State laws governing the status of savings and loan or building and loan association branches-Continued

NOTES

Mr. BOLTON. Reverting to the present legislation, in effect am I correct in saying that your opposition to the creation of a Joint Insurance Board, which is provided under H.R. 729, would, in effect, blunt the distinction between a savings and loan institution and a commercial bank, in the eyes of the public at least, as well as create difficulties in the insurance of two different types of establishments?

Mr. MCMURRAY. Well, the first part of your question isn't the emphasis I gave to it. The second part is.

I think that there are two different types of institutions. I think you would, by enacting the bill, get a less coordinated type of supervision and also a less unifying kind of operation of savings and loan

associations.

I am not sure just how much the combination would blunt the distinction, because, presumably, they would still do their own specialized work; perhaps, it might_ultimately have that effect. Mr. BOLTON. Thank you, sir. Just one other question.

You are now a part of the structure of the Housing and Home Financing Agency, is that correct?

Mr. MCMURRAY. No, sir. We are an independent agency. In 1955 or 1956, the Home Loan Bank Board was made an independent agency. Mr. BOLTON. So that present law recognizes you as a separate financial institution as contrasted to a part of the housing business? Mr. MCMURRAY. Very definitely; yes, sir.

Mr. BOLTON. Thank you. No further questions at this point, Mr. Chairman.

Mr. MULTER. Mr. Moorhead?

Mr. MOORHEAD. Thank you, Mr. Chairman.

Mr. McMurray, I am interested in the interrelationship of these two bills that we are considering-H.R. 729 and H.R. 5874.

Would I be correct in my understanding that we could enact either one of these bills, and it wouldn't be necessary to enact both? Are they separate in that sense?

Mr. MCMURRAY. Well, the first bill relates simply to the Federal Savings and Loan Insurance Corporation, and the FDIC-it would combine them.

The second bill would take the FDIC—it makes no provision at all for the FSLIC-it would simply put the FDIC, the Federal Deposit Insurance Corporation, together with the Comptroller of the Currency and the supervisory functions of the Federal Reserve Bank, in a separate commission.

I would say this, if you enacted H.R. 5874, and you put the FDIC in this new commission, you couldn't very well put the FSLIC with the FDIC unless you further amended the bill and consolidated the FSLIC and the FDIC, and put the consolidated corporation in this new commission. You would create many difficulties if you enacted both of them without recorrecting the drafts.

Actually, you couldn't enact both of them without considerable change in language.

Mr. MOORHEAD. You couldn't enact both bills without amending one or the other-primarily H.R. 5874.

Mr. MCMURRAY. Actually, I would say their objectives are different and conceptually they are in conflict.

Mr. MULTER. One reason for having the hearings on the two bills was because the draftsmen realized that if the principle was to prevail

as enunciated in these two bills, you would probably have to bring out one bill.

Mr. MOORHEAD. Mr. McMurray, would I be correct that if we enacted only H.R. 5874, your Board would not be affected?

Mr. MCMURRAY. Correct, sir. Only to the extent that this would make the banking system more efficient. To that extent, it would help the Federal Home Loan Bank Board because I think all financial institutions gain with the efficiency and health of other institutions.

Mr. MOORHEAD. Mr. McMurray, in your statement you refer to the fact that the thrift and home financing facilities are homogenous institutions.

Would you also include the mutual savings banks in this category, or would you consider them as a separate category?

Mr. MCMURRAY. No, sir. I consider, myself, that the mutual savings banks are part of the thrift and home financing industry. Their major work is financing homes, and their major method of gathering resources is encouraging thrift. It has been my determined effort to encourage the savings banks to join the Federal Home Loan Bank System, and I am very pleased to say that, since I became Chairman, the number of savings banks in the Federal Home Loan Bank System has increased very substantially.

Mr. MOORHEAD. Mr. McMurray, on page 7 of your testimony you refer to the recommendation of the Commission on Money and Credit that the functions of the Federal Savings and Loan Insurance Corporation be broadened so that deposit insurance for savings banks would be available from that Corporation.

I would like to ask you, sir, first, in your opinion is this an advisable thing? And, second, have the savings banks requested this kind of legislation?

Mr. MCMURRAY. As you know, the administration has not taken any position on this. So that I can only speak in a personal way, and not in an official way.

I see much merit to it, personally. I think the job of insuring the thrift type of institution, institutions that make mortgage loans, poses problems that are very similar and, therefore, the insurance would be better done by an agency that has specialized knowledge.

However, I must say that the FDIC has done a good job so far, and I can't see an argument for making a change while they are doing so well.

I believe that in the last draft of the Federal mutual savings bank bill consolidation of the insurance was recommended. I know there was discussion about that, but I am not so sure if it was in the final draft as introduced by Congressman Multer.

Mr. MULTER. Are you talking now about the national mutual savings bank bill?

Mr. DE LAITTRE. Yes; the bill for chartering Federal mutual savings banks.

Mr. MULTER. That bill-we decided we would have the hearings on that at a later time, because, necessarily, whatever the Congress may decide with reference to either or both of these bills will affect that bill. If you should have one agency to do all of the banking job for the Federal Government, obviously we cannot very well put that function into an existing institution, if we are going to merge it with

another.

But if, on the other hand, the institutions as they exist now will be continued, the Home Loan Bank Board separately, with an insurance corporation as part of the Home Loan Bank Board, then if that bill should be enacted, Federal charters for mutual savings banks, obviously, the proper place for it to be would be in the Home Loan Bank System. And then, of course, we must make some accommodation for the fact that you will be taking over savings banks that are now insured in FDIC, you will want them insured in FSLIC-we must make some arrangement in that bill so as to transfer the funds without anybody being hurt, and preserving all their rights, and privileges.

Mr. MOORHEAD. Mr. McMurray, from the point of view of the depositor, is there any difference as to whether his deposit is insured by the FDIC or by the FSLIC?

Mr. MCMURRAY. In terms of safety, sir, I would say no difference. I would say actually, as I pointed out when I appeared before the full committee a couple of weeks ago, the reserves of the FSLIC will be 2 percent by 1970.

But I feel that the safety of the shareholders, depositors-no one needs to worry whether it is 1 or 2 percent.

Mr. BOLTON. Would you yield there for a further question on that line?

Mr. MOORHEAD. Yes.

Mr. BOLTON. Would you comment, sir, upon the treatment, if there is a claim between the FSLIC insurance and the FDIC insurance? Mr. MCMURRAY. I am not quite sure of your question.

The effect of what we have done is to insure all the accounts, even those above $10,000, because what we usually do is merge the institution or make payments to them so that they can continue in business. whereas the FDIC, as I recall it, does not have the same kind of authority as explicitly. They are pretty much limited to paying the depositors up to $10,000, and anybody who has accounts over that, of course, is not insured.

But I presume many of those do get substantial partial payments above $10,000.

Mr. MULTER. I think Mr. Bolton is inquiring as to the matter of payment in the event of liquidation of an institution.

Mr. WILLIAMS. The experience with the Federal Savings and Loan Insurance Corporation, up to this time, has been that when an institution has gotten into difficulty, we have either merged them with another institution, or we have made a contribution to the institution so that they could pay the deposits off in cash. That is what we do. If we found that they were insolvent, we would do one of two things: We would make a contribution to them, to make them solvent, or to merge them with another institution.

Mr. MCMURRAY. May I point out that the Financial Institutions Committee, in its conclusion 14, on page 42 of the report, recommended that the Committee, with one member dissenting, "favors a clarification of the condition in the Federal Deposit Insurance Corporation Act under which the Corporation may assist a failed or failing bank." This has reference to the point I made earlier about the lack of explicit authority for the FDIC to follow the procedure permitted for FSLIC.