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Chairman Dawson. Also, the message spoke about the quality of management. The President appointed all three members of the present Board and he would appoint the members of the new Board at exactly the same salary.

Mr. BRUNDAGE. I think it is the same salary.
Mr. FINAN. Yes.

Chairman Dawson. So what was the purpose of omitting reference to bipartisanship. In passing legislation, Congress thought it should be a good thing to have it bipartisan. Why did you eliminate bipartisanship?

Mr. BRUNDAGE. I didn't think it was a partisan job. I thought we needed somebody in the insurance business.

Chairman Dawson. Do you believe that the members of the present Board have proper experience for the job that they have been appointed to do?

Mr. BRUNDAGE. I do. I would be surprised if any President would not consider the two, but it didn't seem to me it was a situation that called for it specifically in the legislation.

Chairman Dawson. Have the present members shown any partisanship because it is a bipartisan Board?

Mr. BRUNDAGE. Not to my knowledge.

Chairman Dawson. Well, why did you omit it from yours since this bipartisan Board functions so efficiently and effectively and built up a business from $10 billion to $40 billion in 10 years? Why did you leave it out?

Mr. BRUNDAGE. Merely because most of the insurance boards are not specifically covered in that way. There is no mention of partnership or bipartisanship in the other insurance boards.

Mr. Jonas. Will the chairman yield?

Bipartisan means partisans of both groups, and when you eliminate it altogether, maybe they were attempting to eliminate partisanship altogether. You want a partisan of both parties on it. And they don't want partisans of either party.

Chairman Dawson. It is understood by everybody in the United States of America that this country exists under the two-party system and

Mr. BROWN. Sometimes I wonder.

Chairman Dawson. And that we operate under a two-party system and one party or the other is going to be in power. But in order to get a balanced viewpoint on these boards it has been the custom in many instances of appointing a bipartisan board, not members of the same party, and that was done in this instance but this plan removed that provision from it as well as the terms.

Mr. BRUNDAGE. Well, it wasn't specifically provided, Mr. Dawson, because it isn't a regulatory board. The regulatory boards have provisions usually for two parties.

Chairman DAWSON. Mr. Fascell.

Mr. FASCELL. Mr. Brundage, I don't want to disagree with you too vehemently but doesn't the insurance corporation have the right to issue all kinds of regulations with respect to the functions it is required to perform?

Mr. BRUNDAGE. The insurance corporation?

Mr. FASCELL. Well, then, it is regulatory.

Mr. BRUNDAGE. No; that isn't what I would call a regulatory agency.

Mr. FASCELL. It requires the members to abide by some rule and if that isn't a regulation I don't know what it is. I am through, Mr. Chairman.

Chairman Dawson. Why did you leave out a stated term for the proposed trustees! You have them at the will of an individual who is political. Why did you leave out the fixed terms? Other provisions of law include fixed terms for the individual members of the board.

Mr. BRUNDAGE. Well, I think that a board of this kind, an insurance board, would be expected to continue on so long as it was doing adequate and efficient service. I didn't think it would be the kind that would run out with a specific term.

Chairman DAWSON. But that isn't the way things operate in our Government under the two-party system. You know that. Your very présence in the position you hold disclaims that. That is subject to the will of the President. He appoints whom he wants on there. The board is controlled by him and we want a board that is not controlled by any politician, president, or anybody else but one which will serve the people and be removable for cause. You killed that when you cut out the fixed term.

Mr. BRUNDAGE. It doesn't seem to me that this kind of board would be subject to party or partisan influence at all.

Chairman Dawson. Then you questioned the wisdom of the Congress in originally providing for terms and other conditions.

Mr. BRUNDAGE. Well, it seemed like a direct business type of operation, that is all.

Chairman Dawson. Well, it is a business-type operation. We want it done in a business-like way and we want the men responsible to do the business and not be subject to the whim of somebody who doesn't carry the responsibility of doing the job.

Mr. BRUNDAGE. Well, I haven't any comment on that.

Chairman DAWSON. Well, I am just trying to find out why in this plan you left out the provision of the fixed term. You left out that bipartisan arrangement. You must have had some reason to do it because if it existed before then why did you change it?

Mr. BRUNDAGE. We thought that the Home Loan Bank Board is an organizing as well as a regulating agency and that this is just a business insurance type of operation and that the people selected for it would be those familiar with insurance policy, regardless of party,

Chairman Dawson. Aren't the people selected to it now familiar with the insurance business under the bipartisan arrangement.

Mr. BRUNDAGE. They aren't primarily familiar with insurance. They are familiar with banking because it is primarily a banking function which the Home Loan Bank Board provides.

Chairman Dawson. Then why didn't you require in the plan that they be selected from the insurance field?

Mr. BRUNDAGE. Because you don't do that kind of thing, put them in the plans.

Chairman Dawson. You sometimes put it in the law that these men shall be qualified in a certain manner.

Mr. HOLIFIELD. If the chairman will yield, a requirement along that line was put in the selection of the seven members of the Federal Reserve Board of Governors. They should represent different facets of our society. It is in the basic statute.

Mr. FASCELL. If the chairman will yield on that point, as a matter of fact, it was one of the strong recommendations made by the General Accounting Office when they first considered this proposition.

Mr. Jonas. Will the gentleman yield to me.
Chairman Dawson. Certainly.

Mr. Jonas. I would certainly prefer that suggestion than to put it into politics or make any reference to political parties.

Chairman Dawson. We don't want it put into politics.
Mr. Jonas. You want it bipartisan.

Chairman Dawson. The President in appointing these boards could not select all the members from his own party. A certain number would have to be selected from the other party.

Mr. Brown. There is no evidence which party might select these members under the plan. How long are we going ahead with these hearings? The House is in session and we have some very important · legislative

Chairman Dawson. We will get to that as soon as we are through with this witness.

What is the purpose of cutting out these terms, changing the bipartisan arrangement, and then giving the President complete control of the corporation?

He doesn't know what is going on down there. They ought to be the ones to run it, but what is that provision made for, to give him complete control at his whim? If they didn't do what he wanted, he would fire them. That is what would happen.

Mr. BRUNDAGE. As far as I am concerned, that is merely to indicate that they are not responsible to the Home Loan Bank Board. They are independent to the Home Loan Bank Board. They report to the President directly. That is all. I don't think there is any ulterior significance.

Chairman Dawson. I don't think there is either, but I was just wondering why you left out certain things, where the legislation set it up one way. You certainly had some purpose in using the words. I am trying to find out the purpose of your using these words, when these words can affect the working of this institution.

Are there any further questions?

Mr. HENDERSON. Mr. Brundage, there is one provision of the Reorganization Act of 1949 under which this plan was submitted, which deals with the matter of stating in the plan what savings will be made by the plan. I understand the situation here is a little bit different inasmuch as there are no congressional appropriations for this agency, but is there any way that you could possibly estimate whether any savings would be made for the Government under this plan.

You have stated that there would be an increase in expense to the local Federal savings and loan institutions.

Mr. BRUNDAGE. There will be an increase in total cost but greater protection, we think.

Mr. HENDERSON. But no particular savings, no economies that this plan is likely to provide.

Mr. BRUNDAGE. No, that is right.

Chairman Dawson. Don't you think that the Reorganization Act had in view in a reorganization there would be savings because it sets out in the act itself that in the plan the President shall itemize the savings, if possible, so we must have had in mind that the plan would effect some savings.

Mr. Brown. Or efficiencies, and other different things.
Chairman Dawson. I will put efficiency next.
Mr. BROWN. It doesn't have to effect savings.

Chairman Dawson. I will get to efficiency next when we get through with savings.

Mr. BRUNDAGE. It isn't my understanding that reorganization plans are only effected to accomplish savings.

Chairman Dawson. It is one of the things set out in the act, that he shall make the statement of what it will do where statements are concerned.

Mr. BRUNDAGE. That is right.
Chairman Dawson. And if he doesn't do that, then why-
Mr. Brown. That indicates there are no savings, Mr. Chairman.

Chairman Dawson. Then why bring it under the Reorganization Act that specifies that?

Mr. Brown. A plan under the Reorganization Act does not have to be based upon savings in order to qualify. It can be presented for other reasons.

Chairman DAWSON. (reading): The President, in his message transmitting a reorganization plan shall specify with respect to each abolition of a function included in the plant, the statutory authority for excise of such function and shall specify the reduction of expenditures, itemized as far as practical, which it is probable will be brought about by the taking effectand President ought to state the savings in his plan.

It is mandatory and he so ought to state in his plan.
Mr. Brown. Well, that is your judgment.

Chairman Dawson. That is right, that is my judgment, and that is what the law says. You can say that the law didn't mean what it says, if you want.

Mr. Jonas. He gives his view on that on page 3.

Mr. Chairman, he gives his view on that. It is not in as much detail perhaps as you would like but he says that he believes in the long run it will tend to reduce expenditures by reason of the more effective protection of the Government's large financial interest in these affairs, and that is the way in which any potential savings will occur so obviously it would

not mean any reduction in administrative expense. Chairman Dawson. You mean an increase in the administrative Expense.

Mr. FASCELL. I think it would probably be fairer just to state that there would be no reduction in expenditures because that statement that Congressman Jonas just read deals with the possibility of the contingent liability of the Government.

Mr. Jonas. Which is important to think about.

Mr. FASCELL. But you cannot make a statement that you are offering more effective protection and thereby reducing the possibility of a contingent liability when you do not even know what the liability is.

Mr. Jonas. You know what the contingent liability is now.
Mr. FASCELL. Yes? Under the plan, how do you reduce it?

Mr. Jonas. That is quite obvious, if the plan does what the proponents say it will do, provide more protection by closer supervision. I don't say that. I say that is what the proponents say.

Mr. FASCELL. I understand.

By the way, I have been corrected. It is not a contingent liability, is it?

Mr. Jonas. What is not a contingent liability?
Mr. FASCELL. The obligation of the Government.
Mr. Jonas. I hope it is not direct.
Mr. FASCELL. It is a reimbursable loan, is it not?
Somebody square me out on that.
In other words, the Corporation has the right to borrow the money?

Mr. BRUNDAGE. But this is a liability for the insurance, $31 billion. It is a contingent liability.

Mr. Brown. It is only $31 billion, as I understand it. Mr. PINCUs. Mr. Brundage, in connection with section 4 (c) of the plan

Mr. Jonas. May I say this before you go to that? If there is not any Government liability, I think a lot of people around the country are misled.

Mr. HOLIFIELD. It is a Government liability.
Mr. Jonas. That is what I thought.

Mr. HOLIFIELD. Up to $750 million, and undoubtedly if a crash came the Congress would enlarge that for the benefit of the people. There is no doubt about that.

Mr. FASCELL. But there is no liability now of $31 billion as has been stated around here?

Mr. BRUNDAGE. There is a contingent liability because that is the amount of the insurance.

Mr. FASCELL. Contingent liability to whom?

Mr. BRUNDAGE. To the depositors of the Savings and Loan Associations.

Mr. FASCELL. It is not to the Government?

Mr. BRUNDAGE. It is the Government's liability to them. I would not mind if they owed us some money. It would not matter a bit.

Chairman Dawson. Mr. Pincus. Mr. Pincus. Mr. Brundage, referring to section 4 (c) of the plan, what does the plan mean by the words "such measures" and then also the word “dispositions,” particularly what about the word “measures”?

Mr. BRUNDAGE. I presume that was put in by a lawyer to be sure that we covered

everything. I do not know what it means. Mr. FINAN. That is about right. That is to take care of any minor administrative details or loose ends that might be necessary to bring about a tidy separation of these two agencies.

Mr. Pincus. It could be minor or major. We do not know. Do we?

Mr. FINAN. Well, it is minor in the sense that I described it earlier, Mr. Pincus, in that it does not include discretion in the transfer of functions. This is a standard, as I said before, provision that appears in reorganization plans when you are separating functions or agencies.

Mr. Pincus. I am questioning that because section 4 of the Reorganization Act specifically enumerates those things which can be in the plan outside of the reorganization itself and it is entitled “Other

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