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I would like to leave my statement for a minute to answer a question or two in Mr. Brundage's testimony this morning, and I say this in all kindness, because I certainly feel he was on the spot trying to defend what I think is a bad piece of legislation. His testimony was based on the fact that everything in the past has worked very well, but because the savings and loan associations have been so successful and have grown $30 billion in the last 10 years we better change signals. Yet in all of the testimony I have heard today I have not heard anyone criticize the operation of the Insurance Corporation by the present Federal Home Loan Bank Board, which I, as a member of the industry, think has done an excellent job.

Mr. Brundage also mentioned the reserves of the Insurance Corporation.

Now, I just want to point out there is nothing in Reorganization Plan No. 2 concerning reserves. Congress sets the insurance premium that determines the amount the Insurance Corporation will have left over for reserves. We shouldn't confuse the issue as it has no relevancy to Reorganization Plan No. 2.

Now, if I may jump to page 4, I realize that much of this has already been said, but I just want to emphasize a few lines here once again.

1. The division of the Government agency into two separate and equal agencies will result in confusion, duplication, and conflict in the relations of the Federal Government with the savings and loan business. We believe that our member associations would be confronted with conflicting regulations and directions and the frustrations of attempting to determine which agency to follow. Where one report now suffices, two would be necessary under the plan, probably in a different form and with different instructions. In short, redtape and agency buckpassing would result under the plan.

Under the plan everyone concedes the savings and loan institutions would have substantially increased operating expenses which we do not believe to be necessary.

Mr. Brown. Mr. Chairman, while we are taking this testimony in pieces, in order to save time I believe that Mr. Bubb's statement is so well prepared that we ought to have the entire text of it in the record somewhere, even though

Chairman Dawson. It can be introduced in its entirety. Mr. BUBB. I will file a copy of it for the record. Mr. BROWN. I think it should be printed in the record as well as what you say here.

(The complete text of Mr. Bubb's statement is as follows:)

I am Henry A. Bubb of Topeka, Kans., and I appear here today as chairman of the Legislative Committee of the United States Savings and Loan League. I am also president of the Capitol Federal Savings & Loan Association of Topeka and a past president of the league.

I have with me today, Mr. Horace Russell of Chicago, general counsel of the league, and Mr. Stephen Slipher, manager of the league's Washington office. Mr. Russell will present a part of the league's testimony. Also in the room are a number of other officers and members of the United States Savings and Loan League; their presence here today is indicative of the interest in this question.

To identify our organization let me say that the United States Savings and Loan League, founded in 1892, has in its membership 4,300 savings and loan associations, building and loan associations and cooperative banks, representing approximately 90 percent of the Nation's savings and loan assets. These member institutions are both federally chartered and State chartered and are located in every State of the Union.

The United States Savings and Loan League supports House Resolution 541 by Representative Fascell and is opposed to Reorganization Plan No. 2. Seldom have our people been so disturbed by any legislative proposal. From all over the country we have protests to Reorganization Plan No. 2 and petitions to do everything within our power to see that the plan does not go into effect. I might cite just a few of the organizations which have already officially stated their opposition to the plan: The Federal Savings and Loan Advisory Council, Arkansas Savings and Loan League, California Savings and Loan League, Savings and Loan League of Connecticut, Kansas Savings and Loan League, Kentucky Savings and Loan League, Missouri Savings and Loan League, Nebraska League of Savings and Loan Associations, Metropolitan League of Savings Associations of New York City, North Carolina Savings and Loan League, Oklahoma Savings and Loan League, Oregon Savings and Loan League, the Board of Directors of the Federal Home Loan Bank of Greensboro, and the Pacific Northwest Conference of Savings and Loan Associations which includes the States of Montana, Washington, Oregon, Idaho, and Utah. This list is growing daily.

It is abundantly clear that the savings and loan business is opposed to Reorganization Plan No. 2 and that the plan was not proposed in response to any suggestion or request from the industry. Indeed, there was no consultation with the industry prior to the submission of the plan to Congress.

Under the present organizational structure of the Federal Home Loan Bank Board the Board has jurisdiction over the Federal savings and loan system, the Federal Home Loan Bank System, and the Federal Savings and Loan Insurance Corporation. The Federal Home Loan Bank System consists of 11 regional Federal home-loan banks which serve as a reserve system for 4,300 savings and loan associations; the Federal Savings and Loan Insurance Corporation insures up to $10,000 the accounts of savers in insured savings and loan associations; and the Federal savings and loan system consists of some 1,700 associations which are chartered and supervised under Federal laws. This present organizational structure has existed since these agencies were created in the early 1930's and the record of the savings and loan business is persuasive testimony as to the effectiveness of the Federal agencies under the present organizational structure.

Reorganization Plan No. 2 would provide for a separation of the Federal Savings and Loan Insurance Corporation from the Federal Home Loan Bank Board. The Corporation would become an independent agency under a three-man board of trustees (one of whom would be the Federal Home Loan Bank Board Chairman), subject to the direction and control of the President. The plan provides for a basic, extreme and sweeping reorganization of the Government agency. Where we now have 1 Board which is able to coordinate

all of the complicated laws, regulations and transactions with member institutions, there would be 2 completely separate organizations. To us in the savings and loan business this reorganization plan is as revolutionary as a split in the Agriculture Department would be to the farmers, or as a splitup of the Veterans' Administration would be to the veterans.

Savings and loan associations are now the largest single source of home loans, making between 35 and 40 percent of all home loans. These institutions are also the fastest growing savings facility, having recorded last year a net increase in savings of $5 billion. They have assets of over $40 billion as compared to only $10 billion just a decade ago. It is not an exaggeration to say that the record home building in the postwar period is due in substantial part to the spectacular manner in which the savings and loan associations have responded to the heavy demands on our mortgage credit system. Since the savings and loan business is so important to our housing economy and to our national thrift program, it is obvious that this basic reorganization has ramifications of national importance.

Now, I would like to turn to some of the specific reasons why the United States Savings and Loan League is opposed to Reorganization Plan No. 2.

1. The division of the Government agency into two separate and equal agencies will result in confusion, duplication, and conflict in the relations of the Federal Government with the savings and loan business. We believe that our member associations would be confronted with conflicting regulations and directions and the frustrations of attempting to determine which agency to follow. Where 1 report now suffices, 2 would be necessary under the plan, probably in different form and with different instructions. In short, redtape and agency buckpassing would result under the plan.

2. Under the plan the savings and loan institutions would have substantially increased operating expenses. All of the expenses of the Federal Home Loan Bank Board and of the Federal Savings and Loan Insurance Corporation are now paid by member institutions; it goes without saying that the operation of two entirely separate organizations to accomplish the purposes now achieved by a single agency would be most costly. More people would be on the payroll, more space would be occupied, more paperwork would be called for. The savings and loan institutions would consequently pay the difference. In addition, aside from the greater expense of the operation of two agencies in Washington, the prospect under the proposed plan is for a doubling of supervision and examination of the associations, since the Board and the Insurance Corporation would have their respective legal obligations, separate and distinct, to determine the soundness of the associations. Examination costs are already one of the larger items in the operating expenses of associations; this plan would increase them.

Because association managements have a primary obligation to keep strong reserves and to keep adding substantially to reserves each fiscal period, any additional operating expense imposed upon them could not be absorbed without direct impact on either the savers, or the borrowers, or both. Necessarily, then, an increase in the mortgage interest rate or a decrease in the return paid to savers would be the ultimate result of the operation of two separate agencies for the

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savings and loan associations in their relations with the Federal Government.

3. The assumption that the establishment of separate agencies in Washington would change the quality of the examinations of our associations for the better is implicit in the plan, but no substantiation for this concept is offered. We who operate the savings and loan associations and are well acquainted with the character of examinations to which we are subjected, fail to see how separation of the agencies would make for better results; after all, examinations are conducted by individual men hired and paid according to civil service standards, and the same type of personnel generally would be engaged in the work, whether they were working for one agency or the other, or for the two jointly.

The above disadvantages to the savings and loan associations are particularly significant since the savings and loan associations own all of the capital of the Federal home-loan bank system and pay all of the costs of operating the Federal agency. In spite of this fact, the associations were not consulted nor given any opportunity to submit their views prior to the transmittal of the reorganization plan.

I would also like to enumerate some of the reasons why the plan should not be adopted from the point of view of the Congress and the general public interest.

1. The plan violates the basic philosophy of the Reorganization Act of 1949. As we understand the purpose of reorganization plans, it is to permit greater efficiency and economy in Government operations. The establishment of 2 agencies in lieu of 1 cannot possibly be economical but on the contrary represents an increase in expenses. The two agencies now share in the expenses of such activities as a common legal department, statistical department, public relations division, office of secretary, and budget officer. As separate agencies each of these activities would have to be separately staffed. Similarly, the establishment of two agencies is in exactly the opposite direction of avoiding duplication and overlapping, one of the stated objectives of reorganization plans. Congress has recognized that the reorganization plan procedure is a major delegation of legislative authority and it would appear that only reorganizations supported by clear and compelling reasons or of an emergency nature are appropriate for treatment under this procedure.

2. The plan is substantially different than the recommendations of the Hoover Commission report and is exactly opposite to the recommendations of the Commission's Task Force on Lending Agencies. The single sentence recommendation of the Hoover Commission report was that no person should serve on the Federal Home Loan Bank Board and on the Board of Trustees of the Federal Savings and Loan Insurance Corporation. There was no substantiating data or documentation. The Task Force on Lending Agencies, which conducted a thorough study and consulted with the affected agencies, included in its report a substantial section on the operation of these activities and concluded:

It [the Federal Home Loan Bank Board] supervises a system of privately owned Federal home-loan banks, and their member institutions which are local thrift and home-financing institutions of the savings and loan type. Also, it supervises the Federal Savings and Loan Insurance Corporation. This appears to be a natural grouping of functions which requires no change.

Under the heading “Recommendation-Federal Savings and Loan Insurance Corporation” we find the following single sentence:

Except for the general recommendations on management presented earlier in this report, the task force has no recommendation to offer with respect to the organization and operation of this mutual insurance trust.

3. Just last year administration spokesmen opposed the creation of two separate boards. There appears on page 392 of the 1955 hearings before this very committee, the comments of the Housing and Home Finance Agency on the lending agencies report. Administrator Albert M. Cole had this to say about the Hoover Commission recommendation:

I do not agree that the Home Loan Bank Board should be separate and distinct from a board or other managerial body administering the affairs of the Federal Savings and Loan Insurance Corporation. Both the Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation are concerned with the operations of savings and loan associations, and the existence of two boards could result in conflicts of policy and confusion in the industry. Furthermore, such organization would be much less economical than the present one wherein the HLBB and the FSLIC have common administrative services, utilize the services of one examining division, and accumulate jointly knowledge and information about the industry as a whole and about the operation of specific savings and loan associations.

Similarly, on September 13, 1955, the Chairman of the Federal Home Loan Bank Board transmitted an official letter to the chairman of the Senate Banking and Currency Committee expressing his opposition to the principle of the separation of the Insurance Corporation and the Board.

One of the most amazing things about the plan is its complete inconsistency with the administration's own statements last year regarding the creation of independent agencies. In signing the Housing Amendments of 1955, President Eisenhower stated :

I also have serious objections to the provisions of the bill which would create still another independent agency in the executive branch by detaching the Home Loan Bank Board, including the Federal Savings and Loan Insurance Corporation, from the Housing and Home Finance Agency.

Earlier, administration spokesmen, speaking of the establishment of an independent Federal Home Loan Bank Board, made the following statement before the House Banking Committee:

The administration believes that new independent agencies reporting to the President should be created only upon the showing of clear and compelling reasons for such action and of persuasive advantages to be derived from it.

4. The plan injects an unfortunate partisanship into the agency by failing to require bipartisanship on the Board of Trustees of the Corporation. The Federal Home Loan Bank Board is, by law, a bipartisan board.

5. The reorganization plan fails to provide for any term of office for the trustees. The Federal Home Loan Bank Board, the Federal Reserve Board, and the Federal Deposit Insurance Corporation, and virtually all similar Government agencies, make provision for specific terms of office.

We feel that these disadvantages to our associations and to the Congress are compelling reasons for the approval of the resolution to disapprove reorganization plan No. 2. Let me emphasize, however, that our objection to the plan goes right to the basic idea ; that

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