sion and as a member of this committee and a Member of Congress, it is my understanding from your testimony, summing it all up quickly, that you rather feel the recommendation No. 4 of the Commission, to separate the powers and responsibilities of the Insurance Corporation and the Home Loan Bank Board was satisfactory, but that the method which has been followed by this reorganization plan is unsatisfactory.

Mr. HOLIFIELD. I want to answer that very plainly. I still believe in the presence of the separation of this function. I just simply do not believe in asking a person to choke himself. I do not believe he will do it. I believe you have to have checks in the administration of this act. I believe that if the division of powers was done carefully, was planned carefully and clearly so that we could understand just exactly how the functions would be carried out, not only who would have the functions, but how they would be carried out, then I believe we could sit in judgment on the merits of the proposition. But as long as we are not in that position I must reluctantly say that this would be more dangerous, in my opinion, than leaving the matter as it is at the present time.

Mr. BROWN. And does the gentleman agree that the Hoover Commission, itself, made no recommendation as to how this reform should be accomplished, whether by Reorganization Act or legislative enactment?

Mr. HOLIFIELD. That is correct.

Mr. BROWN. And you feel that the wrong approach has been taken and the plan as submitted would not carry out entirely the thoughts and purposes and intent of the Hoover Commission in making Recommendation No. 4, on lending agencies.

Mr. HOLIFIELD. I believe the gentleman has stated it correctly, I doubt if it could be done in a plan. I believe in reorganization plans if they are properly drawn and if they transfer functions with safeguards. But I believe that the reorganization plan procedure should be used sparingly. Congress has given that right to the President in recognition of the difficulty which we sometimes have in legislating efficiency into a bureau of the Government. We have also placed upon the President an obligation that when he does use this power he use it clearly so that the Congress knows what he is doing. We give him a great advantage in allowing him to send us reorganization plans. This has been contended by some as an abdication of Congress' legislative powers. To a certain extent I believe that contention can well be made. I have studied a lot about it and I believe if reorganization plans are sent up to the Congress, they should be sent up sparingly and with very clear language and very clear indication to the Congress as to how they are to be implemented.

Mr. BROWN. I think the gentleman will agree that the reorganization plans have been sent up rather sparingly for sometime.

Mr. HOLIFIELD. They have been.

Mr. BROWN. Since the second Hoover Commission completed its report.

Mr. HOLIFIELD. I think the regular legislative process is the safest It is not the quickest way always, but it is the safest way. Mr. BROWN. Of course, this committee, for instance, is considering a number of legislative bills to implement the recommendations of the second Hoover Commission in different fields of governmental en

deavor, but I just wanted to pinpoint and to make certain for the record your position. As far as the recommendation made by the Commission is concerned, you feel that is a good recommendation and you agree that the Commission did not say how that reform should be accomplished, or what method of procedure should be followed, but you feel that this procedure and especially this plan, as drawn, is not the wise method to follow.

Mr. HOLIFIELD. That is my position.

Chairman DAWSON. Thank you very much.

Mr. FASCELL. I have no questions, Mr. Chairman.

Chairman DAWSON. I do wish to compliment you on your statement, Congressman, the manner in which you made it, the sincerity with which you gave it, and we know that it is a matter close to your heart through the years, the fate of these institutions.

Mr. HOLIFIELD. I will have to say to my friends in the industry I will still support the principle if it is presented to us in the proper fashion.

Chairman DAWSON. In that event, we will call upon our next witness, a representative of the industry, Mr. Henry A. Bubb, of Topeka, Kans., chairman of the legislative subcommittee of the United States Savings and Loan League.

STATEMENT OF HENRY A. BUBB, CHAIRMAN, LEGISLATIVE COMMITTEE, UNITED STATES SAVINGS AND LOAN LEAGUE

Mr. BUBB. Mr. Chairman, and members of the committee, let me say that, in view of the time, and all of the testimony that has gone on, I am going to forego reading one of the finest statements that will be presented and instead I will just try to cover a few points and will file my statement for the record to expedite matters.

I am Henry A. Bubb, of Topeka, Kans., and I appear here today as chairman of the legislative committee of the United States Savings and Loan League. I am also president of the Capitol Federal Savings and Loan Association of Topeka and a past president of the league.

I have with me Mr. Horace Russell of Chicago, our general counsel, and Mr. Stephen Slipher, manager of the league's Washington office, if you care to, ask either one of those gentlemen any questions, or myself when I am through. Also in the room are a number of other officers, including President Dreier, Past President Edgerton, Executive Vice President Norman Strunk, and others of the league.

The United States League was founded in 1892 as an organization of 4,300 savings and loan associations, building and loan associations, and cooperative banks, representing approximately 90 percent of the Nation's savings and loan assets. These member institutions are both federally chartered and State chartered, and are located in every State of the Union.

The United States Savings and Loan League supports House Resolution 541 by Representative Fascell and is opposed to Reorganization Plan No. 2. Seldom have our people been so disturbed by any legislative proposal. From all over the country we have protests to Reorganization Plan No. 2 and petitions to do everything within our power to see that the plan does not go into effect.

I would like to leave my statement for a minute to answer a question or two in Mr. Brundage's testimony this morning, and I say this in all kindness, because I certainly feel he was on the spot trying to defend what I think is a bad piece of legislation. His testimony was based on the fact that everything in the past has worked very well, but because the savings and loan associations have been so successful and have grown $30 billion in the last 10 years we better change signals. Yet in all of the testimony I have heard today I have not heard anyone criticize the operation of the Insurance Corporation by the present Federal Home Loan Bank Board, which I, as a member of the industry, think has done an excellent job.

Mr. Brundage also mentioned the reserves of the Insurance Corporation.

Now, I just want to point out there is nothing in Reorganization Plan No. 2 concerning reserves. Congress sets the insurance premium that determines the amount the Insurance Corporation will have left over for reserves. We shouldn't confuse the issue as it has no relevancy to Reorganization Plan No. 2.

Now, if I may jump to page 4, I realize that much of this has already been said, but I just want to emphasize a few lines here once again.

1. The division of the Government agency into two separate and equal agencies will result in confusion, duplication, and conflict in the relations of the Federal Government with the savings and loan business. We believe that our member associations would be confronted with conflicting regulations and directions and the frustrations of attempting to determine which agency to follow. Where one report now suffices, two would be necessary under the plan, probably in a different form and with different instructions. In short, redtape and agency buckpassing would result under the plan.

Under the plan everyone concedes the savings and loan institutions would have substantially increased operating expenses which we do not believe to be necessary.

Mr. BROWN. Mr. Chairman, while we are taking this testimony in pieces, in order to save time I believe that Mr. Bubb's statement is so well prepared that we ought to have the entire text of it in the record somewhere, even though

Chairman DAWSON. It can be introduced in its entirety.

Mr. BUBB. I will file a copy of it for the record.

Mr. BROWN. I think it should be printed in the record as well as what you say here.

(The complete text of Mr. Bubb's statement is as follows:)

I am Henry A. Bubb of Topeka, Kans., and I appear here today as chairman of the Legislative Committee of the United States Savings and Loan League. I am also president of the Capitol Federal Savings & Loan Association of Topeka and a past president of the league.

I have with me today, Mr. Horace Russell of Chicago, general counsel of the league, and Mr. Stephen Slipher, manager of the league's Washington office. Mr. Russell will present a part of the league's testimony. Also in the room are a number of other officers and members of the United States Savings and Loan League; their presence here today is indicative of the interest in this question.

To identify our organization let me say that the United States Savings and Loan League, founded in 1892, has in its membership 4,300 savings and loan associations, building and loan associations and cooperative banks, representing approximately 90 percent of the Nation's savings and loan assets. These member institutions are both federally chartered and State chartered and are located in every State of the Union.

The United States Savings and Loan League supports House Resolution 541 by Representative Fascell and is opposed to Reorganization Plan No. 2. Seldom have our people been so disturbed by any legislative proposal. From all over the country we have protests to Reorganization Plan No. 2 and petitions to do everything within our power to see that the plan does not go into effect. I might cite just a few of the organizations which have already officially stated their opposition to the plan: The Federal Savings and Loan Advisory Council, Arkansas Savings and Loan League, California Savings and Loan League, Savings and Loan League of Connecticut, Kansas Savings and Loan League, Kentucky Savings and Loan League, Missouri Savings and Loan League, Nebraska League of Savings and Loan Associations, Metropolitan League of Savings Associations of New York City, North Carolina Savings and Loan League, Oklahoma Savings and Loan League, Oregon Savings and Loan League, the Board of Directors of the Federal Home Loan Bank of Greensboro, and the Pacific Northwest Conference of Savings and Loan Associations which includes the States of Montana, Washington, Oregon, Idaho, and Utah. This list is growing daily.

It is abundantly clear that the savings and loan business is opposed to Reorganization Plan No. 2 and that the plan was not proposed in response to any suggestion or request from the industry. Indeed, there was no consultation with the industry prior to the submission of the plan to Congress.

Under the present organizational structure of the Federal Home Loan Bank Board the Board has jurisdiction over the Federal savings and loan system, the Federal Home Loan Bank System, and the Federal Savings and Loan Insurance Corporation. The Federal Home Loan Bank System consists of 11 regional Federal home-loan banks which serve as a reserve system for 4,300 savings and loan associations; the Federal Savings and Loan Insurance Corporation insures up to $10,000 the accounts of savers in insured savings and loan associations; and the Federal savings and loan system consists of some 1,700 associations which are chartered and supervised under Federal laws. This present organizational structure has existed since these agencies were created in the early 1930's and the record of the savings and loan business is persuasive testimony as to the effectiveness of the Federal agencies under the present organizational

structure.

Reorganization Plan No. 2 would provide for a separation of the Federal Savings and Loan Insurance Corporation from the Federal Home Loan Bank Board. The Corporation would become an independent agency under a three-man board of trustees (one of whom would be the Federal Home Loan Bank Board Chairman), subject to the direction and control of the President. The plan provides for a basic, extreme and sweeping reorganization of the Government agency. Where we now have 1 Board which is able to coordinate

all of the complicated laws, regulations and transactions with member institutions, there would be 2 completely separate organizations. To us in the savings and loan business this reorganization plan is as revolutionary as a split in the Agriculture Department would be to the farmers, or as a splitup of the Veterans' Administration would be to the veterans.

Savings and loan associations are now the largest single source of home loans, making between 35 and 40 percent of all home loans. These institutions are also the fastest growing savings facility, having recorded last year a net increase in savings of $5 billion. They have assets of over $40 billion as compared to only $10 billion just a decade ago. It is not an exaggeration to say that the record home building in the postwar period is due in substantial part to the spectacular manner in which the savings and loan associations have responded to the heavy demands on our mortgage credit system. Since the savings and loan business is so important to our housing economy and to our national thrift program, it is obvious that this basic reorganization has ramifications of national importance.

Now, I would like to turn to some of the specific reasons why the United States Savings and Loan League is opposed to Reorganization Plan No. 2.

1. The division of the Government agency into two separate and equal agencies will result in confusion, duplication, and conflict in the relations of the Federal Government with the savings and loan business. We believe that our member associations would be confronted with conflicting regulations and directions and the frustrations of attempting to determine which agency to follow. Where 1 report now suffices, 2 would be necessary under the plan, probably in a different form and with different instructions. In short, redtape and agency buckpassing would result under the plan.

2. Under the plan the savings and loan institutions would have substantially increased operating expenses. All of the expenses of the Federal Home Loan Bank Board and of the Federal Savings and Loan Insurance Corporation are now paid by member institutions; it goes without saying that the operation of two entirely separate organizations to accomplish the purposes now achieved by a single agency would be most costly. More people would be on the payroll, more space would be occupied, more paperwork would be called for. The savings and loan institutions would consequently pay the difference. In addition, aside from the greater expense of the operation of two agencies in Washington, the prospect under the proposed plan is for a doubling of supervision and examination of the associations, since the Board and the Insurance Corporation would have their respective legal obligations, separate and distinct, to determine the soundness of the associations. Examination costs are already one of the larger items in the operating expenses of associations; this plan would increase them.

Because association managements have a primary obligation to keep strong reserves and to keep adding substantially to reserves each fiscal period, any additional operating expense imposed upon them could not be absorbed without direct impact on either the savers, or the borrowers, or both. Necessarily, then, an increase in the mortgage interest rate or a decrease in the return paid to savers would be the ultimate result of the operation of two separate agencies for the