for supervising litigation and collection activities, in coordination with Dan Williams. This is very time consuming, and will require at least 80% of his time. This is a difficult area to quantify except to report that our outside firms tend to accumulate tremendous bills. Rivers Development litigation, which was neither extraordinarily complex or factually difficult, consumed $25,000; the Wheatsville receivership cost nearly $20,000. Without Alan's constant attention, these numbers are likely to increase.

c) Administrative Support

The balance of Alan's scheduled time is devoted to labor relations and personnel work. We have two known arbitrations scheduled for next year and cannot politically afford to lose either. His detailed work on both is crucial. Whatever time he has remaining (in excess of 100%), he will devote to work with me on policy and regulatory issues left unresolved from this year or newly arising next year.

Ken will devote the remainder of his scheduled time to CCDC issues, including policy questions and procedures for the corporation, accounting questions as they arise, guidance to the Board, etc. I envision that, initially, this will be a very time-consuming and delicate job. Over time, I am hopeful that he can devote more time to commercial activities and less to administrative work, but the foreseeable future is not encouraging in this regard.

Of course, the entire legal staff is a resource for the various offices and departments in the Bank. Responding to inquiries concerning miscellaneous matters, such as conflict of interest, public information, general corporate matters, (including stock), contracts, tax, insurance, and Bank Act and policy interpretations, is a burden shared by all attorneys (but Ken and Alan in particular) in excess of their allotted matters.

d) The General Counsel's Time

This leaves any time unaccounted for. To some extent, I work with each of the above on the projects they have, to provide supervision and coordination. Primarily, however, I service Board and management needs for policy and legal guidance, coordinate work with GAO and FCA auditors from a legal perspective, and involve myself in major "deals" to be sure they are successful. This involves specific projects, such as Davis Cable or Parkshore, and general efforts to market the bank's syndication approaches to the legal and investment communities. I find that regular and special duties require the commitment of 150% of my time and I foresee no reduction of that burden next year.

II. Reconsidering Outside Counsel

Last year the Board insisted that the legal staff be drastically reduced and that the cost of loan closing be shifted, to the maximum extent possible, to outside counsel. This request was made before I had time to sufficiently study the matter. I believed then that it was in error. Our experience over the past year confirms my belief.

We use outside counsel that are relatively inexpensive and reasonably efficient. The cost of transacting business with a law firm, the time involved in negotiating deals with several parties included, and the complexities of the Bank's loans confirmed my estimate of closing costs at around 1 point. in some cases, however, particularly in smaller loans, costs have been higher. Our borrowers find this expensive and, consequently, we often "eat" fees. Thus we accomplish nothing by moving the work outside except additional expense for the Bank.

An alternative would be to allow the Legal Department to add two midlevel comercial attorneys to our existing staff. The total cost for the three attorneys, together with benefits, clerical support and travel, would be about $225,000. If we actually close $50,000,000 of loans next year, our present arrangements will result in fees from $250,000 to $500,000 to be passed on to the borrowers or accepted by the Bank, together with internal costs of $75,000. If the proposed approach were to be used, I would recommend that the Pricing and Investment Subcommittee consider adopting a flat 1/2 point charge, in addition to stock, for legal and processing costs. This would yield $250,000 on a volume of $50,000,000, I believe this approach nas merit and would result in an inexpensive and more efficient operation.


Excerpt from Finance Committee Minutes, November 18, 1982

Page 5

Office of General Counsel The question was raised as to whether some of the reductions made in the 1982 staffing for the office of General Counsel constituted false economies due to the expense of outside counsel. Richard Gross, General Counsel, stated the view that adding two more lawyers to do loan closings and charging the borrower half a point for each closing would provide better service to borrowers and do this more cheaply. He contended that the additional budget costs could be offset by the fee charged and that future loan pricing 1iscussions should consider this option. The Executive Committee reported that it was not recommending additional reductions in the General Counsel's staffing. A motion was then made and seconded to approve the 1983 budget for the office of General Counsel. The mot ton was approved.

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Mr. Chairman, Members of the Subcommittee, it is my pleasure to appear before

you today to discuss the National Consumer Cooperative Bank, a new cooperative

financial institution of great interest to my organization. My name is Stewart

Kohl and I am Executive Vice President of the Cooperative League of the USA.

The Cooperative League is a "chamber of commerce" for America's cooperative

business community.

Our membership includes not only the health, housing,

student, craft, worker, and consumer goods and services cooperatives eligible

to use the bank's services, but also America's farm supply, agricultural

marketing, rural electric and telephone, credit union, fishery, farm credit

and other types of cooperatives.

It includes cooperatives of all sizes, from

neighborhood stores to major businesses.

The Cooperative League was instrumental in the founding of the National Consumer

Cooperative Bank in 1978, and in the fight to save the Bank in 1981, which

ultimately ended in the privatization amendments.

I know that it is the Committee's primary interest to ask questions and I will,

therefore, keep my remarks brief.

I will be happy to respond to questions now

or in writing for the record.

The Co-op Bank has not had an easy time of it in its three brief years of


Instability and outside interference have been the norm, not the

exception. And the Bank's performance has not met our high hopes.

While this Committee and the Congress enacted the Bank legislation in 1978, the

Bank did not actually open its doors until 1980 and did not make its first loan

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