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Mr. Jonas. That is quite obvious, if the plan does what the proponents say it will do, provide more protection by closer supervision. I don't say that. I say that is what the proponents say.

Mr. FASCELL. I understand.

By the way, I have been corrected. It is not a contingent liability, is it?

Mr. Jonas. What is not a contingent liability ?
Mr. FASCELL. The obligation of the Government.
Mr. Jonas. I hope it is not direct.
Mr. FASCELL. It is a reimbursable loan, is it not?
Somebody square me out on that.
In other words, the Corporation has the right to borrow the money?

Mr. BRUNDAGE. But this is a liability for the insurance, $31 billion. It is a contingent liability.

Mr. BROWN. It is only $31 billion, as I understand it. Mr. Pincus. Mr. Brundage, in connection with section 4 (c) of the plan

Mr. Jonas. May I say this before you go to that? If there is not any Government liability, I think a lot of people around the country are misled.

Mr. HOLIFIELD. It is a Government liability.
Mr. Jonas. That is what I thought.

Mr. HOLIFIELD. Up to $750 million, and undoubtedly if a crash came the Congress would enlarge that for the benefit of the people. There is no doubt about that.

Mr. FASCELL. But there is no liability now of $31 billion as has been stated around here?

Mr. BRUNDAGE. There is a contingent liability because that is the amount of the insurance.

Mr. FASCELL. Contingent liability to whom?

Mr. BRUNDAGE. To the depositors of the Savings and Loan Associations.

Mr. FASCELL. It is not to the Government?

Mr. BRUNDAGE. It is the Government's liability to them. I would not mind if they owed us some money. It would not matter a bit.

Chairman DAWSON. Mr. Pincus. Mr. Pincus. Mr. Brundage, referring to section 4 (c) of the plan, what does the plan mean by the words "such measures" and then also the word “dispositions,” particularly what about the word “measures”?

Mr. BRUNDAGE. I presume that was put in by a lawyer to be sure that we covered everything. I do not know what it means.

Mr. FINAN. That is about right. That is to take care of any minor administrative details or loose ends that might be necessary to bring about a tidy separation of these two agencies.

Mr. Pincus. It could be minor or major. We do not know. Do we?

Mr. FINAN. Well, it is minor in the sense that I described it earlier, Mr. Pincus, in that it does not include discretion in the transfer of functions. This is a standard, as I said before, provision that appears in reorganization plans when you are separating functions or agencies.

Mr. PINCUs. I am questioning that because section 4 of the Reorganization Act specifically enumerates those things which can be in the plan outside of the reorganization itself and it is entitled "Other Contents of Plans.” As I read it, there is no provision in section 4 of that plan that authorizes any such broad language as such further measures as the Director of the Budget shall determine to be necessary in order to effectuate the transfer.

That reads to me more like a piece of legislation that the Congress has enacted or is considering enacting. If you refer to section 4 of the Reorganization Act of 1949, you will find five types of items that may be included as “Other Contents," and I don't find such other measures, any blanket authority of that sort included, nor do I find the blanket use of the word “dispositions” in subsection 3 of section 4 of the Reorganization Act.

I find provision to make disposition of the records, property, and personnel, but no authority to use what looks like a legislative section, such further measures and dispositions without any reference or restriction.

Mr. FINAN. Are you raising this as a question of legal defect or too broad authority from a legal point of view?

Mr. Pincus. We are raising the question as to whether there is any authority to write into a reorganization plan a broad, unlimited, and unrestricted authority to take further measures and dispositions which seems to be more analogous to a legislative provision than a bill enacted by the Congress.

Mr. Finan. Our answer to that can only be that this plan was approved as to form and legality by the Attorney General, and that this type of provision has been standard in reorganization plans of this character for many years and has not been challenged either within the executive, or to my knowledge, the legislative branch.

Mr. Pincus. Can we get the same type of memorandum from the Justice Department on this particular section?

Mr. Finan. I think we can supply that to you without any difficulty.

Mr. Pincus. I have one other question.

Referring again to the creation of this board of trustees, and this is a legal question, too, that I think we might want a ruling from Justice on another matter. I read the Reorganization Act, again section 4, under "Other Contents," and I think Mr. Brundage referred to it in his statement, "may include provisions for the appointment and compensation of the head

and one or more other officers of any agency," and so forth, “if the President finds that by reason of a reorganization made by the plan such provisions are necessary."

Now, as I read that, it does not say you can set up a new position in order to make a reorganization. It says you can set up new positions if they are necessary by reason of a reorganization made by the plan.

Now, as I read this plan, there is no one to transfer any functions to until you have set up these trustees, and that is exactly what the plan proceeds to do.

You establish a board of trustees, new positions, and then you transfer the functions to those trustees.

I have a question as to whether you have not inverted the purpose of the reorganization.

Mr. FINAN. The establishment of the trustees, as a legal interpretation of the Reorganization Act, you would like that covered in the memorandum?

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Mr. PINOUS. Yes. That is all I have. Mr. FASCELL. I have a couple more questions, Mr. Chairman. Chairman Dawson. Yes, Mr. Fascell. Mr. FASCELL. Mr. Brundage, did the reorganization plan originate with the Home Loan Bank Board ?


Mr. FASCELL. Was the Federal Savings and Loan Advisory Council consulted with respect to the submission of the plan?

Mr. BRUNDAGE. I do not know. I did not consult them.

Mr. FASCELL. Was any other agency or department of Govrenment consulted ?

Mr. BRUNDAGE. Yes. Several committees. The President's Advisory Committee on Government Organization, Mr. Kestnbaum, special adviser to the President, and a number of other agencies.

That was handled by you, Mr. Finan.

Mr. FASCELL. Were any of the industry organizations contacted at all?

Mr. FINAN. As you know, this is a matter involving a Presidential decision. How the President arrives at his decisions and how he seeks his advice is something for the President to determine.

I think, however, to answer that last question directly, by now I think it is common knowledge that the industry was not consulted in connection with the preparation of this plan.

Mr. FASCELL. That is all.

Chairman Dawson. I thank you very much, Mr. Brundage, for your appearance before us today.

Mr. BRUNDAGE. Thank you.
Mr. FASCELL. I have one other question that just occurred to me.

In hearings before this subcommittee on the lending agencies report in 1955, Oakley Hunter was testifying, and he said then that the entire problem, talking about the recommendation No. 4 of the Hoover Commission, is under consideration at the present time within the executive branch, and any recommendation he might make on it at the present time would be premature. July 6, 1955, those hearings were held. Correction: that statement was made in a hearing Tuesday, June 21, 1955.

Then on cross-examination by my colleague, Mr. Brown, he makes a statement on page 108, “I think so," talking about the reorganization plan which would separate these two functions.

Partially based on this studymeaning the Hoover Commission studyand the recommendation which was submitted to the administration almost a year ago. That would be sometime in 1954. Now, the plan was submitted on May 17, 1956, and it will go

into effect on July 16, 1956, at 12:01 a. m. unless House Resolution 541 or some other such thing is approved.

And the statement was made in the message, and you have concurred in it, and the time has come to separate the two agencies.

Now, I would just like to know from 1954 to now, what has occurred on May 17, 1956, or 30 days thereto, or 60 days thereto, or 90 days thereto, or however long it took to draft up this plan and get the Bureau of

the Budget clearance and submission to the Congress, that made it necessary to submit it now and not back in 1955 or 1954?

Mr. BRUNDAGE. I do not know what happened in 1954, but I know that we did not get the report from the Attorney General until just shortly before this came up here.

Chairman Dawson. Did you ask for it previously?

Mr. Finan. I just do not know what Mr. Hunter was referring to there.

Mr. Pincus. Excuse me, what report of the Attorney General are you speaking of?

Mr. BRUNDAGE. The approval of the plan.

Mr. Pincus. When was the plan written? That is what Mr. Fascell's question was.

Mr. BRUNDAGE. I do not know. We have been talking about it for about a year. But I do not recall anything before last summer, though. Mr. Pincus. When was it sent to the Attorney General, a year ago?

Mr. BRUNDAGE. No, it was under discussion, it was under analysis, as were all of the Hoover Commission recommendations. It was reviewed by the Government Organization Committee, and Mr. Kesstnbaum.

Mr. PINCUS. You have no knowledge of when the plan was sent to the Attorney General ?

Mr. BRUNDAGE. I do not recall when.

Mr. FINAN. I do not recall the exact date but it was much more recent than last year. It was April 1956.

Mr. FASCELL. Mr. Chairman, I think in all fairness, so we can get the whole import of that statement, I would like to read the whole statement-it is very short—by Mr. Hunter, who was the General Counsel of the Housing and Home Finance Agency at the time the hearings were held by this subcommittee on the lending agencies report of the Hoover Commission, which had been submitted to the Congress in March of 1955, and this hearing took place on June 21, 1955, and he said—this is Mr. Hunter speaking: Recommendation No. 4 He is testifying on all of the recommendations.

The Commission has also recommended that the managerial body of the Federal Savings and Loan Insurance Corporation should be separate and distinct from the Home Loan Bank Board which, as the committee knows, also supervises the operations of the 11 regional home loan banks and charters and otherwise regulated the system of Federal savings and loan associations.

As to the matter of the economy stemming from the use of common administrative services and the like, it is undoubtedly true that the organizational arrangement which has prevailed since establishment of the insurance corporation in 1934, namely identity of the two managerial bodies, has been less costly than would have been the case if each organization had maintained separate staffs and facilities.

However, the possibility of a conflict of interest between the authority providing insurance of accounts and savings and loan associations, on the one hand, and the body charged with chartering and regulating savings and loan associations, on the other, has been noted over a period of years, particularly by the General Accounting Office.

A number of the reports on audit made by the General Accounting Office have contained recommendations and comments on this particular problem. This entire problem is under consideration at the present time within the executive branch and any recommendation I might make on it at the present time would be premature.


Mr. BRUNDAGE. What was the date of that, did you say?
Mr. FASCELL. June 21, 1955.

Mr. FINAN. I think it is very safe to assume that Mr. Oakley Hunter was referring to the fact that the executive branch had all of the Hoover Commission recommendations under the most intensive review at that time, and this recommendation would have been one of them.

I do not know what he could have had more specifically in mind at that point, however, or whether he had anything more specific in mind at that time.

Mr. Jonas. I do not get the point of the gentleman from Florida.

Mr. FASCELL. The point is, I am trying to trace the history of the study of this reorganization plan.

Mr. Jonas. Is that so important? Is it not the merit of the plan or the demerit of the plan that is important, the fact that the executive department has been studying it for a year? I do not think that is pertinent.

You have a contrary opinion and you have a right to it.

Mr. FASCELL. I do not know that I have a contrary opinion. I am just inquiring as to what

Mr. Jonas. I was just anxious to get over to the House.

Mr. FASCELL. Well, I am, too, and I was just asking the question why the statement was made in the message that the time has now come.

What has transpired now that hasn't transpired before.
Mr. Jonas. He has completed the study.
Mr. BRUNDAGE. It went up another $5 billion.

Chairman Dawson. Thank you very much, Mr. Brundage, for your testimony.

Now, we have quite a few witnesses to be heard from, some of them from out of town. We have on the floor today a matter concerning the veterans of this country that is going to cause the congressmen to be running back and forth.

The question in my mind is whether to attempt to continue the hearings or whether to adjourn until tomorrow morning and go on with them.

Now, for those out of town, what is your situation, can you be with us tomorrow morning?

Mr. SLIFER (of the United States Savings and Loan League). Mr. chairman, there are hearings on the resolutions in the Senate tomorrow.

Chairman DAWSON. You are organized, are you not? Can we not shuttle between them? We will be interrupted by rollcalls, I am quite sure, and it may be very difficult to continue the hearings through the afternoon.

Mr. HOLIFIELD. Mr. Chairman, a gentleman from the GAO said they are obligated to appear before the Senate committee in the morning. I do not know what your schedule of witnesses is but there is that problem.

Mr. FASCELL. May we have the GAO today, Mr. Chairman? I do not know how long their statement is.

Chairman Dawson. Under those circumstances, I will hear the GAO, provided that a member of the minority stays with us to question him.


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