proposed to be included in more appropriate place and form in proposed amendments to subsection (c) of section 402 herein below. 154. CAPITAL STOCK OF INSURANCE CORPORATION Existing law Subsection (b) of section 402 of the National Housing Act, as amended: "(b) The Corporation shall have a capital stock of $100,000,000, which shall be divided into shares of $100 each. The total amount of such capital stock shall be subscribed for by the Home Owners' Loan Corporation which is hereby authorized and directed to subscribe for such stock and make payment therefor in bonds of the Home Owners' Loan Corporation. The Corporation shall issue to the Home Owners' Loan Corporation receipts for payment for or on account of such stock, which shall serve as evidence of the ownership thereof, and the Home Owners' Loan Corporation shall be entitled to the payment of dividends on such stock out of net earnings at a rate equal to the interest rate on such bonds, which dividends shall be cumulative." Recommendation Repeal the last two sentences of subsection (b). Reason To repeal obsolete provisions relating to the original subscription to and issuance of the capital stock of the Federal Savings and Loan Insurance Corporation. Existing law 155. POWERS OF INSURANCE CORPORATION Subsection (c) of section 402 of the National Housing Act, as amended: "(c) Upon the date of enactment of this Act, the Corporation shall become a body corporate, and shall be an instrumentality of the United States, and as such shall have power "(1) To adopt and use a corporate seal. "(2) To have succession until dissolved by Act of Congress. "(3) To make contracts. "(4) To sue and be sued, complain and defend, in any court of competent jurisdiction in the United States or its Territories or possessions or the Commonwealth of Puerto Rico, and may be served by serving a copy of process on any of its agents or any agent of the Home Loan Bank Board and mailing a copy of such process by registered mail to the Corporation at Washington, District of Columbia. "(5) To appoint and to fix the compensation, by its board of trustees, of such officers, employees, attorneys, or agents, as shall be necessary for the performance of its duties under this title, without regard to the provisions of any other laws relating to the employment or compensation of officers or employees of the United States. Nothing in this title or any other provision of law shall be construed to prevent the appointment and compensation as an officer, attorney, or employee of the Corporation, of any officer, attorney, or employee of any board, corporation, commission, establishment, executive department, or in strumentality of the Government. The Corporation, with the consent of any board, corporation, commission, establishment, executive department, or instrumentality of the Government, including any field services thereof, may avail itself of the use of information, service, and facilities thereof in carrying out the provisions of this title. The Corporation shall be entitled to the free use of the United States mails for its official business in the same manner as the executive departments of the Government, and shall determine its necessary expenditures under this Act and the manner in which the same shall be incurred, allowed, and paid, without regard to the provisions of any other law governing the expenditure of public funds. All necessary expenses in connection with the making of supervisory or other examinations (except examinations of Federal home loan banks), including the provision of services and facilities therefor, shall be considered as nonadministrative expenses." Recommendations (1) Amend subdivision (3) of subsection (c) by adding thereto at the end thereof, immediately before the period, a comma and the language "and to settle, compromise, or release claims by or against the Corporation". (2) Amend subdivision (4) of subsection (c) to read as follows: "(4) To sue and be sued, complain and defend, in any court of competent jurisdiction. Notwithstanding section 1349 of title 28 of the United States Code or any other provision of law, the Corporation (a) shall be deemed to be an agency included in sections 1345 and 1442 of said title, and (b) may remove actions and prosecutions under subsection (a) of said section 1442, or separate and independent claims or causes of action under subsection (c) of section 1441 of said title, without regard to any restriction or requirement imposed by said subsections. No attachment or execution shall be issued against the Corporation or its property before final judgment in any court of any State or of the United States or any District, Territory, or possession thereof, or any other court. The Corporation may be served by serving a copy of process on any of its agents or any agent of the Board and mailing a copy of such process by registered mail to the Corporation at Washington, District of Columbia." (3) Amend subsection (c) of section 402 by adding thereto at the end thereof the following new subdivisions: "(6) To adopt and amend bylaws and to adopt, amend, and require the observance of such rules, regulations, and orders as may from time to time be deemed necessary for carrying out the provisions or purposes of this title or for the protection of its insurance risk. "(7) To require information and reports from insured institutions." Reasons (1) It appears advisable that the Corporation, as an insurer and in the administration of its affairs, have express authority to settle, compromise, or release claims. (2) It is considered highly advisable that the Federal Savings and Loan Insurance Corporation, as a Federal agency, have clear power to bring suit in the Federal courts and to remove to the Federal courts judicial proceedings brought against them, or separable controversies in judicial proceedings involving them, which may be instituted in State courts. Such power would be conferred by the first full sentence of the proposed revision and is similar to the power of Federal Reserve banks under section 632 of title 12 of the United States Code. The provisions of the second full sentence are similar to provisions with respect to the Federal Reserve banks which are contained in said section 632 and provisions with respect to the Federal Deposit Insurance Corporation which are contained in section 1819 of title 12 of the United States Code. (3) These amendments are proposed in order to (1) make clear that the Federal Savings and Loan Insurance Corporation has authority to make and enforce substantive rules and regulations to carry out the purposes or provisions of title IV of the National Housing Act and (2) make clear that the Corporation has authority to require insured institutions to submit information and reports. 156. PROTECTION OF INSURANCE CORPORATION'S SIGNS, DEVICES, AND Existing law Recommendation INSIGNIA Amend section 402 of the National Housing Act, as amended, by adding thereto, immediately after subsection (e), the following new subsection: "(f) No individual, association, partnership, or corporation shall use or display (1) any sign, device, or insigne prescribed or approved by the Corporation for use or display by insured institutions, (2) any copy, reproduction or colorable imitation of any such sign, device, or insigne, or (3) any sign, device, or insigne reasonably calculated to convey the impression that it is a sign, device, or insigne used by insured institutions, contrary to regulations of the Corporation prohibiting, or limiting or restricting, such use or display by such individual, association, partnership, or corporation. Every individual, partnership, association, or corporation violating this subsection shal be punished by a fine of not exceeding $5,000, or by imprisonment not exceeding one year, or both." Reason There has been some misuse of the devices approved by the Insurance Corporation for use of insured members, and it is considered advisable that the Corporation be authorized to prohibit, under criminal penalties, misuse of this type. Existing law 157. CRIMINAL ACTS RELATING TO INSURANCE Subsection (g) of section 402 of the National Housing Act, as amended: "(g) No individual, association, partnership, or corporation shall use the words 'Federal Savings and Loan Insurance Corporation', or any combination of any of these words which would have the effect of leading the public in general to believe there was any connection, actually not existing, between such individual, association, partnership, or corporation and the Federal Savings and Loan Insurance Corpora No tion, as the name under which he or it shall hereafter do business. individual, association, partnership, or corporation shall advertise or otherwise represent falsely by any device whatsoever that his or its accounts are insured or in anywise guaranteed by the Federal Savings and Loan Insurance Corporation, or by the Government of the United States, or by any instrumentality thereof; and no insured member shall advertise or otherwise represent falsely by any device whatsoever the extent to which or the manner in which its accounts are insured by the Federal Savings and Loan Insurance Corporation. Every individual, partnership, association, or corporation violating this subsection shall be punished by a fine of not exceeding $1,000, or by imprisonment not exceeding one year, or both. Recommendation Amend subsection (g) as follows: (1) By striking in the second sentence the word "member" and inserting in lieu thereof the word "institution", and (2) by striking in the last sentence the figure "$1,000" and inserting in lieu thereof the figure "$5,000". Reasons Amendment (1) would correct a technical error in the language of the sentence which would be amended. Amendment (2) is proposed for the reason that it is believed that the $1,000 penalty in this provision is rather low in view of the possible serious consequences of the acts which are prohibited by the provisions in question. Existing law 158. REGULATION OF INSURED INSTITUTIONS Subsection (b) of section 403 of the National Housing Act, as amended: "(b) Application for such insurance shall be made immediately by each Federal savings and loan association, and may be made at any time by other eligible institutions. Such applications shall be in such form as the Corporation shall prescribe, and shall contain an agreement (1) to pay the reasonable cost of such examinations as the Corporation shall deem necessary in connection with such insurance, and (2) if the insurance is granted, to permit and pay the cost of such examinations as in the judgment of the Corporation may from time to time be necessary for its protection and the protection of other insured institutions, to permit the Corporation to have access to any information or report with respect to any examination made by any public regulatory authority and to furnish any additional information with respect thereto as the Corporation may require, and to pay the premium charges for insurance as hereinafter provided. Each applicant for such insurance shall also file with its application an agreement that during the period that the insurance is in force it will not make any loans beyond fifty miles from its principal office except with the approval of, and pursuant to regulations of, the Corporation, but any applicant which, prior to the date of enactment of this Act, has been permitted to make loans beyond such fifty mile limit may continue to make loans within the territory in which the applicant is operating on such date; will not, after it becomes an insured institution, issue securities which guarantee a definite return or which have a definite maturity except with the specific approval of the Corporation, or issue any securities the form of which has not been approved by the Corporation; will not carry on any sales plan or practices, or any advertising, in violation of regulations to be made by the Corporation; will provide adequate reserves satisfactory to the Corporation, to be established in accordance with regulations made by the Corporation, before paying dividends to its insured members; but such regulations shall require the building up of reserves to 5 per centum of all insured accounts within a reasonable period, not exceeding twenty years, and shall prohibit the payment of dividends from such reserves, or the payment of any dividends if any losses are chargeable to such reserves: Provided, That for any year dividends may be declared and paid when losses are chargeable to such reserves if the declaration of such dividends in such case is approved by the Corporation." Recommendation Amend subsection (b) of section 403 as follows: (1) by adding a provision that the Board may establish conditions subject to which it will approve mergers or consolidations of, or the purchase or sale of assets by, insured institutions; (2) by adding a provision that the Corporation shall have power to regulate retirement, pension, and deferred-compensation contracts and arrangements of insured institutions; and (3) by adding to said subsection, at the end thereof, a new sentence along the following line: "The Corporation shall have power, by regulation, to define and limit the losses which may be charged to such reserves." Reasons Amendment (1) would supply a measure of needed regulatory authority which the Insurance Corporation does not at present clearly have. Amendment (2) would expressly authorize the Corporation to regulate on a matter with respect to which there has been a tendency toward abuse on the part of the managements of a few savings and loan institutions. Amendment (3) would enable the Corporation to take proper measures to protect the reserves which are required of insured institutions under subsection (b) of section 403; it is believed to be obvious that the making of allocations toward the building up of reserves may be defeated in a very simple manner if the reserves themselves are concurrently subjected to improper or unwarranted charges. 159. APPLICATIONS FOR INSURANCE Existing law Subsection (c) of section 403 of the National Housing Act, as amended. "(c) The Corporation shall reject the application of any applicant if it finds that the capital of the applicant is impaired or that its financial policies or management are unsafe; and the Corporation may reject the application of any applicant if it finds that the character of the management of the applicant or its home financing policy is inconsistent with economical home financing or with the purposes of this title. Upon the approval of any application for insurance the Corporation shall notify the applicant, and upon the payment of the initial premium charge for such insurance, as provided in section 404, the Corporation shall issue to the applicant a certificate stating that |