tion to the contingent liability there is more risk to the Government, That is what I was trying to point out.

Mr. HOLIFIELD. All right. Now another factor which has caused the reduction of the 1.2 percent to the 0.6 percent in the Corporation has been the rapid chartering of institutions in the last 10 years without an opportunity for those rapidly chartered institutions, with their huge deposits, to contribute to this.

Mr. BRUNDAGE. That is exactly what I was trying to bring out, that the development has been so rapid that I think it is approaching a point where we ought to be careful."

Mr. HOLIFIELD. But there is nothing in this reorganization plan which obligates the Corporation to do what you think it ought to do, which is to increase the Corporation reserves?

Mr. BRUNDAGE. Well, it provides for a separate board to have the responsibility for considering these things.

Mr. HOLIFIELD. But a board already has that responsibility.

Mr. BRUNDAGE. But it is the same board that charters the savings and loan association.

Mr. HOLIFIELD. That has nothing to do with the problem. The problem is whether it is the same board or a different board. The problem is still before a board of three men. The point I am making is they can do what you suggested under the present arrangement just as easily as they could do it under the new arrangement if they so desired, and if it were the administration policy for them to do it. Is that not true?

Mr. BRUNDAGE. It is just an additional protection, I think, in a situation that is getting a little more risky.

Mr. HOLIFIELD. We are not discussing the merit of your suggestion. We are discussing whether they can do it under the present arrangement as well as under the new arrangement.

Mr. BRUNDAGE. The Board can; yes.

Mr. HOLIFIELD. I believe you agree that they can. That is all. Mr. FASCELL. You are not suggesting, Mr. Brundage, that the reserves be increased.

Mr. BRUNDAGE. Well, I am not at the moment.

Mr. FASCELL. That is not what your statement says. Your statement makes as a point for the adoption of the reorganization plan the fact that there has been a reduction in reserves, leaving an inference thereby that there is something wrong that will be corrected by this reorganization plan.

Mr. BRUNDAGE. Well, what I intended to point out was that it is an additional reason, it seems to me, to have a separate independent board considering these problems, that is all.

Mr. FASCELL. That may be true, but the point is this: If something is wrong with the reserves, why doesn't the administration do something with the present Board to make a change in the reserve picture? Why create a new one?

Mr. BRUNDAGE. Well, I think that the Board presumably is the same board that made these loans, made these advances, that chartered these savings and loan associations, and that by introducing a new element into it, it would receive more careful consideration. I can't say from here as to whether this is too low or not, but I think that somebody on the spot charged with that responsibility ought to be considering it, that is all.

Mr. FASCELL. And you don't think they are doing it now? Mr. BRUNDAGE. Well, I assume that they must be doing it, but I am just providing a little extra protection. This isn't an earth-shattering plan. It is just a little extra protection.

Mr. FASCELL. All right, sir; another one of your sales points is the fact that you point out that the examiners have been reduced in relation to the total amount of liability. That is what you said in your statement. It now has less than 12 examiners per billion dollars

of assets.

Mr. BRUNDAGE. In proportion.

Mr. FASCELL. As against the 32 examiners per billion dollars of assets from 1946 to 1956. Do you think we ought to have more exami

ners.

Mr. BRUNDAGE. Well, it looks to me as if the business has been going up more rapidly than the organization to handle it. That is all. Mr. FASCELL. Well, why doesn't the administration tell the present Board to hire more examiners then?

Mr. BRUNDAGE. Well, it is an independent board.

Mr. FASCELL. It is? It is not subject to the control and jurisdiction of the President?

Mr. BRUNDAGE. It is a Board responsible to the President, but unless there was some obvious danger I don't think that the President would interfere.

Mr. FASCELL. Has anyone suggested they should hire, the Bureau of the Budget or anybody suggested that more examiners should be hired?

Mr. FINAN. This has been under very active discussion within the board, as I understand it, now for a year or so.

Mr. FASCELL. That is within the Board itself.

The point is you don't mean to leave an unfair inference that there are insufficient examiners to do the job at the present time?

Mr. BRUNDAGE. No.

Mr. FASCELL. Nor do you wish to leave the inference that more examiners couldn't be hired to do the job under the present situation? Mr. BRUNDAGE. That is right.

Mr. FASCELL. Now, you state that this is an independent agency not subject to the jurisdiction of the President, and yet section 3 (b) of the Reorganization Plan No. 2 of 1956 makes a very specific point of saying that it shall be under the direction and control of the President of the United States, this new board.

Now, in your statement you say that they already had the jurisdiction anyway, so I ask you if they do, why is it necessary to put section 3 (b) in there?

Mr. BRUNDAGE. I think that is merely clarifying the situation.

Mr. FASCELL. Well, it sure is, because you testified a moment ago that this was an independent agency, but section 3 (b) makes it very clear that all matters under the jurisdiction of this new Board of Trustees shall be subject to the direction and control of the President, which as you have previously stated, is not the case now. So this does contemplate a change.

Mr. BRUNDAGE. Well, it will report independently and at present it is the same thing, the Home Loan Bank Board and the Insurance, Board are the same thing. There isn't any insurance board and this

is setting up an insurance board, and in doing that it is making it clear that its responsibility is to the President and not to the Home Loan Bank Board.

Mr. FASCELL. Don't you think if there was any question as to whether or not that section constituted a delegation of authority, which authority does not now exist, that it would be better to delete it from the plan?

Mr. BRUNDAGE. I would have to reread it again to see if it would be covered anywhere else. Do you know, Mr. Finan?

Mr. FINAN. I am not sure that I understand that question. If I understand it, Mr. Fascell, you are raising primarily a legal question here that may be a matter for the Attorney General.

Mr. FASCELL. Well, it may be, but it is also a matter for our consideration to determine whether or not there is a change in authority contemplated by this plan. So right now, at this point, we have this situation, as I understand the testimony: Mr. Brundage says the present organization is an independent agency, not subject to the direction and control of the President, but reporting for administrative purposes.

Mr. FINAN. To begin with, I didn't understand the Director to say that the agency was independent to that extent. The Federal Home Loan Bank Board was originally created, as you know, as a regulatory body and it was primarily, I would assume, although that was many years ago, that it was in recognition of that that it was placed under a board of a bipartisan character and with fixed, overlapping

terms.

Now, only to that extent is the Federal Home Loan Bank Board whatever is meant by "independent." In other words, there are limitations on the President as to the appointment of members to that Board, the length of terms of their office, and by reason of the overlapping of those terms of offices, the President could not effect an immediate turnover in the Board.

To that extent the Board is what is generally what we mean when we refer to an independent board or independent commission.

Mr. FASCELL. Thank you. That makes the meaning of section 3 (b) clear. Because it eliminates that restriction and allows the President to do whatever he wants to with respect to this Board of Trustees, and that is the purpose of the section; isn't it?

Mr. FINAN. I don't want to answer that question "Yes" or "No" because it is a long, complicated question; but let me answer it this way: There is no doubt that the Board of Trustees of Federal Savings and Loan Insurance Corporation under this plan will be a different type of board from the Board of Directors of the Federal Home Loan Bank Board, in the sense that the two members of the Board serve completely at the pleasure of the President.

Mr. HOLIFIELD. Well, let's get this very clear for the record now. Members of the Home Loan Bank Board are appointed for terms of 4 years, but subject, of course, to the advice and consent of the Senate. They cannot be removed from that office except by cause. They have complete independence as far as that point is concerned. That is carried over to the Savings and Loan Insurance Corporation Board by virtue of the fact that the same people serve on both boards, so they, therefore, have that same independence.

79534-56- -3

Now, by your section 3 (b), you take away that independence because there is no set term of years for them to serve. There is no staggering of terms. They serve at the pleasure of the President. It also puts under the President the control of all matters under the jurisdiction of the Board of Trustees.

If the President should desire a certain regulation by this Board of Trustees, all in the world he would have to do is to send down a letter and they would have no independence of action. They would be completely subservient to the President's letter, whether it was good or bad. If it happened to be, in their best judgment, bad for the industry, they would be, if the President wanted them to be, under pain of dismissal and replacement by reappointment of a new board if they declined to go along with the President's admonition. Although they are the ones that know more about the industry than an outside source.

Is that not true? That situation could exist. I am not saying that it will, but it could exist. In view of the fact that they are not appointed for set terms of years, they are susceptible to political pressure, to lay it right on the table; is that not true?

Mr. FINAN. I would not agree, Mr. Holifield, that this means they are susceptible to political pressure.

Mr. HOLIFIELD. All right, I will change the word "political" and say they are susceptible to pressure from the President's office, which can override their independent judgment.

Mr. FINAN. I would prefer not to answer that question, stated in terms of "pressure.

Mr. HOLIFIELD. Well, I didn't want to put you in an embarrassing position. I think the record can stand with my question changed from a question to a statement.

Mr. BRUNDAGE. I think this was taken from one of these other boards.

Mr. HOLIFIELD. I am sure it was. It was taken from somewhere. Mr. BROWN. From the past, which I remember quite well.

Mr. FASCELL. Now, Mr. Brundage, getting back to your statement, you answered the question that there will be no duplication of such supervision and examination and careful analysis of the assignment of functions between the Corporation and the Federal home-loan bank as provided by the plan-these are your words.

Now I am questioning that statement as provided by the plan.
Mr. BRUNDAGE. What page is that?

4

Mr. FASCELL. Page 4 of your statement right now, and on page of the Reorganization Plan No. 2. Section 2 of the reorganization plan deals with the transfer of the functions in broad general terms. But section 4 says as the Director of the Bureau of the Budget shall determine to relate primarily to the Corporation or to its functions dealing with the division of assets, liabilities, contracts, commitments, property, records, personnel, unexpended balances of appropriations, allocations of other funds, including authorizations, and then if that isn't enough, it says the functions transferred to the Board by the provisions of this reorganization shall be transferred from the Board to the Corporation at such time or times as the said director shall direct, meaning the Bureau of the Budget, which means that the functions may be delineated and transferred personally, whenever in the

discretion of the Bureau of the Budget, under this reorganization plan it sees the necessity or the desirability of doing so and, therefore, you delineate in your statement what the Bureau of the Budget now thinks these functions are that should be in the Board and what they should be in the Corporation, but they are not in the plan; are they? Mr. BRUNDAGE. Well, I think I can't find that particular phrase that you are quoting from. I think the plan

Mr. FASCELL. Well, I am quoting from the top of page 4.

It has been contended that the reorganization will result in duplicate Federal supervision and examination of savings and loan associations, duplicate reporting, and conflicting regulations. Careful analysis of the assignment of functions between the Corporation and the Federal Home Loan Bank Board, as provided by the plan, will demonstrate that these contentions stem from a misunderstanding of the plan.

Then you go on to delineate the division of the responsibilities in your statement as between the Board and your Corporation, but the delineation is not made in the plan itself, is it, Mr. Brundage?

Mr. BRUNDAGE. In part; yes. In part it is left to the Board and to the Bureau of the Budget.

Mr. FASCELL. Well, they are made in part in the organization plan. Mr. BRUNDAGE. That is right.

Mr. FASCELL. But the details of the provision are laid down in your statement; are they not?

Mr. BRUNDAGE. These details are intended to cover what is provided in the plan plus the alternatives.

Mr. FASCELL. Yes; but they are an answer to the argument that there would be duplication of the functions of supervision and examination and your conclusion is that there would not be because this is the way the functions would be divided and this would be the responsibility of the Board and the Corporation.

Mr. BRUNDAGE. I think that there would not be because there need not be and I can't conceive why they would want to duplicate.

Mr. FASCELL. At any rate, isn't it true, however, that while you said that in this statement, under the plan you could change all of that any time you got ready?

Mr. BRUNDAGE. I don't think so, no.

This deals

Mr. FASCELL. Well, if you say no, what does this mean?

Mr. BRUNDAGE. This deals with the transfer in order to expedite it and simplify it. This is legal language to put in effect a very simple plan.

Mr. FASCELL. Well, now if you say you don't think so, where do you find in the reorganization plan that the new insurance corporation shall not have the right to set up completely separate examinations and supervisions and inspections. Where does it say that in here? Mr. BRUNDAGE. That they shall have the right?

Mr. FASCELL. Shall not have the right to do that.

Mr. BRUNDAGE. It isn't provided.

Mr. FASCELL. Then they can do it?

Mr. BRUNDAGE. They could if they wanted to, I suppose.

Mr. FASCELL. Except that the Bureau of the Budget under this plan can delineate the functions.

Mr. BRUNDAGE. We will attempt to help the board and its staff to work out the simplest and most effective way of giving the necessary examinations and protection and independent review.