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the Insurance Corporation, it should not be necessary for the trustees to have unusual powers with regard to the management and conduct of the business of the insured institution. For example, on page 29, lines 6 to 24, contain powers in the hands of the Insurance Corporation which go far beyond anything even suggested in the law creating the Federal Deposit Insurance Corporation, and certainly the powers of the trustees to terminate insurance, as well as establish premiums, are sufficient without giving them the power to minutely supervise the business operations of insured associations, including advertising, contracts, and the like.

The reserves enforced upon the association itself, in addition to the substantial annual insurance premium, would so decrease earnings as to embarrass the institutions and thus defeat the worthy purposes intended. The managements of thrift and home-financing institutions should not be regulated in all their activities, such as advertising, dividend policies, issue of shares authorized by State laws, and any other activities that the Insurance Corporation sees fit to deal with. There should be sufficient regulation to protect the Insurance Corporation and beyond that managements should be permitted to operate their institutions within the restrictions of the Federal Home Loan Bank Act and the State laws under which they are chartered and supervised.

Amendment.-On page 28, line 24, commencing with the words, “no insured institution ", strike out all language thereafter, through and including line 25, and on page 29, strike out lines i through 18, and insert in lieu thereof the following:

“No insured institution shall: (1) Issue securities after becoming an insured institution, the form of which has not been approved by the Insurance Corporation; or, (2) violate such necessary and reasonable regulations made by the trustees for the protection of the Insurance Corporation."


Page 35, after line 3:

Proposal. The participation of the Federal Government in matters of mortgage practice and home financing and the beginning of the development of a real mortgage banking system for the country is a rather recent innovation. It is the judgment of leaders in our business that the work of the Federal agencies in connection with housing and home financing will be assisted if some officially constituted liaison group or advisory body were established, which might present information and make representations from time to time.

It should be noted that since its establishment, the Federal Reserve System has had a Federal advisory council. The legislation here proposed as an additional section to title III, follows almost the identical language and purposes appearing in section 12 of the Federal Reserve Act.

Amendment.--On page 35, after line 3, add the following new section :

“ SEC. 314. There is hereby created a Federal Savings and Loan Advisory Council which shall consist of as many members as there are Federal homeloan bank districts. Each Federal home-loan bank, by its board of directors, shall annually elect a resident of such bank district interested in thrift and the financing of homes as a member of said Council, who shall receive, subject to the approval of the board, such compensation and allowances, as may be fixed and paid by the Federal home-loan bank of the district from which he is elected. The Federal Savings and Loan Advisory Council shall meet at Washington, District of Columbia, at least four times a year and oftener if requested by the board or by the trustees. Said Council may meet at other times and other places as it may deem necessary and may select its own chairman and vice chairman and the secretary and adopt its own method of procedure. The directors of the Federal home-loan banks shall elect members of the Council annually for a one-year term and shall fill any vacancies that may occur. The Federal Savings and Loan Advisory Council shall have power :

1. To confer with the board or the trustees on general business conditions or special conditions affecting the Federal Home Loan Bank System or its members or the Insurance Corporation.

“ 2. To make representations concerning matters within the jurisdiction of the board of trustees.

“3. To request information and make recommendations in reference to the Federal Home Loan Bank System or its members of the Insurance Corporation."


XIII Page 38, lines 17–23:

Proposal.-The original Federal Home Loan Bank Act authorizes each Federal home-loan bank in its own discretion to accept deposits from members, but not to render any checking or banking service, and to pay not exceeding 2-percent interest thereon. We prefer that the language of the original act be retained.

Amendment.-On page 38, strike out lines 17 through 23 and insert in lieu thereof the following: “(e) Each Federal home-loan bank shall have power to accept only such deposits as are made by members and nonmember borrowers of such bank, or by other Federal home-loan banks. Such deposits shall not be subject to check, and no rate of interest in excess of two per centum per annum shall be paid thereon. "Deposits', as used in this section, does not include deposits made under section 6 (e). No Federal home-loan bank shall transact any banking or other business not expressly authorized by this act."

XIV Pages 41 and 42:

The attention of the committee is respectfully called to pages 41 and 42, sections 405 and 406, of the proposed legislation.

The policy of Congress in this connection must be determined in light of their decision on earlier sections of the bill. In light of recent experience, it is questionable as to whether commercial banking institutions should be authorized and encouraged to invest substantial portions of their assets in long-term real-estate collateral.




Reference to the whole act would be facilitated if a short title were written descriptive of the entire act. There is now a citation for title I only.


If the amendments proposed on behalf of building and loan associations are adopted, the purpose, just prior to the enacting clause, should be briefed to read as follows:

“To improve Nation-wide housing standards, provide employment, and stimulate industry; to improve conditions with respect to home-mortgage financing; to promote thrift and protect savings; to amend the Federal Home Loan Bank Act; to amend the Federal Reserve Act; and for other purposes.”


On page 4, at the end of sentence line 7, the following language might appropriately be inserted:

“No such officer, employee, attorney, or agent shall be paid compensation at a rate in excess of the rate provided by law in the case of the members of the Federal Home Loan Bank Board."


If the substitute section 5 proposed on behalf of building and loan associations is approved, the words " and for the purposes of section 5 of this act”, in lines 11 and 12 on page 7, should be omitted.


Section 7, page 8, of H.R. 9620, provides for an almost exact duplication of work authorized and directed in section 8 of the original Federal Home Loan Bank Act. It might be wise to coordinate these two by saying, “ The Corporation and the Federal Home Loan Bank Board shall cause, etc.", or by omitting the provision from the responsibilities of the temporary Home Credit Insurance Corporation.


On page 20, line 6, before the word “share”, insert “ Withdrawable or repurchasable.”


On page 20, line 12, a "default" is defined. In connection with this action, it would seem wise to provide for direct notice to the Corporation at the time any court or supervisory authority took over an association for the purpose of liquidation.


On page 20, lines 17 through 21 could be wisely reversed and get a simpler, clearer statement of “surplus." .

The following language is suggested: "(i) The term 'surplus' means the excess of the assets of an insured institution as shown by the adjusted statement of its condition over and above the total of the accounts of its insured members and other creditor obligations."


On page 21, lines 21–23: The Government capital with which the Federal home-loan banks were established was made available to the bank system at 2 percent cumulative dividends. It might help the operations of the Corporation if the sentence on page 21, lines 21, 22, and 23, read as follows:

“ Said stock shall pay dividends which shall accrue, if unpaid, at a rate of 2 per centum per annum.”


On page 24, line 13, subsection (b) would be clearer if punctuation and numbers were used to set out the four items to be included in all agreements. The language would be as follows:

“(b) Applications to insure accounts as is provided in this title shall contain an agreement: (1) To pay the reasonable cost of any necessary examination and, if the insurance is accepted, the reasonable costs of examinations from time to time for the protection of the Insurance Corporation and other insured institutions; (2) to permit such examinations and to furnish any information at its disposal;:(3) to permit the Insurance Corporation to have access to the report of any examination of such insured institution as made by any public regulatory authority, and (4) to pay the insurance premiums fixed as is provided in this title, and such other provisions as may appear to the trustees to be appropriate, if such insurance is accepted.”.


On page 25, lines 11 through 14, improved language could be adopted. We are advised that under the California law the term impaired capital” has a very distinct meaning, which would work an inequality in the treatment of their institutions. It is our judgment that the sentence could read as follows and answer the same purpose and put the trustees of the Corporation in position to accept only such institutions as were in proper financial condition:

“ The Insurance Corporation shall decline the application of any applicant if its financial condition, its financial policies, or its management are unsafe."


On page 26, line 20, the words “after examination" can be omitted and the letter “a” of “ acceptable” capitalized as the first letter of the sentence. There may be cases where sufficient information is at hand that the trustees may not desire an examination. As written, the necessity of examination is implied.


On page 27, line 3, after “(d)”, the following words could be appropriately inserted : “In determining the amount of the insurance premium.” This makes clear the relationship of this clause to the establishing of premium rates.


On page 28, lines 1, 2, and 3 might more appropriately read: “tors under the insurance obligation shall terminate immediately, but the obligation to pay premiums as is provided in this title shall continue for three years, if the reserve of the corporation is less than 3 per centum."

Identical language should also appear in lines 9, 10, and 11.

In other words, an association should not be asked to continue its annual contributions after withdrawal if a substantial fund has been built up and other associations are not making contributions at that time.

XV In title IV all reference to “nonmember borrowers” probably can be omitted as enabling legislation has been enacted in practically every State where desired, or the period allowed in the original Federal Home Loan Bank Act has expired.


Page 36, lines 19 to 22. If members of the Federal Home Loan Bank System make advances under the modernization program and are loaned funds for that purpose as provided in this section it might be wise to provide that these advances be made available at the same rates of interest that the Home Credit Insurance Corporation makes funds available to finance companies, etc., under section 4 of title I. Therefore, suggest that the last sentence in section 4 ought to read as follows:

“Advances made under the terms of this section shall be at rates of interest not in excess of those provided by the Home Credit Insurance Corporation under section 4 of this Act."

XVII On page 37, line 1, the language would be consistent with the previous amendment if it read: “Each Federal Home Loan bank shall, etc.”



Some 300 or 400 new local cooperative thrift and home-financing institutions, in the form of Federal savings and loan associations, have been organized. The majority of these are starting with only $2,500 capital, and none with more than $7,500. It seems inappropriate that they should be required to join the Federal Home Loan Bank System and place $1,500 of their initial funds in stock in the system. When the Federal Home Loan Bank Act was enacted, the program of organizing these small community institutions not contemplated.

It would help their progress and would be quite sound and proper if the amount of initial subscription in the Federal Home Loan Bank System were lowered to $500. This amendment is particularly important to the Southern and western parts of the country. The following amendment is therefore proposed :

Page 40 : “ SEC. — Section 6 of the Federal Home Loan Bank Act is amended by striking out $1,500 ” in subsection (c) and (e), and inserting in lieu thereof “$500.”



Miss OBENAUER. I appear here as the Joint Chairman of the Board of Governors of the Home Owners Protective Enterprise. Because of certain statements that were made by Mr. Russell of the Home Loan Board, I should like to talk to you for a few moments as a person who has grown white-haired in the business of fact finding

I was chief woman administrator of awards for the National War Labor Board; I ran the investigation of the housing conditions of the miners for the United States Coal Commission. The work I have done is a matter of official record, I am only stating this so that you may know what weight to give to what I have to say.

I should like to call your attention, please, to something that Mr. Russell said which bears very much on a fundamental objection that we have to this bill. Section 5 makes a distinction between the existing home and the new homes of 60 percent as against on existing homes as against 80 percent on new homes. This discrimination will draw within the shadow of foreclosure millions of homes and, instead of accomplishing the purpose of eliminating second mortgages, or stabilizing the mortgage market, will create a stampede straight to the second mortgage. I call your attention to the fact that the title of bill says it is to eliminate the second mortgage. Now I have made that preliminary statement for the reason that before the Senate Banking and Currency Committee we submitted facts as to why that 60-percent limit on existing homes would jeopardize millions of homes that are not now jeopardized.

There are in the neighborhood of 20 billion dollars resting on eleven and a half million urban homes. The value of those homes, allowing for a depreciation of 40 percent given by the Twentieth Century Fund, with the 5-percent comeback, makes the value of those homes approximately thirty-two billion and a half. Now you figure it out for yourselves and you will see that the mortgage on the existing home is approximately 63 percent. If existing mortgages must be brought down to 60 percent to have the benefits of this bill where are we to go for money to curtail our mortgages except to the second-mortgage lender?' Where are we to go whose homes have now mortgages on them of more than 60 percent, except to that second-mortgage market? Now, I say this because Mr. Russell yesterday said that something between four and five billion dollars have been withdrawn from the mortgage market within the last 4 or 5 years and that, therefore, presumably the mortgage burden is in the neighborhood of 16 billion dollars or considerably below the 63 percent. I hope I am making myself clear, because it is very important.

On page 64 of the Senate hearing, Mr. Russell says: The real-estate mortgage debt of the United States is about $43,000,000,000, divided into about $8,000,000,000 farm mortgages, about $21,000,000,000 of home mortgages, and the rest are the real-estate securities.

Chairman Fahey, on page 198, makes the statement that there are twenty-one and a half billion dollars.

Presumably, neither Chairman Fahey nor Mr. Russell are handing the Banking and Currency Committee information that is 5 years old. I am sure Mr. Russell was doing himself an injustice.

He was basing these on the Internal Debt of the United States by the Twentieth Century Fund, and I will read just a sentence which says that the long-term indebtedness represented by the urban mortgage and the real-estate securities in the United States was, as of December 31, 1931—and that is a little less than 212 years ago

Now, one other matter. Mr. Russell said that there were 50 percent of the urban homes mortgaged. That is right, but it is not

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