credit has declined to the vanishing point. The public is afraid to deposit their money in the banks, and the banks are afraid to employ their deposits in the extension of bank credit for the support of trade and commerce. Businessmen and investors are victimized by the same fear. The result is curtailment of business, decline in values, idleness, unemployment, breadlines, national depression, and distress. We must resume the use of bank credit if we are to find our way out of our present difficulties. (H. Rept. 150, 73d Cong., p. 6.)

In connection with the hearings in 1950 on the Federal Deposit Insurance Act before the Senate Committee on Banking and Currency, the Chairman of the Board of Governors of the Federal Reserve System inserted in the record of the hearing a staff study which included the following statement (pp. 110-111) :

As the agent primarily responsible for monetary stability, the Federal Reserve System is vitally interested in the functioning of an insurance program which has as its primary objective the removal of one of the prime causes of monetary instability. Deposit insurance is potentially one of the more important reforms directed to greater monetary stability by the banking legislation of the 1930's. In essence, these banking reforms aimed at preventing a repetition of the wholesale destruction of the money supply that occurred between 1929-33. * * * From the individual's standpoint, deposit insurance provides protection, within limits, against the banking hazards of deposit ownership. But the major virtue of deposit insurance is for the Nation as a whole. By assuring the public, individuals and businesses alike, that their cash in the form of bank deposits is insured up to a prescribed maximum, a major cause of instability in the Nation's money supply is removed.

The monetary functions of the Corporation are reflected in its operating duties, but the importance of these duties is sometimes forgotten during years of economic prosperity. For this reason a brief review of these duties is warranted. When the Corporation acts to restore circulating medium which is in danger of being destroyed or of becoming unavailable as a result of bank failure, it exercises powers which have an important bearing on the economic life of the country. In the case of an insured bank which becomes involved in serious financial difficulties, the Corporation may take one of a number of actions. If the bank is placed in receivership by the appropriate supervisory authority, the Corporation may pay the depositors of that bank the amount of their insured deposits, or it may determine that its interests, as well as the interests of the depositors, are best served by rendering financial assistance to permit the reopening of the bank, or to facilitate an assumption of the liabilities of the closed bank by another insured bank. If the bank has not yet been placed in receivership, the Corporation may provide funds to facilitate a merger, or may render assistance to the distressed bank to enable it to continue operations.

Operating duties relating to liquidation of assets acquired as a consequence of disbursements to protect depositors also require decisions which can be important in the monetary sphere. Section 11 (d) of the Federal Deposit Insurance Act requires that in liquidating assets the Corporation give "due regard to the condition of credit in the locality ****" Thus the Corporation is not permitted to consider only the losses which it may sustain. If we assume a period of crisis, such as 1930-33, the Corporation may acquire billions of dollars of assets within a relatively short time, the disposal of which may play a significant role in the acceleration or alleviation of the crisis. In this connection it is pertinent to note that in 1940 about 30 percent of the deposit insurance fund was represented by such assets.

Action taken by the Corporation to protect depositors of failing banks or to liquadate assets acquired thereby may be of national significance only during period of economic depression, or if there is a failure of a very large bank. However, in its operating activities relating to supervisory duties the Corporation is daily engaged in helping to maintain a strong and stable banking system. In addition to examination activities there are supervisory duties which are quasi-judicial in nature. For example, Corporation officials must pass on applications for insurance from new banks, for branch offices and for mergers of existing banks, and upon recommendations from its examiners that insurance be withdrawn from banks operated in an unsafe or unsound manner. The nature of these supervisory activities requires a degree of impartiality and objectivity in decisions which might be impossible to assure unless the Corporation retains its independent status. For example, proper operation of deposit insurance necessitates (and the law requires) that there be no discrimination against State banks not members of the Federal Reserve System. Decisions relating to withdrawal of insurance from a bank because of its unsafe and unsound operation must be taken solely with regard to the merits of the case in terms of the Corporation's duty to help maintain a sound banking system. How well can these, and other objectives, be accomplished if the Corporation is subjected to influences which may be inclined to give weight, for political purposes, to the pressures which inevitably arise at such critical times?

It is my considered conclusion that the enactment of this bill would, to a substantial and unreasonable degree, impair the Federal Deposit Insurance Corporation's ability to carry out its important functions as authorized by law. Certainly the men who have been intimately acquainted with the unique problems of Federal deposit insurance sincerely feel that legislation making the Corporation subject to review by the Bureau of the Budget would hamper the Corporation in discharging its responsibilities.

During the course of debate on legislation in 1947 to subject the Corporation to budget control, which legislation was defeated in the Senate by a vote of 83 to 1, Senator Vandenberg discussed precisely this point and concluded as follows:

I submit, Mr. President, that in the very nature of this tremendous public trust it is absolutely impossible to deal with it on any such budgetary basis as was proposed * * * (Congressional Record, vol. 93, pt. 8, p. 10123, July 25, 1947).

The Hon. Leo T. Crowley, long-time Chairman of the Corporation, with whom many of the committee are acquainted, discusses this entire issue in the full text of the statement which we are submitting herewith. However, permit me to call your attention to certain pertinent excerpts from this statement:

dislocate its even functioning that the harm resulting therefrom will be greater than any possible benefits sought to be achieved. ***

The Corporation must be measured solely by the needs of the banking system and should not be affected by overall policy for Government establishments generally. The banking system cannot be kept sound by turning supervision on and off. * * *

*** To unnecessarily deprive the Federal Deposit Insurance Corporation of its independence and flexibility which its corporate structure was designed to furnish, as is proposed in the pending measure, would, in my opinion, be a very grave mistake. * **

To comment briefly on the foregoing observations, I call attention to the fact that, although the Corporation could not be prevented by the proposed legislation from carrying out its authorized activities of examining insured banks, paying insured deposits, liquidating banks and rendering financial assistance to banks, its operating and administrative expenses in connection with such activities could be limited. In prior proposals the suggestion has been made that the budget control would not effect a restraint on the use of the reserve fund in the discharge by the Corporation of its insurance obligations, but that the application of budget techniques to the operations and administration of the Corporation was entirely proper. The fallacy of this argument is self-evident. The insurance responsibility of the Corporation is not discharged with dollars alone. Manpower is equally essential to such discharge. For instance, if, because of general ecoonmic conditions, the nonliquid assets of banks become frozen and substantially reduced in value, this creates a volume of problem banks-serious problem banks and, finally, closed banks. The requirements of such a time necessitates more frequent examinations of operating banks, and more exacting and time-consuming examinations of all problem banks, thus requiring expansion of the personnel in the Division of Examination. The personnel of the Division of Liquidation swells and falls depending upon the number of banks that currently need financial aid of the Corporation or are forced into liquidation.

Such extension of activities of these two divisions of necessity requires an expansion of the Accounting Division, the Legal Division, the stenographic and clerical force-in fact, an overall increase in personnel. If it be admitted that it is untenable to apply budget techniques to the use of the reserve fund in the discharge of the insurance responsibilities, then with equal force it is untenable to apply such techniques to the administrative operations of the Corporation.

Again I refer you to the Congressional Record, where we find the statements of Senator Vandenberg on this general subject in his own convincing language:

I know of no surer way to precipitate a crisis in the United States than to have the budget of the FDIC necessarly increased in anticipation of bank failures made public to the world on New Year's each year.

Since 1933 the Congress has repeatedly affirmed its original decision to establish an independent corporation and has rejected every attempt or proposal to subordinate the Corporation to any other agency. In 1933 the Congress rejected a proposal to subordinate the Corporation to the Federal Reserve System and announced its intention of organizing an "independent" Corporation (Congressional Record, vol. 77, pt. 6, p. 5862). It has never deviated from that position, whether with respect to the Federal Reserve or to any other Government agency.

The attempt in 1947 to subject the Corporation to budget control aroused virtually unanimous opposition and the Senate rejected the proposal by a vote of 83 to 1. During the course of the debate on this legislation, Senator Vandenberg declared :

I am not so much afraid of what the political controls would do, because I assume that they would have an adequate respect for this institution. But I am saying that the fundamental importance and value of the Federal Deposit Insurance Corporation is psychological; it is the faith that for 15 years America has demonstrated it has in this institution. At the moment when the FDIC is about completing $1 billion of earnings of its own, so that it can eliminate all Government capital, at this time when there is a billion dollars of money available in the Treasury of the FDIC, if the American people read that, at long last, in Washington something is going on which indicates that the political powers are restless and will remain restless until they can get their hands upon this great institution, the effect will be most deplorable. * * *

I am confining myself to this fundamental conception, because I submit, Mr. President, that the one thing in the economic life of the United States which is basically essential is the maintenance of banking confidence, which is dependent, fundamentally and primarily, upon the continuing independent sanctity of the Federal Deposit Insurance Corporation. (Cong. Rec., vol. 93, pt. 8, p. 10123, July 25, 1947.)

Again, in 1950 the conference report on the Budget and Accounting Procedures Act retained the language of the Senate amendment which provided that the term "appropriations" would include any other authority making funds available for obligation or expenditure. The conference report signed by the present chairman, Congressman Dawson, as one of the managers on the part of the House, contains the following statement with reference to the Corporation:

In retaining the language of the Senate amendment, the committee wishes to make it clear that it is not intended to * * * affect the Federal Deposit Insurance Corporation or its funds. The funds of the Federal Deposit Insurance Corporation are received from assessments on insured banks and are used only for the purposes of deposit insurance. These funds have never been under the Budget and Accounting Act for the reason that they are not Government moneys or appropriations and there was no intention of including such funds in this amendment. (H. Rept. No. 303, 81st Cong., p. 2; Cong. Rec., vol. 96, pt. 10. p. 13988, Aug. 31, 1950.)

I deem that there is no more appropriate manner in which to conclude my comments than to recall the discussions that took place on the floor of the Senate on July 25, 1947, so that you may have an impression of bipartisan views on this identical issue when it was presented for consideration at that time.

Mr. VANDENBERG. The Senator is correct. I shall leave the further discussion of that matter to those who are more familiar with it. I am confining myself to this fundamental conception, because I submit, Mr. President, that the one thing in the economic life of the United States which is basically essential is the maintenance of banking confidence, which is dependent, fundamentally and primarily, upon the continuing independent sanctity of the Federal Deposit Insurance Corporation.

Mr. SPARKMAN. Mr. President, will the Senator yield?
Mr. VANDENBERG. I yield.

Mr. SPARKMAN. I am sorry that I have not been able to be in the Chamber during all the discussion, and I have missed some of the debate. But the amendment the Senator is arguing has to do with the section which was added to the bill in the House of Representatives, and was stricken out by the Senate Appropriations Committee. The reason given at the time was that it was legislation on an appropriation bill, and that the matter should be studied by the proper legislative committee, rather than by the Appropriations Committee.

As a matter of fact, we had this matter before the Senate Banking and Currency Committee, and we discussed rather at length this very idea of making the Federal Deposit Insurance Corporation subject to the Budget Control Act. That committee decided that it was not proper to do so. I believe the committee was unanimous in reaching that decision.

Some members of the committee felt that the administrative expense should be subject to budget control; and, as a matter of fact, Mr. Harl, Chairman of the Federal Deposit Insurance Corporation, told us that already there was submitted to the budget the administrative expenses for each year.

Based upon that, the regularly constituted legislative committee of the Senate rejected the idea of placing the Federal Deposit Insurance Corporation under the control of the Budget Control Act. In other words, we did exactly what the Senate Appropriations Committee said should be done : We studied it. After studying it, we rejected it. I think it is an unsound principle to be written into a bill.

Mr. VANDENBERG. Mr. President, I thank the Senator. He has reviewed a situation which, in some respects, already has been submitted by other Senators. Now let me conclude, Mr. President, because I do not think it is necessary to labor this point. I wish to remind the Senate that the Federal Deposit Insurance Corporation has no place in the same category or bracket with the other Government corporations to which this bill is fundamentally dedicated. I remind the Senate that the FDIC does not get 1 penny, not 1 nickel, of tax money; and it never has. It is entirely dependent upon its own premiums. In the operation of its premium account, it has finally accumulated $1 billion of assets, so that in the next 2 years there will not even be a nickel of Government funds in its capital structure.

As I have pointed out, at the present time we have increased the amount of the deposit insurance fund to $1,850,000,000, and we have paid interest on the capital in addition to retiring the capital.

Here is an institution which has bailed itself out from zero, in respect to its own finances, and today is the finest example of fiscal ability and success, even as a corporation, that can be found in this Nation. Here is an institution which in 15 years has resulted in a banking record in the United States without the loss of 1 penny to 1 bank depositor in the United States.

That has happened in a decade and a half. Here is an institution which is totally successful by every possible degree or manner of measurement which can be applied to it.

Here is an institution which the Bureau of the Budget does not want to tamper with, which the Treasury does not wish to have anyone tamper with, which the banking fraternity in the United States wishes to remain independent, which the legislative committees of the Senate have twice insisted must remain independent. Here is an institution which does not deserve the proposed treatment at this 11th hour in the 80th Congress and I say it with great feeling, Mr. Presidentparticularly under the auspices of the Republican Party, which is supposed to have some particular dedication to the preservation of private enterprise, and some particular aversion to the needless application of governmental controls. So I submit that under all these combined circumstances, it is not only a travesty, but it is a crime, if this conference report is adopted. (Cong. Rec., vol. 93, pt. 8, pp. 10123–10124, July 25, 1947.)

Throughout this discussion I have made frequent references to statements made by the late Senator Vandenberg pertaining to the issues here under consideraiton. Unfortunately there are no pertinent