PROVIDING FOR THE CONVEYANCE OF A TRACT OF LAND IN GREENBELT, MD., TO THE STATE OF MARYLAND FOR USE AS A SITE FOR A NATIONAL GUARD ARMORY

JULY 20, 1949.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. SPENCE, from the Committee on Banking and Currency, submitted the following

REPORT

[To accompany S. 803)

The Committee on Banking and Currency, to whom was referred the bill (S. 803) to provide for the conveyance of a tract of land in Prince Georges County, Md., to the State of Maryland for use as a site for a National Guard armory and for training the National Guard or for other military purposes, having considered the same, report favorably thereon without amendment and recommend that the bill do pass.

GENERAL STATEMENT

This bill would authorize and direct the Public Housing Commissioner to convey by quitclaim deed, without consideration, to the State of Maryland 8.03 acres of land in Greenbelt, Md., for use as a site for a National Guard armory. In such conveyance the United States would be saved harmless from or reimbursed for such costs incidental to the conveyance as the Commissioner may deem proper.

Provision is made that the land authorized to be conveyed shall be used by the grantee for purposes of a site for a National Guard armory and for training the National Guard or for other military purposes and the conveyance of such land shall contain the express condition that if the grantee shall fail or cease to use such land for such purposes, or shall alienate or attempt to alienate such land, title thereto shall, at the option of the United States, revert to the United States. Also it is required that before the conveyance can be made the Governor of the State of Maryland shall certify in writing to the Secretary of Defense that such land is needed by the State of Maryland for such purposes and that the land is suitable therefor.

The Honorable G. Lansdale Sasscer, Representative in Congress from the Fifth District of Maryland appeared as awitness in support of the proposed legislation and advised the committee that the State of Maryland is prepared to go ahead with the erection of an armory on the site and has earmarked funds for that purpose.

The Department of the Army, expressing the views of the National Military Establishment, favors the enactment of this bill, and the bill was reported unanimously by your committee.

O

desiring to become a member of the Federal Reserve System, may make application to the Board of Governors of the Federal Reserve System, under such rules and regulations as it may prescribe, for the right to subscribe to the stock of the Federal Reserve bank organized within the district in which the applying bank is located. Such application shall be for the same amount of stock that the applying bank would be required to subscribe to as a national bank. For the purposes

of membership of any such bank the terms "capital" and "capital stock" shall include the amount of outstanding capital notes and debentures legally issued by the applying bank and purchased by the Reconstruction Finance Corporation. The Board of Governors of the Federal Reserve System, subject to the provisions of this Act and to such conditions as it may prescribe pursuant thereto may permit the applying bank to become a stockholder of such Federal Reserve bank. Upon the conversion of a national bank into a State bank, or the merger or consolidation of a national bank with a State bank which is not a member of the Federal Reserve System, the resulting or continuing State bank may be admitted to membership in the Federal Reserve System by the Board of Governors of the Federal Reserve System in accordance with the provisions of this section, but, otherwise, the Federal Reserve bank stock owned by the national bank shall be canceled and paid for as provided in section 5 of this Act. Upon the merger or consolidation of a national bank with a State member bank under a State charter, the membership of the State bank in the Federal Reserve System shall continue.

SECTION 12B. INSURANCE OF BANK DEPOSITS

(e)

MEMBER BANKS ENTITLED TO INSURANCE BENEFITS

(2) After the effective date, every national member bank which is authorized to commence or resume the business of banking, and every State bank which is converted into a national member bank or which becomes a member of the Federal Reserve System, shall be an insured bank from the time it is authorized to commence or resume business or becomes a member of the Federal Reserve System. The certificate herein prescribed shall be issued to the Corporation by the Comptroller of the Currency in the case of such national member bank, or by the Board of Governors of the Federal Reserve System in the case of such State member bank: Provided, That in the case of an insured bank which is admitted to membership in the Federal Reserve System or an insured State bank which is converted into a national member bank, such certificate shall not be required, and the bank shall continue as an insured bank. Such certificate shall state that the bank is authorized to transact the business of banking in the case of a national member bank, or is a member of the Federal Reserve System in the case of a State member bank, and that consideration has been given to the factors enumerated in subsection (g) of this section. A State bank, resulting from the conversion of an insured national bank, shall continue as an insured bank. A State bank, resulting from the merger or consolidation of insured banks, or from the merger or consolidation of a noninsured bank or institution with an insured State bank, shall continue as an insured bank.

(1) (1) TERMINATION OF INSURANCE OF NONMEMBER BANKS.

EFFECT OF TERMINATION OF INSURANCE OF MEMBER BANKS

(2) Whenever the insured status of a State member bank shall be terminated by action of the board of directors, the Board of Governors of the Federal Reserve System shall terminate its membership in the Federal Reserve System in accordance with the provisions of section 9 of this Act, and whenever the insured status of a national member bank shall be so terminated the Comptroller of the Currency shall appoint a receiver for the bank, which shall be the Corporation whenever the bank shall be unable to meet the demands of its depositors. [Whenever a member bank shall cease to be a member of the Federal Reserve System, its status as an insured bank shall, without notice or other action by the board of directors, terminate on the date the bank shall cease to be a member of the Federal Reserve System, with like effect as if its insured status had been terminated on said date by the board of directors after proceedings under paragraph (1) of

Historically, national banks always have been free to leave the national banking system in order to enter a State system, although the procedure required the liquidation of the national bank and the transfer of its assets to an existing or newly organized State bank. Until recent years the necessity for voluntary liquidation, as a condition precedent to consolidation of a national bank with a State bank under the charter of the latter, or to conversion into a State bank, has not been of great importance because it constituted a mere formality. Many national banks have been placed in voluntary liquidation by their shareholders and their assets transferred to newly organized State banks, often for the purpose of permitting them to operate on a smaller capital than is required of national banks or to charge exchange on checks drawn by their depositors.

However, in recent years, this formality has developed into an obstacle because of its taxation aspects. This is true especially in cases where the capital position of the national bank is such that upon liquidation a substantial portion of the capital structure might constitute a taxable gain, and where the Federal tax laws favor a statutory consolidation. If we are to have a dual banking system with national banks operating side by side with State banks, with State banks being permitted to convert into national associations or to consolidate with national banks and thus continue the banking business under a national charter, then a tax obstacle should not stand in the way of complete duality-of freedom of egress by banks from the national system. Sections 1, 2, and 3 of the bill would provide the basis for such equality of tax treatment.

The bill would protect dissenting shareholders of national banks who were opposed to a proposed conversion or consolidation by permitting them to receive the value of their stock in cash. Depositors would not be injured, because they could withdraw their funds. In this connection it is to be noted that even though a national bank converted into a State bank, it could not terminate its insured status under the Federal Deposit Insurance Corporation Act without giving 90 days' notice to the Corporation, and all deposits covered by insurance would remain so covered for a period of 2 years. Furthermore. a national bank cannot consolidate with an uninsured State bank except with the consent of the Federal Deposit Insurance Corporation which constitutes a protection for such depositors.

The bill provides a greater degree of equality as between national banks and State banks, and adequately protects both the depositors and the shareholders of a national bank, which converts into a State bank, or consolidates with the State bank under that bank's charter.

SECTION BY SECTION ANALYSIS OF THE BILL

SECTION 1

This section defines the term "State bank" in the same manner as the definition of that term in the Federal Deposit Insurance law except that it does not include mutual savings banks and unincorporated banks. This definition is used so as not to enlarge the types of institutions eligible for insurance under the automatic insurance provided in section 6 of the proposed bill.

SECTION 2

This section, in authorizing a national bank to convert into or merge or consolidate with a State bank in the same State in which the national bank is located, sets forth the requisite corporate procedure to be taken by the national bank. It is similar to the present procedure for the consolidation of National banks and the consolidation of national and State banks except in minor matters. These are, primarily, the waiver of three of the four prescribed publications of notice of shareholders meeting by the holders of two-thirds of each class of capital stock with the approval of the Comptroller of the Currency; the selection by dissenting shareholders of one appraisal committee rather than a separate committee for each dissenting shareholder; and in the opportunity given a dissenting shareholder to change. his mind by requiring of him that, in addition to his timely dissent, he must in writing request payment of the value of his shares within 30 days after the action from which he dissents. A dissenting shareholder shall be entitled to receive in cash the value of the shares held by him.

SECTION 3

This provision continues the business and corporate entity of the national bank in the State bank resulting from a conversion, merger, or consolidation of a national bank, and is similar in effect to the provisions of the National Bank Act in respect to State banks moving into the national system and to the provisions of many State laws.

SECTION 4

This section requires that no conversion of a national bank into, or its merger or consolidation with, a State bank under a State charter shall take place in contravention of the laws of the State in which the national bank is located. It further provides that a national bank may not convert, merge, or consolidate under the provisions of this act unless, in the State where it is located, a State bank may, without the approval of any State authorities, convert into and merge or consolidate with national banks, as provided for by Federal law.

SECTION 5

This section amends the indicated law to give the Federal Deposit Insurance Corporation control over conversion, merger, or consolidation and assumption transactions between insured banks and any noninsured banks or institutions. Their present control is limited to merger, consolidation, and assumption transactions between insured and noninsured banks. It also gives that Corporation the necessary control to prevent capital and surplus diminution in such transactions authorized by the proposed bill and other applicable laws where the resulting, continuing, or assuming bank is an insured nonmember State bank. Similar control in such transactions involving only insured banks is given to the Comptroller of the Currency and the Board of Governors of the Federal Reserve System ove: resulting, continuing, or assuming banks under their respective supervision in cases not now provided for under existing law.