it has become an insured institution. In considering applications for such insurance the Corporation shall give full consideration to all factors in connection with the financial condition of applicants and insured institutions, and shall have power to make such adjustments in their financial statements as the Corporation finds to be necessary." Recommendation Amend subsection (c) as follows: (1) By inserting immediately after the language "the management of the applicant" a comma and the language "the character or nature of its facilities for serving the public, (2) by inserting immediately after the language "inconsistent with" the language "sound and"; (3) by inserting immediately after the language "economical home financing" a comma and the language "with the rendering of proper services to the public, or"; and (4) by amending the last sentence to read as follows: "In considering applications for such insurance the Corporation shall give full consideration to all factors in connection with the financial condition and policies of applicants, the need for additional insured institutions in the community, and the effect of the granting of insurance upon existing insured institutions in the community, and shall have power to impose such conditions to insurance, which conditions may be conditions precedent or conditions subsequent, as it may deem necessary or advisable in the public interest or for the protection of investors. Any such conditions heretofore imposed are hereby validated." Reasons These amendments relate to the grounds of discretionary rejection of applications for insurance. Amendment (1) would expressly authorize rejection if the character or nature of the applicant's facilities for serving the public were of the nature set forth in the subsection. Amendment (2) would broaden the category of grounds for rejection by expressly authorizing rejection if the applicant's management or its home financing policy (or, if amendment (1) were adopted, its facilities for serving the public) were inconsistent with "sound and" economical home financing (the quoted language would be added by this amendment). Amendment (3) would expressly authorize rejection if the applicant's management or its home financing policy (or, if amendment (1) were adopted, its facilities for serving the public) were inconsistent with the rendering of proper services to the public. It is believed that this broadening of the categories for rejection would assist the Corporation in making proper disposition of applications for insurance. Amendment (4) would (a) expressly authorize the consideration of the financial policies of applicants for insurance, (b) expressly authorize the consideration of the question of need and of the effect upon existing insured institutions, and (c) expressly authorize the imposition of conditions to insurance and validate conditions heretofore imposed. Existing law 160. PREMIUM ADJUSTMENTS No comparable provision contained in existing law. Recommendation Amend subsection (a) of section 404 by adding thereto at the end thereof the following new sentence: "The Corporation may by regu lations provide for premium adjustments in the case of merger or consolidation involving an insured institution or insured institutions liquidation or dissolution of an insured institution, or purchase of assets by or from an insured institution." Reason Where an insured institution merges into another insured institution, the merging institution may have only recently made payment on its insurance premium, and the premium year of the surviving institution may shortly begin, so that there is, in part, a double payment of premium. Similar maladjustments may occur in the other types of case referred to in the proposed amendment. If the amendment were adopted, the Corporation would have express statutory authority to make such adjustments as would prevent injustices or undue burdens, and it is therefore believed that the amendment should be enacted. Existing law 161. EXCESS PREMIUMS PREVIOUSLY PAID Subsection (c) of section 404 of the National Housing Act, as amended: "(c) If an insured institution has paid a premium (other than any premium which may be assessed under subsection (b) of this section) at a rate in excess of one-twelfth of 1 per centum of the total amount of the accounts of its insured members and its creditor obligations for any period of time after June 30, 1949, it shall receive a credit upon its future premiums in an amount equal to the excess premium so paid for the period beyond such date." Recommendation Repeal subsection (e) with a saving clause as follows: "Provided, That such repeal of said subsection shall not affect any right existing on the effective date of such repeal." Reason This amendment would repeal, with a saving clause, the provision (enacted in 1950 as a part of the reduction in the premium rate of the Federal Savings and Loan Insurance Corporation to one-twelfth of 1 percent) that if an insured institution has paid a premium (other than additional premiums under subsection (b)) at a rate in excess of one-twelfth of 1 percent after June 30, 1949, it shall receive a credit on future premiums for the excess. It would appear that such repeal, with a saving clause as aforesaid, would be advisable in order to remove from the act matter not currently helpful. Existing, law 162. LIQUIDATION OF INSURED INSTITUTIONS Section 406 of the National Housing Act, as amended: "(a) In order to facilitate the liquidation of insured institutions, the Corporation is authorized (1) to contract with any insured institution with respect to the making available of insured accounts to the insured members of any insured institution in default, or (2) to provide for the organization of a new Federal savings and loan associa tion for such purpose subject to the approval of the Federal Home Loan Bank Board. "(b) In the event that a Federal savings and loan association is in default, the Corporation shall be appointed as conservator or receiver and is authorized as such (1) to take over the assets of and operate such association, (2) to take such action as may be necessary to put it in a sound and solvent condition, (3) to merge it with another insured institution, (4) to organize a new Federal savings and loan association to take over its assets, or (5) to proceed to liquidate its assets in an orderly manner, whichever shall appear to be to the best interests of the insured members of the association in default; and in any event the Corporation shall pay the insurance as provided in section 405 and all valid credit obligations of such association. The surrender and transfer to the Corporation of an insured account in any such association which is in default shall subrogate the Corporation with respect to such insured account, but shall not affect any right which the insured member may have in the uninsured portion of his account or any right which he may have to participate in the distribution of the net proceeds remaining from the disposition of the assets of such association. "(c) In the event any insured institution other than a Federal savings and loan association is in default, the Corporation shall have authority to act as conservator, receiver, or other legal custodian of such insured institution, and the services of the Corporation are hereby tendered to the court or other public authority having the power of appointment. If the Corporation is so appointed, it shall have the same powers and duties with respect to the insured institution in default as are conferred upon it under subsection (b) with respect to Federal savings and loan associations. If the Corporation is not so appointed it shall pay the insurance as provided in section 405, and shall have power (1) to bid for the assets of the insured institution in default, (2) to negotiate for the merger of the insured institution or the transfer of its assets, or (3) to make any other disposition of the matter as it may deem in the best interests of all concerned. "(d) In connection with the liquidation of insured institutions in default, the Corporation shall have power to carry on the business of and to collect all obligations to the insured institutions, to settle, compromise, or release claims in favor of or against the insured institutions, and to do all other things that may be necessary in connection therewith, subject only to the regulation of the court or other public authority having jurisdiction over the matter. "(e) The Corporation shall make an annual report to the Congress of the operation by it of insured institutions in default, and shall keep a complete record of the administration by it of the assets of such insured institutions which shall be subject to inspection by any officer of any such insured institution or by any other interested party, and, if any such insured institution is operated under the laws of any State, Territory, or possession of the United States, or of the District of Columbia, such annual report shall also be filed with the public authority which has jurisdiction over the insured institution. "(f) In order to prevent a default in an insured institution or in order to restore an insured institution in default to normal operation as an insured institution, the Corporation is authorized, in its discre 83668-56- -14 tion, to make loans to, purchase the assets of, or make a contribution to, an insured institution or an insured institution in default; but no contribution shall be made to any such institution in an amount in excess of that which the Corporation finds to be reasonably necessary to save the expense of liquidating such institution." Recommendations (1) Amend subsection (b) as follows: (a) by striking in the first sentence the language "conservator or"; (b) by striking in the first sentence the language "and all valid credit obligations of such association"; and (c) by adding thereto at the end thereof the following new sentence: "In the event of such appoinment the Corporation shall have power to purchase at public or private sale the assets or any part thereof of such association." (2) Amend subsection (c) as follows: (a) by deleting all of the first sentence following the language "of such insured institution" and before the period, and inserting in lieu thereof the language "or as joint conservator, receiver, or other legal custodian, and to accept an appointment in any of said capacities from the court or other public authority having the power of appointment"; (b) by deleting in the second sentence the language "shall have" and inserting in lieu thereof the language "shall pay the insurance as provided in section 405 and shall, so far as not inconsistent with its powers and duties under such appointment, have"; (c) by striking in the last sentence the language "(1) to bid for the assets of the insured institution in default, (2) to negotiate for the merger of the insured institution or the transfer of its assets, or (3)" and inserting in lieu thereof the language "(1) to negotiate for the merger of the insured institution or the transfer of its assets, or (2)"; and (d) by adding to said subsection, at the end thereof, the following new sentence: "Whether or not the Corporation is so appointed, the Corporation shall have power to purchase at public or private sale the assets or any part thereof of such institution." (3) Amend subsection (d) by striking the language "the liquidation of". (4) Amend subsection (e) of section 406 by striking the language "State, Territory, or possession of the United States, or of the District of Columbia" and inserting in lieu thereof the language "State, District, Territory, or possession". (5) Amend subsection (f) as follows: (a) by inserting after the language "prevent a default" the language "or impairment"; (b) by inserting after the word "restore" the language "an impairment in an insured institution or to restore"; and (c) by striking the language "to save the expense of liquidating such institution" and inserting in lieu thereof the word "therefor". Reasons Amendment (a) is suggested because the general objective of a conservatorship is to preserve assets rather than to liquidate the institution. Amendment (b) would strike a provision which is not an appropriate provision in view of the fact that payment of credit obligations would not always be necessary (as in the case of a successful effort to merge) and because the provision might possibly be contended to mean that the Corporation should pay such credit obligations out of its own funds as distinguished from paying them out of the funds of the institution in default. Amendment (c) would make clear that the Insurance Corporation may protect its interests where assets migh otherwise be sold at a sacrifice. (2) Amendments (a) and (b) would clarify the authority of the Insurance Corporation to serve as joint (as distinguished from sole) legal custodian in cases not involving Federal savings and loan associations and would make clear the Corporation's rights and duties if appointed as sole or joint custodian. Amendments (c) and (d) would make a companion clarification to that above proposed to be made as to Federal associations. (3) The powers set forth in subsection (d) are equally needed whether the handling of the insured institution in default actually proceeds to liquidation or is accomplished through merger or other measures not involving liquidation. (4) This is a needed conforming amendment to make the language here appearing consisting with that used elsewhere in title IV. (5) Amendments (a) and (b) are intended to cover cases in which a contribution or purchase of assets by the Federal Savings and Loan Insurance Corporation might be needed not necessarily to prevent a "default" in the sense of the appointment of a legal custodian for purposes of liquidation but in order to prevent a writedown of accounts to cure an impairment, or to prevent other consequences if impairment. Amendment (c) would relieve the present restriction by which a contribution may not be made in excess of that which the Insurance Corporation finds to be necessary to save the expense of liquidating such institution, which has been found to be unduly narrow. Existing law 163. TERMINATION OF INSURED STATUS Section 407 of the National Housing Act, as amended: "Any insured institution other than a Federal savings and loan association may terminate its status as an insured institution by written notice to the Corporation. Whenever in the opinion of the Home Loan Bank Board any insured institution has violated its duty as such or has continued unsafe or unsound practices in conducting the business of such institution, or has knowingly or negligently permitted any of its officers or agents to violate any provision of any law or regulation to which the insured institution is subject, said Board shall first give to the authority having supervision of the institution, if any, a statement with respect to such practices or violations for the purpose of securing the correction thereof and shall give a copy thereof to the institution. In the case of an institution of a State where there is no supervisory authority the statement shall be sent directly to the instiution. Unless such correction shall be made within one hundred and twenty days or such shorter period of time as the supervisory authority, if any, shall require, the Home Loan Bank Board, if it shall determine to proceed further, shall give to the institution not less than thirty days' written notice of intention to terminate the status of the institution as an insured institution, and shall fix a time and place for a hearing before the Home Loan Bank Board, a member thereof, or a person designated by the Board. The Home Loan Bank Board shall make written findings. Unless the institution shall appear at the hearing by |