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the cost of home-mortgage funds. I can describe the operation best by saying that building and loan investments or shares are more similar to long-time deposits in mutual savings banks than they are to issues of stock or flotations of bonds.

We therefore wish to ask you to amend section 11 in a way which will except building and loan associations from reporting to the Federal Trade Commission and paying the fees which are required, as we do not feel that the act is aimed at our type of activity,

I would emphatically point out to the committee that we are in accord with sections 13 and 14, which would apply to all of our associations if there are any improper or fraudulent or deceptive practices. The exceptions to the submission of reports and the like, which are provided in section 11 do not apply to sections 13 and 14 and you will find very specific language in this regard on page 25, lines 22, 23, and 24, and page 26, lines 16, 17, and 18.

Again, a substantial amount of our business seems to be interstate. A man starts saving his money in a building and loan association, for instance, in Dormont, Pa., and then he moves over into Ohio. He usually continues his account. As a matter of fact, every one of our small, humble building and loan associations will have savings accounts and share accounts spread over a half dozen States. They will seldom have a great number, because they are principally local institutions, but nevertheless, there is a crossing of the State lines.

I noted with interest that the gentleman testifying in behalf of the Government suggested that the whole activity resulting from this act could be carried on on $100,000 a year. If you require the reports that are provided in sections 1 to 12 from our 11,442 building and loan associations, it will take that much money to handle this material, without regard to other activities. By the way, if the act stands without the amendment we are going to suggest, I would indicate to you that if you have registration in the State of Pennsylvania alone, our building and loan associations will have to pay you at least $160,000 a year, to take just the $50 minimum. Those of you who are familiar with the operations of local building and loan associations know that they issue shares sometimes annually or semiannually, sometimes quarterly, and sometimes monthly in the serial type of association. So we conclude that under this law there is a difficult problem of administration and it just doesn't seem to us that our kind of originating of securities fits in with the picture.

There is also a difficulty that arises in determining the costs that 'we should pay, if we are left in the act. A man starts to save $10 a month. We really issue him a share certificate, that when he carries out his contract 10 years hence, it will be worth $1,000; but the way the law reads, it is the par value of the share at the time of issue.

In 46 States the associations are subject to frequent examination by State supervising officials. All the information which the first part of the Federal Securities Act would require is already to be had by consulting the State supervisors' files. This information, coupled with the stringent powers of the second and third important parts of the act, sections 13 and 14, would place the Federal Trade Commission in position to deal promptly and vigorously with any situation which merited their attention. There are probably not 100 institutions in the whole 11,442 against whom any complaint could ever arise, and we ask you to deal with them vigorously under sections 13 and 14,

but to eliminate the necessity of all this reporting and voluminous information. Why, the way this bill is drawn, building and loan associations would encounter great difficulties by being required to include in every announcement or advertisement going to a shareholder in another State the voluminous information which would be required in announcing a foreign-bond issue.

Apparently in section 11 (d), the authors of the bill had planned to make an exception of mortgage institutions which buy and sell and negotiate mortgages under $25,000. I assume that this takes care of private-mortgage companies and guarantee concerns. Our business is confined entirely to the making of mortgages and it would seem that this principle in the act would further suggest the propriety of making an exception in regards to securities issued by building and loan associations.

Again, we approve vigorously and are quite willing to be subject to section 13, which is the fraud section, as we understand it, and section 14, which protects any State from activities not permitted in its boundaries, but permitted in another State. We therefore petition that section 11 be amended by adding the following language:

(f) Any security issued by a building and loan association, savings and loan association, cooperative bank, and homestead association operated under the laws and subject to the examination, supervision, and control of any State of the United States or any insular possession.

That means, that even though you forego the registration of these community institutions

Mr. BULWINKLE. Would you want to insert in that, the District of Columbia, too?

Mr. BODFISH. The District of Columbia would be a most acceptable amendment, Mr. Bulwinkle.

Now, all we are asking is that under section 11, you except us, if you please, from filing these reports, every time we put out a little piece of literature or mail a share or a pass-book, from having to go through all of the data and carrying all of the information that you would put into an “Insull security” prospectus.

That proposed amendment, with the District of Columbia added to it, would read:

(f) Any security issued by a building and loan association, savings and loan association, cooperative bank, and homestead association operated under the laws and subject to the examination, supervision, and control of any State of the United States or any insular possession, and District of Columbia.

Now, Mr. Miller very kindly permitted me to read the statement that he had prepared with regard to the legal and economic aspects of this law, and I note on page 20 their rather vigorous statement which I think bears out the thing we have in mind. It is where he talks of exemptions. He says:

These various exemptions are, naturally, included in blue sky laws for the purpose of leaving the channels of legitimate business as free as practicable from unwarranted obstructions by statutes intended only to regulate or prevent speculation and fraudulent transactions.

And then lists the exemptions. In one of them

(d) Issues of public utility companies supervised by the State or Federal Government and secured railway equipment trust securities.


(f) Issues of banks under State or Federal control and of building and loan associations organized under the laws of the State.

Now, gentlemen, we want you to leave the fraud sections there, just as they are, so that any fraud developed in connection with the management of any of our institutions anywhere or under the name of building and loan, this law can be effective and operative.

We do think, as a practical matter, you should leave these 11,442 building and loan associations, which are mainly small community institutions, out from the routine reporting and registering of their securities every time they start to issue more stock, which may be daily, monthly, semiannually, and also relieve them of that burden. I submit a table showing the distribution of the associations.

I am very much obliged to you, Mr. Chairman.
The CHAIRMAN. We are very much obliged to you, Mr. Bodfish.

Summary table of number of associations, total membership, and total assets of Summary table of number of associations, total membership, and total assets of


building and loan associations, by States, 1931

(Prepared by H. F. Cellarius, secretary-treasurer, United States Building and Loan League, Cincinnati,



Number of associa


Total member


Total assets

Increase in


Increase in member



1. Pennsylvania 2. New Jersey 3. Ohio. 4. Massachusetts 5. Illinois.. 6. California. 7. New York 8. Indiana 9. Wisconsin. 10. Maryland ? 11. Missouri. 12. Louisiana. 13. Michigan. 14. Nebraska. 15. Texas.. 16. Oklahoma. 17. Kansas 18. Kentucky19. North Carolina. 20. District of Colubia. 21. Washington.. 22. Virginia 23. Colorado. 24. Utah.. 25. Iowa. 26. Arkansas. 27. Minnesota 28. West Virginia 29. Rhode Island. 30. Alabama. 31. Oregon 32. Connecticut. 33. South Carolina 2 34. Maine.. 35. Montana.. 36. Mississippi. 37. Tennessee. 38. Delaware. 39. Florida 40. New Hampshire.

!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !


3, 268


1, 100




1, 236, 297 $1, 250, 692, 072
1, 107, 73 1, 201, 973, 615
2, 378, 811 1, 158, 281, 871

499, 523 560, 103, 042
905, 500 466, 600, 631
550,000 453, 007, 351
585, 471 443, 252, 364
400, 800 288, 584, 111
278, 795 281, 233, 267
320,000 210,000,000
268, 082 206, 364, 643
190, 496 170, 871, 291
219, 174 165, 269, 540
205, 250 137, 017, 569
174, 550 127, 285, 978
214, 678 126, 343, 461
193, 771 126, 319, 718
187, 000 121, 821, 568
95, 208 85, 348, 383
83, 307 81, 861, 000
220, 256 72,895, 967
66, 570 60, 365, 508
85, 870 59, 136, 661
86, 654 53, 245, 524
66, 405 48, 104, 496
61, 571 44,810, 774
118, 155 43, 334, 358
56, 350 37, 741, 341
49, 041 34, 639, 798
39, 440 28, 080, 387
46, 000 27,009, 782
36, 133 26, 436, 580
32,000 25, 550,000
28, 444 25, 515, 436
37,903 20, 920, 378
27, 380 18, 680, 105
24, 970 18, 496, 924
20, 500 16, 118, 223
12, 400 15, 975, 572
17,625 14, 217, 425

2 Estimated.

1 120, 531, 357

19,968, 29
1 85, 985, 055
12, 615, 206
13, 472, 636
1 57, 513, 139

2,523, 350
1 18, 286, 071

19, 392, 718 1 10,000,000

14,555, 959 111, 487, 001

11,930, 273 1 11, 689, 194

17, 457, 172 1 13, 460, 734 16,042, 931

2,893, 309 1 6, 843, 991

6, 457, 000 1 35, 365, 403

174, 136 1 897, 711 1 2,397, 180 11,603, 694

73, 686 819, 503 1, 489, 194 3,098, 546 11,354, 495 13,559, 321

269, 674 11, 450,000

515, 436 1 314, 747 11,781, 991

97, 538

629, 502 11,853, 263

424, 361

1 304, 288

1 90, 446 1 204, 956 1 13, 908 1 40,000 1 50,000 1 10, 394 1 28, 647 1 26, 066 1 10,000 1 13, 949 1 10, 434

8, 452 119, 750 1 10, 210 1 40, 322 116,512

4, 100

1 707 8,054 1 78, 588

i 160 1 35, 984 18,609

1,062 1 11, 146

12,117 1 2,450

4,561 11,900 1 6,000 1 1,867 1 2,000 11, 556 1 7,260 1 2, 620 1 130

800 1 1, 100

1 45


i Decrease.

building and loan associations, by States, 1931- Continued

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The CHAIRMAN. Mr. Thompson, you may now go along. Mr. THOMPSON. Mr. Walter L. Miller, Chief Foreign Service Division, Bureau of Foreign and Domestic Commerce, will be next.



Mr. MILLER. Walter L. Miller, Chief Foreign Service Division, Bureau of Foreign and Domestic Commerce.

First of all, may I request that this study which we have prepared in the Department of Commerce, be included in the hearings, if that is permissible?

The CHAIRMAN. Let me see it. Mr. MILLER. Yes, Mr. Chairman. The CHAIRMAN. You may go ahead, Mr. Miller. Mr. MILLER. Mr. Thompson suggests that I make some reply to Mr. Bodfish's statement, and particularly just why we have not included the building and loan associations in the exempt securities.

Mr. Bodfish has the pleasure of coming from the central West but in the East the good name of the building and loan associations has been used by some promoters for most fraudulent purposes.

As a matter of fact, we have, down in the Department of Commerce, had some experience with certain forms of building and loan associations which, in our discussions with Mr. Bodfish yesterday, he admitted were entirely fraudulent.

Now, by making exemptions and only including such organizations under the fraud section of this law, it is very difficult to get at the trouble, because then you cannot do anything until fraud is committed; and I may tell you that some fraud is being committed in nearby sections here.

And so, after careful consideration, we did not believe it desirable to exempt building and loan associations, despite the fact that they do have, generally speaking, an excellent record. Taken by and large, they have perhaps as good a record as any financial institutions in the country, except national banks.

But as so many promoters have learned of the excellent selling arguments which they can put to use, to the unsuspecting public, by using the name of the building and loan associations, we believed that it was desirable not to exempt them.

Mr. BULWINKLE. Could you limit that to building and loan associations doing, primarily, building and loan association business?

Mr. MILLER. We would have difficulty in doing that, Mr. Bulwinkle, and in determining just which are doing a legitimate building and loan business, because all of them, of course, do some building and loan work.

Mr. BULWINKLE. Would you not practically put these building and loan associations out of business, especially in the small places?

Mr. MILLER. On the other hand, as I told these gentlemen yesterday, I believe that, by registering with the Federal Trade Commission, the securities will be increased in value and the public will be much more ready to buy them because there will be then that evidence of honesty.

Mr. BULWINKLE. Well, take the small building and loan association in my town. It would cost at least $200 a year. They are operated to help the community.

Mr. MILLER. That point came up in our conversation yesterday, and we are inclined to believe that by a slight change in the method of issuing the stock of the building and loan associations, they can successfully cut down to the minimum fee, once in every two or three years.

Mr. BULWINKLE. Well, they would have to register in many of the States, and they would have to change the laws. That is what they are up against.

Mr. MILLER. If you would care to have me explain just how some promoters around Washington are getting away with their building and loan associations, so-called, I would be glad to tell you.

Mr. BULWINKLE. I cannot tell you about what they are doing in the District of Columbia, but I can tell you about North Carolina.

Mr. MILLER. Of course, we have this situation in making any Federal law. We cover the whole country and it is bound to interfere with some perfectly proper organizations.

Mr. BULWINKLE. Then, let me ask you about the District of Columbia. Are they to be exempted here in the District of Columbia ?

Mr. MILLER. I cannot answer that.



Mr. James. They are under the supervision of the Comptroller of the Currency. I think that Mr. Miller, in fairness, ought to say that

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