thereafter annually the amount of such benefit payments made on the account of the Corporation's officers and employees, and (c) extend the benefits of the Federal Employees Compensation Act (5 U. S. C. 751-791 and 793) and the Federal employees' unemployment compensation benefits of title XV of the Social Security Act (42 U. S. C. 1361-1370) to the officers and employees of the Corporation.

Reason

(a) and (b) The Federal Deposit Insurance Corporation operates without any appropriated funds; its income is derived from assessments paid to it by insured banks. The Corporation has refunded, with interest, the original investment of $289 million in its capital stock made by the United States Treasury and the Federal Reserve banks and it has accumulated a reserve insurance fund in excess of $1.6 billion, while caring for operating costs and losses. By the amendments here offered the Corporation proposes to remove all vestige of Government subsidy from its operations and to repay to the Government all sums heretofore advanced by it on account of benefits that have accrued to the Corporation's employees by reason of the subsidies mentioned in the amendments.

The amendments authorize the Corporation to pay the Government's share of the cost of civil-service retirement and disability benefits which have heretofore accrued and, in the future, to make current payments of such costs as they mature. Further, the Corporation desires to compensate the Government for benefits that have heretofore accrued on account of the benefits under the workmen's compensation laws and, in the future, to pay its fair share of the costs of workmen's compensation as they mature.

For several years the Comptroller General in his audit reports has recommended the enactment of legislation which would direct the action proposed herein in reference to retirement, disability and workmen's compensation benefits. In the 1953 audit report it was estimated that benefits theretofore received by the Corporation's personnel on account of these laws would amount to approximately $2.5 million and that the annual carrying charges therefor would be approximately $300,000. The current estimates fix the backlog obligation at approximately $3.5 million. The Corporation now proposes to relieve the Treasury of these burdens, and to assume full responsibility not only for the future costs thereof but to refund to the Government those costs which have been borne by the Government in the past.

There is no provision for any payment to the Secretary of Labor for the unemployment compensation benefits to persons by reason of their employment by the Corporation. Because the number of employees of the Corporation is relatively small, disbursements for unemployment benefits would undoubtedly also be small, possibly amounting to $1,000 to $1,500 annually. The proposal of such payment was met with the opinion that the increased overall cost of agency accounting and payment, as well as the compounding of administrative problems, militates strongly against any allocation of unemployment compensation costs of Federal employees to the individual agencies. It was pointed out that such an allocation would require additional records in every one of the 51 jurisdictions disbursing Federal employee benefits. It would pose the problem of devising some method of separating the overall costs of administering the Federal-State unemployment com

pensation program from the costs of administering that portion which relates to Federal benefits. It would also involve proration of costs between Federal agencies where employment with more than one agency is involved and State laws do not, in general, make such prorating possible. It appears that the cost of determining the amount of the benefits to former employees of this Corporation would exceed the amount of the benefits received by such employees.

(c) The Corporation desires to make certain the application of the workmen's compensation laws and Federal employees unemployment compensation laws to its employees. There exists a difference of opinion between the Department of Labor and the Corporation as to the applicability of these laws to the Corporation. To eliminate this uncertainty, these laws should be expressly extended to the officers and employees of the Corporation.

113. ACCOUNTING AND AUDITING OF THE CORPORATION ON CALENDAR YEAR BASIS

Existing law

The first and second sentences of subsection (c) of section 17 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1827 (c)):

"A report of the audit for each fiscal year ending on June 30 shall be made by the Comptroller General to the Congress not later than January 15 following the close of such fiscal year. On or before December 15 following such fiscal year the Comptroller General shall furnish the Corporation a short form report showing the financial position of the Corporation at the close of the fiscal year."

The last sentence of subsection (b) of section 17 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1827 (b)):

"The audit shall begin with financial transactions occurring on and after August 31, 1948."

Recommendation

(a) The first and second sentences of subsection (c) of section 17 should be amended to make the calendar year the fiscal year of the Corporation, to provide for the audit of the Corporation by the Comptroller General on the calendar year basis rather than for each year ending on June 30 and to provide that the Comptroller General furnish the Corporation with a short form report of the financial position of the Corporation at the close of the calendar year, if possible, in time for inclusion of the report in the Corporation's annual report to Congress.

(b) The last sentence of subsection (b) of section 17 should be deleted.

Reason

(a) By statute, accounting by the Corporation and auditing by the General Accounting Office are on the basis of a fiscal year ending June 30. Also by statute, the Corporation is required to make an annual report to Congress on a calendar basis. Further, the calculation and determination of assessment credits which are provided in the act for the benefit of insured banks must be made on the basis of operations on a calendar year basis. The complication of requiring financial statements of operations and accountings to be made, for certain purposes, on a fiscal June 30 basis, and, for other purposes, on a calen

dar year basis, has been confusing and burdensome. It has resulted in unnecessary and duplicate work on the part of the financial and accounting personnel of the Corporation. The Comptroller General, on many occasions, has recommended that his audit report on the Corporation's operations be made on a calendar year basis. Under the proposed amendments the Corporation accounting and GAO auditing would be on the basis of a calendar year.

(b) The last sentence of subsection (b) of section 17 is obsolete and therefore should be deleted.

Existing law

114. REGULATION OF BANK MERGERS

The present laws concerning bank mergers are summarized in the report of the Senate Committee on Banking and Currency (S. Rept. No. 2583, 84th Cong., pp. 2-4).

The first three sentences of subsection (c) of section 18 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1828 (c)):

"Without prior written consent by the Corporation, no insured bank shall (1) merge or consolidate with any noninsured bank or institution or convert into a noninsured bank or institution or (2) assume liability to pay any deposits made in, or similar liabilities of, any nonnsured bank or institution or (3) transfer assets to any noninsured bank or institution in consideration of the assumption of liabilities for any portion of the deposits made in such insured bank. No insured bank shall convert into an insured State bank if its capital stock, or its surplus will be less than the capital stock or surplus, respectively, of the converting bank at the time of the shareholders' meeting approving such conversion, without prior written consent by the Comptroller of the Currency if the resulting bank is to be a District bank, or by the Board of Governors of the Federal Reserve System if the resulting bank is to be a State member bank (except a District bank), or by the Corporation if the resulting bank is to be a State nonmember insured bank (except a District bank). No insured bank shall (i) merge or consolidate with an insured State bank under the charter of a State bank or (ii) assume liability to pay any deposits made in another insured bank, if the capital stock or surplus of the resulting or assuming bank will be less than the aggregate capital stock or aggregate surplus, respectively, of all the merging or consolidating banks or of all the parties to the assumption of liabilities, at the time of the shareholders' meetings which authorized the merger or consolidation or at the time of the assumption of liabilities, unless the Comptroller of the Currency shall give prior written consent if the assuming bank is to be a national bank or the assuming or resulting bank is to be a District bank; or unless the Board of Governors of the Federal Reserve System gives prior written consent if the assuming or resulting bank is to be a State member bank (except a District bank); or unless the Corporation gives prior written consent if the assuming or resulting bank is to be a nonmember insured bank (except a District bank)."

Recommendation

The third sentence of subsection (c) of section 18 should be amended as provided in S. 3911, 84th Congress, which passed the Senate.

Reason

The proposed amendment provides full and adequate protection to the public for the screening of bank merger, consolidation and acquisition transactions, and hence is in accord with the program of the President. The amendment is couched in language to assure safeguards for banking and the public alike, while at the same time it does not place the administering agencies in a strait jacket by positive prohibitions against transactions which may be in the public interest. Finally, it vests the responsibility of the administration of the authority granted in those agencies which, by experience and knowledge, are best qualified to make the determinations contemplated by the law. The proposal provides the most effective and efficient means of accomplishing the end result of serving both the interests of banking and of the public alike.

115. LOANS TO EXAMINERS OF THE CORPORATION

Existing law

Sections 217 and 218 of title 18 of the United States Code:

"Offer of loan or gratuity to bank examiner

"Whoever, being an officer, director or employee of a bank which is a member of the Federal Reserve System or the deposits of which are insured by the Federal Deposit Insurance Corporation, or of any National Agricultural Credit Corporation, or of any lank bank, national farm loan association or other institution subject to examination by a farm credit examiner, makes or grants any loan or gratuity, to any examiner or assistant examiner who examines or has authority to examine such bank, corporation, or institution, shall be fined not more than $5,000 or imprisoned not more than one year, or both; and may be fined a further sum equal to the money so loaned or gratuity given.

"The provisions of this section and section 218 of this title shall apply to all public examiners and assistant examiners who examine member banks of the Federal Reserve System or insured banks, or National Agricultural Credit Corporations, whether appointed by the Comptroller of the Currency, by the Board of Governors of the Federal Reserve System, by a Federal Reserve Agent, by a Federal Reserve bank or by the Federal Deposit Insurance Corporation, or appointed or elected under the laws of any state; but shall not apply to private examiners or assistant examiners employed only by a clearinghouse association or by the directors of a bank.

"Acceptance of loan or gratuity by bank examiner

"Whoever, being an examiner or assistant examiner of member banks of the Federal Reserve System or banks the deposits of which are insured by the Federal Deposit Insurance Corporation, or a farm credit examiner or examiner of National Agricultural Credit Corporations, accepts a loan or gratuity from any bank, corporation, association or organization examined by him or from any person connected therewith, shall be fined not more than $5,000 or imprisoned not more than one year, or both; and may be fined a further sum equal to the money so loaned or gratuity given, and shall be disqualified from holding office as such examiner."

The first three sentences of subsection (b) of section 10 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1820 (b)):

"The Board of Directors shall appoint examiners who shall have power, on behalf of the Corporation, to examine any insured State nonmember bank (except a District bank), any State nonmember bank making application to become an insured bank, and any closed insured bank, whenever in the judgment of the Board of Directors an examination of the bank is necessary. In addition to the examinations provided for in the preceding sentence, such examiners shall have like power to make special examination of any State member bank and any national bank or District bank, whenever in the judgment of the Board of Directors such special examination is necessary to determine the condition of any such bank for insurance purposes. Each such examiner shall have power to make a thorough examination of all the affairs of the bank and in doing so he shall have power to administer oaths and to examine and take and preserve the testimony of any of the officers and agents thereof, and shall make a full and detailed report of the condition of the bank to the Corporation." Recommendation

Section 217 should be amended to make sections 217 and 218 inapplicable to loans by national banks, district banks and State member banks to examiners and assistant examiners of the Federal Deposit Insurance Corporation when such loans are made in accordance with regulations prescribed by the Board of Directors of the Corporation. Reason

Examiners of the Corporation regularly examine only insured State banks which are not members of the Federal Reserve System and may make a special examination of any State member bank, national bank or district bank, only when in the judgment of the Board of Directors such special examination is necessary to determine the condition of any such bank for insurance purposes.

Examiners of the Corporation are now prohibited from borrowing from any insured bank, because of their authority to examine any insured bank. As a result they are denied reasonable bank credit facilities and must obtain funds for their needs elsewhere at higher rates. Other State and Federal examiners do not have authority to examine all insured banks and may borrow from banks which are not within their jurisdiction. With the proposed amendment, examiners of the Corpoartion would be able to obtain reasonable bank credit facilities. The Corporation by regulation could require notice of any borrowings by its examiners from national, district and State member banks. In the event of a special examination of such a bank, this information would enable the assignment of examiners who are not borrowers of the bank.