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"The articles of association and the organization certificate of the new bank shall be executed by representatives designated by the Corporation. No capital stock need be paid in by the Corporation. The new bank shall not have a board of directors, but shall be managed by an executive officer appointed by the Board of Directors of the Corporation who shall be subject to its directions. In all other respects the new bank shall be organized in accordance with the then existing provisions of law relating to the organization of national banking associations. The new bank may, with the approval of the Corporation, accept new deposits which shall be subject to withdrawal on demand and which, except where the new bank is the only bank in the community, shall not exceed $10,000 for any depositor. The new bank, without application to or approval by the Corporation, shall be an insured bank and shall maintain on deposit with the Federal Reserve bank of its district reserves in the amount required by law for member banks, but it shall not be required to subscribe for stock of the Federal Reserve bank. Funds of the new bank shall be kept on hand in cash, invested in obligations of the United States, or in obligations guaranteed as to principal and interest by the United States, or deposited with the Corporation, with a Federal Reserve bank, or, to the extent of the insurance coverage thereon, with an insured bank. The new bank, unless otherwise authorized by the Comptroller of the Currency, shall transact no business except that authorized by this Act and as may be incidental to its organization. Notwithstanding any other provision of law the new bank, its franchise, property, and income shall be exempt from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority.

"Upon the organization of a new bank, the Corporation shall promptly make available to it an amount equal to the estimated insured deposits of such closed bank plus the estimated amount of the expenses of operating the new bank, and shall determine as soon as possible the amount due each depositor for his insured deposit in the closed bank, and the total expenses of operation of the new bank. Upon such determination, the amounts so estimated and made available shall be adjusted to conform to the amounts so determined. Earnings of the new bank shall be paid over or credited to the Corporation in such adjustment. If any new bank, during the period it continues its status as such, sustains any losses with respect to which it is not effectively protected except by reason of being an insured bank, the Corporation shall furnish to it additional funds in the amount of such losses. The new bank shall assume as transferred deposits the payment of the insured deposits of such closed bank to each of its depositors. Of the amounts so made available, the Corporation shall transfer to the new bank, in cash, such sums as may be necessary to enable it to meet its expenses of operation and immediate cash demands on such transferred deposits, and the remainder of such amounts shall be subject to withdrawal by the new bank on demand.

"Whenever in the judgment of the Board of Directors it is desirable to do so, the Corporation shall cause capital stock of the new bank to be offered for sale on such terms and conditions as the Board of Directors shall deem advisable in an amount sufficient, in the opinion of the Board of Directors, to make possible the conduct of the business

of the new bank on a sound basis, but in no event less than that required by section 5138 of the Revised Statutes, as amended (U. S. C., title 12, sec. 51), for the organization of a national bank in the place where such new bank is located. The stockholders of the closed insured bank shall be given the first opportunity to purchase any shares of common stock so offered. Upon proof that an adequate amount of capital stock in the new bank has been subscribed and paid for in cash, the Comptroller of the Currency shall require the articles of association and the organization certificate to be amended to conform to the requirements for the organization of a national bank, and thereafter, when the requirements of law with respect to the organization of a national bank have been complied with, he shall issue to the bank a certificate of authority to commence business, and thereupon the bank shall cease to have the status of a new bank, shall be managed by directors elected by its own shareholders and may exercise all the powers granted by law, and it shall be subject to all the provisions of law relating to national banks. Such bank shall thereafter be an insured national bank, without certification to or approval by the Corportion.

"If the capital stock of the new bank is not offered for sale, or if an adequate amount of capital for such new bank is not subscribed and paid for, the Board of Directors may offer to transfer its business to any insured bank in the same community which will take over its assets, assume its liabilities, and pay to the Corporation for such business such amount as the Board of Directors may deem adequate; or the Board of Directors in its discretion may change the location of the new bank to the office of the Corporation or to some other place or may at any time wind up its affairs as herein provided. Unless the capital stock of the new bank is sold or its assets are taken over and its liabilities are assumed by an insured bank as above provided within two years from the date of its organization, the Corporation shall wind up the affairs of such bank, after giving such notice, if any, as the Comptroller of the Currency may require, and shall certify to the Comptroller of the Currency the termination of the new bank. Thereafter the Corporation shall be liable for the obligations of such bank and shall be the owner of its assets. The provisions of sections 5220 and 5221 of the Revised Statutes (U. S. C., title 12, secs, 191 and 182) shall not apply to such new banks."

Recommendation

(a) The seventh sentence of subsection (i) of section 11 should be amended to provide that a new bank shall transact no business except that authorized by the Federal Deposit Insurance Act and as may be incidental to its organization, provided however that the Comptroller of the Currency, in his discretion, may authorize the bank to transact such other business as a national bank may transact.

(b) The second sentence of subsection (1) of section 11 should be amended by adding a provision that the Corporation may extend the 2-year limitation on the operation of such a new national bank for periods of 6 months, but not in excess of 2 additional years, when the Board of Directors determines that the continuance of the new bank is necessary to meet the needs and convenience of the community.

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Reason

(a) This amendment would clarify the seventh sentence of subsection (i) to expressly state what it now implies.

(b) This amendment of the second sentence of subsection (1) would enable the Corporation to continue the operation of the new national bank to meet the needs and conveniences of the community.

Both amendments would better enable the new bank to serve the community in emergency situations.

Existing law

109. RECEIVER OF AN INSURED BANK

Subsection (a) of section 12 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1822 (a)):

"Notwithstanding any other provision of law, the Corporation as receiver of a closed national bank or District bank shall not be required to furnish bond and shall have the right to appoint an agent or agents to assist it in its duties as such receiver, and all fees, compensation, and expenses of liquidation and administration thereof shall be fixed by the Corporation, and may be paid by it out of funds coming into its possession as such receiver."

Recommendation

The provision in subsection (a) of section 12 should be transferred to subsection (d) of section 11, which relates to the powers and duties of the Corporation as receiver of insured national and district banks. A new provision should be substituted in subsection (a) of section 12 to provide that persons employed by the Corporation, acting as receiver of any insured State, national, or district bank, to assist the Corporation in a particular receivership shall be considered employees of the receivership estate and shall not be deemed for any purpose to be employees of the Corporation.

Reason

This will make clear that temporary employees employed for a particular receivership of a closed insured bank are not employees of the Corporation, so that such employees will be eligible for the same benefits of workmen's compensation laws and social security and unemployment laws, as employees of the bank were. There is now a substantial degree of confusion and conflict in these areas on the part of both State and Federal agencies with respect to the status of temporary receivership employees. The amendment will remove this confusion and conflict and clearly fix the status of such employees.

110. LIABILITY OF DEPOSITOR AS STOCKHOLDER OF CLOSED BANK

Existing law

Subsection (d) of section 12 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1822 (d)):

"The Corporation may withhold payment of such portion of the insured deposit of any depositor in a closed bank as may be required. to provide for the payment of any liability of such depositor as a stockholder of the closed bank, or of any liability of such depositor to the closed bank or its receiver, which is not offset against a claim

due from such bank, pending the determination and payment of such liability by such depositor or any other person liable therefor." Recommendation

Subsection (d) of section 12 should be amended to delete the reference therein to any liability of the depositor as a stockholder of the closed bank.

Reason

The additional liability of stockholders of national banks and of all insured State banks, except those in Arizona, has been terminated. The Corporation's interest in any recoveries of such additional liability of stockholders has been waived in favor of the stockholders by subsection (g) of section 11. Any liability of a stockholder for unpaid subscriptions for capital stock would be included in the words "any liability of such depositor to the closed bank or its receiver." 111. LOANS TO AND ASSET PURCHASES FROM RECEIVERS OR LIQUIDATORS Existing law

Subsection (d) of section 13 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1823 (d)):

"Receivers or liquidators of insured banks closed on account of inability to meet the demands of their depositors shall be entitled to offer the assets of such banks for sale to the Corporation or as security for loans from the Corporation, upon receiving permission from the appropriate State authority in accordance with express provisions of State law in the case of insured State banks. The proceeds of every such sale or loan shall be utilized for the same purposes and in the same manner as other funds realized from the liquidation of the assets of such banks. In any case where prior to the effective date of this amendment, the Comptroller of the Currency has appointed a receiver of a closed national bank other than the Corporation, he may, in his discretion, pay dividends on proved claims at any time after the expiration of the period of advertisement made pursuant to section 5235 of the Revised Statutes (U. S. C., Title 12, sec. 193), and no liability shall attach to the Comptroller of the Currency or to the receiver of any such national bank by reason of any such payment for failure to pay dividends to a claimant whose claim is not proved at the time of any such payment. The Corporation, in its discretion, may make loans on the security of or may purchase and liquidate or sell any part of the assets of an insured bank which is now or may hereafter be closed on account of inability to meet the demands of its depositors, but in any case in which the Corporation is acting as receiver of a closed insured bank, no such loan or purchase shall be made without the approval of a court of competent jurisdiction."

Recommendation

The last clause of the first sentence which pertains to the requisite permission of State authorities to the sale of assets to or borrowing from the Corporation by receivers of State banks should be amended. The statute now requires that such permission be in accordance with "express provisions of State law" in the case of insured State banks. Such permission should be in accordance with "applicable State law." The third sentence of this subsection should be deleted.

Reason

The change from "express provisions of State law" to "applicable State law" would extend this clause so as to cover cases where the State law does not expressly authorize receivers to sell assets or borrow money, but the courts or the Attorney General may hold that receivers of banks of that State nonetheless have that power. The third sentence of subsection (d) of section 13 should be deleted because it is obsolete.

112. CIVIL-SERVICE RETIREMENT AND DISABILITY BENEFITS AND EMPLOYEES' COMPENSATION BENEFITS

Existing law

The first three sentences of subsection (a) of section 4 of the Civil Service Retirement Act of May 29, 1930, as amended by Public Law 854, 84th Congress, approved July 31, 1956:

"From and after the first day of the first pay period which begins on or after the effective date of the Civil Service Retirement Act Amendments of 1956, there shall be deducted and withheld from each employee's basic salary an amount equal to 612 per centum of such basic salary and from each Member's basic salary an amount equal to 72 per centum of such basic salary. From and after the first day of the first pay period which begins after June 30, 1957, an equal sum shall also be contributed from the respective appropriation or fund which is used for payment of his salary, pay or compensation, or in the case of an elected official, from such appropriation or fund as may be available for payment of other salaries of the same office or establishment. The amounts so deducted and withheld by each department or agency, together with the amounts so contributed, shall, in accordance with such procedures as may be prescribed by the Comptroller General of the United States, be deposited by the department or agency in the Treasury of the United States to the credit of the fund."

Subsection (b) of section 40 of the Federal Employees Compensation Act, as amended (5 U. S. C. 790):

"The term 'employee' includes (1) all civil officers and employees of all branches of the Government of the United States (including officers and employees of instrumentalities of the United States wholly owned by the United States);

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Subsection (a) of section 1501 of the Social Security Act (42 U. S. C. 1361):

"The term 'Federal service' means any service performed after 1952 in the employ of the United States or any instrumentality thereof which is wholly owned by the United States, ***"

Recommendation

The Federal Deposit Insurance Act should be amended to provide (a) for the payment by the Corporation of the Government's share of the cost of civil-service retirement and disability benefits from the creation of the Corporation to the first day of the first pay period beginning after June 30, 1957, when agency contributions of 611⁄2 percent of salaries are required to be paid to the Treasury under section 4 (a) of the Civil Service Retirement Act of May 29, 1930, as amended, (b) for the payment into the employees' compensation fund of the amount of the benefit payments made from such fund on account of the Corporation's officers and employees prior to January 1, 1957, and

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