April 24, 1963, two letters from Board to Long Beach. One letter confirmed meeting held on April 19, 1963, and advising that Board expected Long Beach to make necessary changes in article XV plan before shareholders considered and voted thereon. Letter also stated that Board expected that before action was taken on the article XV plan the free-rider problem would be amicably resolved. The second letter pointed out certain inaccuracies in Mr. Gregory's letters of April 19 and 20. It stated again the reasons why the dissolution of Long Beach by way of merger with Equitable was not in accord with article XV and discussed generally the free-rider problem.

April 26, 1963, telegram from attorney for the Shareholders Protective Committee asking questions about the free-rider problem.

April 26, 1963, telegram from Mr. Williams to attorney for Shareholders Protective Committee advising that free-rider problem raised fundamental questions of policy, a satisfactory solution to which had not and could not be reached before April 27. Also advised that Board had not made a definitive decision with respect to the dissolution of Long Beach by way of merger with Equitable.

April 23, 1963, letter from Long Beach explaining in what respects Long Beach would act upon the suggestions set forth in Mr. Monk's letter of April 15, 1963, relating to the article XV plan.

April 29, 1963, letter from Long Beach to Mr. McMurray advising of results of April 27 meeting of Long Beach shareholders and enclosing copies of various resolutions adopted by shareholders.

I submit that the Board has done everything it could to expedite this settlement. It has constantly advised Mr. Gregory. It thought at various times it had reached an agreement on the basic questions. We have our responsibilities. We would like to settle this question. We are willing to sit down. This is a highly complicated case. has a long history.

It

When I took this position, some people thought that I was crazy to take a job that had this particular case. But I felt that I could settle it, and I would settle it. But I would settle this case with honor, and under the law as I see it, and as I am advised by counsel, and after I have made my own decision.

I would only hope that this hearing, that this public airing of the problem would result in an amicable settlement of this problem.

I think it is a question that not only concerns this particular case, but might very well affect and influence decisions of the Board for many years to come.

I wish, Mr. Chairman, that the law was more specific on many of these questions. I suppose that is why our Board is here, to try to interpret the law and the regulations and to apply it to particular

cases.

The two gentlemen on my right and left are lawyers. I happen not to be a lawyer; I wish I were. But I have had plenty of experience with lawyers in dealing with the law. I have some understanding of economics and banking.

I submit to you that we three will do what is right and what is fair and what is in the public interest. Because there is a problem, and because we are under heat of getting a quick settlement to this, we are not going to do anything other than what we think is right.

Mr. MULTER. I think all this committee can ask you to do is to do it and to do it promptly. I think you have given what appears to be a

very adequate explanation of the reason for what appears to be the tremendous delay in bringing the matter to an end.

At the same time, I think that your Board ought to meet and make a decision-whether you have the right to do it or you don't have the right to do it, you should make a decision as to what you are going to do with these accounts.

If your decision is that certain of these accounts, certain kinds, a certain amount must be turned back before you approve anything, I think you ought to put that in the form of a directive, and let the matter conclude on that point. If they can meet that directive, let them proceed from that point. If they cannot, they have got to liquidate in some other manner than by merger, or just continue the organization. But I think the matter ought to be resolved without further delay.

That is my opinion. I have no right to talk for the other members of the committee.

Basically, I repeat that you gentlemen are dutybound to come up with some recommendation to this committee legislatively as to what we should do so future situations of the same kind do not recur, so there will be standards that can be followed and everybody will know what the law is and what they must comply with in order to carry on under similar circumstances.

Mr. Chairman, do you have any questions at this time?

Mr. PATMAN. No, I will not ask any at this time. It is late, and it has been a long day.

Mr. WILFAND. Congressman Multer, may I read into the record the standards of the California commission on this so-called free-rider problem?

Mr. MULTER. Without objection it will be made a part of the record. You will furnish them to us, please.

Mr. WILFAND. It is very short.

Mr. MULTER. All right, go ahead.

Mr. WILFAND. It says this: This is in connection with a merger

If the disappearing association is merged with an association, then standard 3 reads this way:

"The absence of evidence that the mutual management has protected the interests of account holders from unfair dilution may be grounds for disapproval of a proposed merger."

Mr. MCMURRAY. Mr. Chairman, may I insert two things in the record which relate to questions that were asked?

One is with regard to the Home Saving & Loan Association in Falls Church, which is the only insured association in Falls Church, which was conditionally approved on February 20, 1962. Ninety-five percent of the permanent stock was held by people who have a residence or place of business in Virginia's 10th Congressional District, which is the proposed service area of the association, including Falls Church and Arlington. The balance of 5 percent was held by Fairfax and Washington people.

The other is a policy statement of the Federal Home Loan Bank Board relative to branches for Federal savings and loan associations made over the years by different chairmen, which I think will confirm what I have advocated in my oral testimony.

Mr. MULTER. They will be made a part of the record.

(The information referred to follows:)

POLICY STATEMENTS OF THE FEDERAL HOME LOAN BANK BOARD RELATIVE TO BRANCHES FOR FEDERAL SAVINGS AND LOAN ASSOCIATIONS

(1) February 27, 1952:

"It is our position that if the States have specifically prohibited branches for all types of financial institutions (savings and loan associations, mutual savings banks, and commercial banks) the Board will recognize that such States do not wish branches within their borders as a matter of principle, and will respect the wish. On the other hand, if the people of the State permit branches to financial institutions, we feel that we are in the best position to determine under what circumstances Federal savings and loan associations should be granted branches in such States just as the State legislatures or State supervisors determine the conditions under which State-chartered institutions may operate branches" (hearings before Senate Committee on Banking and Currency on S. 2517 and S. 2564, 82d Cong., 2d sess., 13 (1952)).

(2) February 16, 1954:

"Limitations in State statutes, such as one branch for each association, or to a branch if the association applying is located in a city of over a certain population, would appear to be directed solely at prohibiting the growth of such associations rather than to the need of facilities in the area and the public interest. Such limitations in our opinion are not in keeping with section 5 of the Home Owners Loan Act" (hearings before Senate Committee on Banking and Currency on S. 975, 83d Cong., 2d sess., 7 (1954)).

(3) May 31, 1955:

"Limitations in State statutes, such as to one branch for each association, or to a branch in the same city or county where the home office is located, would appear to be directed solely at prohibiting the growth of such associations, rather than to the need of the facilities in the area and the public interest. Under such limitations, irrespective of the public interest, the need, the nearness of the association to the area, its ability economically to provide savings and loan facilities to the people in the area, and the practicability and desirability of establishing a branch, the application to operate a branch would necessarily have to be denied. Such limitations, in the opinion of the Home Loan Bank Board, would not be in keeping with section 5 of the Home Owners Loan Act of 1933, as amended, which states that the purpose of creating Federal savings and loan associations is to provide local mutual thrift institutions in which people may invest their funds in order to provide for the financing of homes" (hearings before Senate Committee on Banking and Currency on S. 972, 84th Cong., 1st sess., 4 (1955)).

(4) January 14, 1958:

"The Board's general policy with respect to branches of Federal savings and loan associations is this. If the State law, or the State practice in the absence of statutory prohibition, permits savings and loan associations of the State, or savings banks or commercial banks of the State, to establish branches therein, the Board will permit Federal savings and loan associations to establish branches in that State. Also, if none of these types of institutions is permitted to establish branches but the State law, or the State practice in the absence of statutory prohibition, permits one or more of these types of institutions to conduct chain, group, or affiliate operations, the Board will permit Federal savings and loan associations to establish branches therein.

"However, even in such cases the Board will not approve the establishment of a Federal savings and loan association unless in the Board's judgment a necessity exists for such a facility in the community to be served, nor unless there is a reasonable probability of its usefulness and success, nor unless the same can be established without undue injury to properly conducted existing local thrift and home-financing institutions.

"These criteria are analogous to criteria which the Board under subsection (e) of section 5 of the Homeowners Loan Act of 1933, is required to apply in the granting of charters for Federal savings and loan associations. The Board applies these criteria even in States which impose no corresponding limitations or restrictions on branching by their own institutions" (hearings before House Committe on Banking and Currency on S. 1451 and H.R. 7026, 85th Cong., 2d sess., pt. 2, 880 (1958)).

NO RECORD OF A "FAMILY SLA" IN FALLS CHURCH

The only insured association in Falls Church is Home Savings & Loan Association, insured February 20, 1962. Ninety-five percent of the permanent stock was held by people having residence or place of business in Virginia's 10th Congressional District, which is proposed service area of association consisting of Falls Church and part of Arlington. Balance of 5 percent held by Fairfax or Washington people.

Mr. MULTER. If after you have read the transcript there is anything else you may want to add to the record, we will be pleased to have it. One of the standing rules-not actually a rule, but one of the standard things we do by tradition in this committee is that we permit members to address further questions to the witnesses which are then made part of the record, together with their answers. So if you receive any such questions from any members of the committee, please respond to them and they will be added to the record. Thank you, gentlemen, very much.

We will stand in recess until tomorrow at 10 o'clock.

(Whereupon, at 4:50 p.m., the committee recessed, to reconvene at 10 a.m., Wednesday, May 8, 1963.)