Mr. SLIPHER. The Board put in a new regulation about a year ago, and I don't think there have been any conversions since then. Mr. MUTLER. How about on a State level?

Mr. SLIPHER. That is what I was referring to. They put in a regulation on all insuring institutions on how you could convert, and I don't believe anyone has chosen to convert under those conditions that have been in, in the past year. So the converting used to be rather frequently, but there isn't much any more.

Mr. MULTER. Is there any difference as to the insurability of a stock association and a mutual association?

Mr. MORTLOCK. No.

Mr. MULTER. The same principles apply?

Mr. MORTLOCK. Yes, sir.

Mr. MULTER. Thank you very much, gentlemen.
Mr. MORTLOCK. Thank you, sir.

Mr. MULTER. Now, Mr. Courshon.

STATEMENT OF ARTHUR H. COURSHON, CHAIRMAN, LEGISLATIVE COMMITTEE, NATIONAL LEAGUE OF INSURED SAVINGS ASSOCIATIONS, ACCOMPANIED BY BRYCE CURRY, GENERAL COUNSEL, LEGISLATIVE COMMITTEE, NATIONAL LEAGUE OF INSURED SAVINGS ASSOCIATIONS

Mr. MULTER. We are very happy to have you here this morning, Mr. Courshon. I received a message saying that you asked to be excused from testifying today. I hope you got the message that if you desired to be excused you would be.

Mr. COURSHON. Mr. Chairman, I did get the message, and the first thing I wanted to do was to think you for accommodating me.

Basically, it was the problem of trying to be in two places at the same time, and I have never been able to solve it.

And I have also known that one of the most important places to be was before the Congress of the United States, and therefore I am happy to be here.

Good morning, my name is Arthur Courshon. I am chairman of the board and one of the organizers of the Washington Federal Savings & Loan Association of Miami Beach. I am also chairman of the Legislative Committee of the National League of Insured Savings Associations. In addition to that, of course, I am a member of the trade organization that just testified. I am accompanied by the gentleman on my left, whom you probably all know, the general counsel of the National League, Mr. Bryce Curry. Frankly, I am not a believer in prepared written statements, because I have always felt that the committee wants facts based upon current information and the hearings as they go at that moment; and, therefore, I have not favored you with a typed, written report.

I felt that it would be more pertinent to have my comments as I think of them, based upon my background and experience and in the atmosphere of the testimony that has already taken place, including the recent exchange of questions and answers that I just heard with a great deal of interest and all of which answers I don't completely subscribe to.

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First, I want to say, however, that the National League frankly would be opposed to House bill H.R. 729 for some of the reasons testified to by Mr. Mortlock, but not exactly for the same reasons, some of which I will briefly allude to in a moment.

We are not really prepared to discuss House bill H.R. 5874 which was the successor or the duplicate of, except for minor changes, H.R. 4253. But we would like to point out that basically these two bills would create a peculiar situation. One would fragment an existing agency-namely, the Federal Home Loan Bank Board-while the other would consolidate the several Federal agencies in the commercial banking area.

As already has been testified, there are three separate supervisory agencies or bodies involved with bank supervision. And what H.R. 5874, by the creation of the Federal Banking Commission Act, would do, is to bring it under one. And that, in my opinion, makes a lot of

sense.

When I say "in my opinion," I mean personally. The league, not being in the banking business, as banks per se, does not have a position on H.R. 5874 other than to be for the theory or the practice of unified supervision rather than a fragmentation of supervision.

Now, dealing with H.R. 729, the board, as you know, has been under attack for years for supervisory problems under the Government Operations Committee, as has already been alluded to. There have been suggestions of the past administration for Reorganization Plan of 1956, which, as Mr. Mortlock has testified, was opposed by the Congress of the United States, was opposed by the U.S. League, and was opposed by the National League.

And, basically, it is for the same reasons that we opposed the Reorganization Plan of 1956 that we would now be opposed to H.R. 729, because we feel that we would again have a fragmentation, we would have two Government agencies concerned with the same problems, and possibly moving in separate directions.

And that really is the thrust of H.R. 729, that is, to try to clean up and to bring about a better system of supervision. And from the tenor of some of the questions I heard this morning, I had the feeling that there was an uneasiness on the part of Congress that the board is a judge, jury, policeman, district attorney, and has the power to do just about everything.

It seems that the sense of H.R. 729 is to slow down, or dissipate, a little bit of that power by having at least the insurance aspect of the Board's operation differentiated from its supervisory and theoretically quasi-judicial aspects, which are not always handled in a quasi-judicial manner.

To attack the problem of deficiencies in supervision, we do not feel that it is necessary that the Board itself should have, or the industry or the public should have, the greater problem of a fragmentation of the Home Loan Bank Board.

We would rather approach the problem of supervision and zero in on it by looking into the particular laws that are involved, which are sections 5(d)(1) and 5(d) (2) of the Home Owners Loan Act. And it is for that ron that we have also been working on drafts, in conjunction TT.S. League, to try to solve the problem roblem.

without creatin

Therefore, we have been opposed to H.R. 729 because it would create two agencies using two different levers to supervise the same business, which may right now be oversupervised and possibly overregulated.

The organizational structure of the Federal Home Loan Bank Board, which has been in being really since 1932, has already undergone five separate changes, and the Board really hasn't had a chance to settle down, the last change being in 1955 when the Board received its independence.

The proposed change now would be the sixth change, when the Board would be basically disrupted, and would be facing many problems.

For example, if the Board determined under the proposed act to charter a new institution, could the Federal Deposit Insurance Corporation refuse to insure what the Board has just chartered?

It is not clear. And it is just a problem I don't think that the country needs.

Or, for example

Mr. MULTER. May I interrupt you?

I think that is what we would like to get some guidance on.

Mr. COURSHON. I have ideas, but I don't know whether or not they are guidance.

But, anyway, I raise that as one of the points. We want to see proper supervision in the public interest which has a check and balance system in it, so if there are abuses on the part of the supervisors, they can be rectified under a check and balance system in the courts. But we don't believe that to be appointed is necessarily to be appointed in a Federal agency.

We have another basic objection to the proposed bill, in that it mixes two types of Federal agencies-I mean financial businesses, banks and savings and loans.

Basically, while they are similar to each other, and they overlap in some respects, they are still not the same kind of creature.

Banks, essentially, and except for certain limitations—and I don't like to overgeneralize before some of the greatest experts on banking in the world in this room today, as to these statements-banks, basically, are dealing with demand deposits and short-term credit. They have different liquidity and reserve problems, being basically stock companies, than the great majority of savings and loans which are mutual companies and deal with time deposits, and have longer term considerations, even though, as I say, banks have paralleled savings and loan practices and the savings and loans, to a certain extent, are moving toward bank-type operations.

But when you have one superagency that attempts now to be the insuring agency for the banks and the savings and loans, which have different problems, I don't think it is in the public interest. And it is for that reason we also oppose the legislation.

Basically, I would like to conclude by saying that we don't feel in the National League that the proposed bill really gets to the thrust of the problem. We recognize what the problem is; we think we know some of the answers. We are not sure we are right. But we feel that this solution will create greater problems than the problems that already exist.

I want to thank you very much for having the opportunity to testify this morning.

Thank you very much.

Mr. MULTER. Mr. Courshon, I was pleased to note you would be one of the witnesses here, because I think you are one of the more knowledgeable men in the industry. I think you are thoroughly experienced and familiar with most of the facets of the operation of the thrift institutions.

We have been told that there is a distinction between savings and loan associations and savings banks.

What is the distinction, other than their right of investment, and the restrictions and limitations on their right to invest?

Mr. COURSHON. I appreciate the compliment, Mr. Chairman. I think my answers will reflect that you have too much confidence.

There are basically 17 States that have State laws in which there are savings banks. As you know, there is no Federal mutual savings bank system, though there is a proposed bill to create one. And, therefore, the first difference is that it is not a dual system.

You have State savings banks. You do not have Federal savings banks. You do not have 50 States that have savings banks. Secondly, you have

Mr. MULTER. It is 18 States now, since Alaska came in. Eighteen States have savings bank laws. And in every one of those States that have State savings banks, mutual savings banks, they also have mutual savings and loan associations.

Now, what is the difference, if any, other than their investing powers?

Mr. COURSHON. Well, basically, the difference-we have to approach it several ways. You cannot just say "other than their investment powers," because, of course, Mr. Multer, investment power is a big difference.

Secondly, it is their structure. Basically, a savings bank is a trustee concept, where the board of trustees are appointed perpetually, and there is no proxy system. They are only subject to removal, in most cases, by a two-thirds vote of the members, or the beneficiaries of the trust. And, therefore, they are theoretically, I would say, less responsive to their members than a savings and loan association that is amenable to the wishes of its members who vote directly according to the amounts that they have in their accounts.

Secondly, by virtue of the difference in the investment powers, they have more flexibility, I would say, from the standpoint of being able to move into the various areas of the market as the needs of the market arise, frankly, than, in many cases, savings and loan associations. For example, Florida has no savings bank law, and we therefore don't have the competition of the savings banks.

Now, many of my friends in New England and in New York that do say that the competition is tremendous--well, I feel that is in the public interest.

So, basically, from the frame of reference where you ask it, they are in the same business. There is a difference if you are talking ́about structure. There is a difference if you are talking about investment power. But they are both more or less savings banks.

I think it was a happy accident that the savings and loans in 1933, when the Federal system was created, were called Federal savings and loan associations rather than Federal savings banks. It may well have been that the bankers at that time would have objected to having this new creature that came into being called a bank.

I can't really tell you that I see that much difference, other than the points that I have made.

Mr. MULTER. The savings and loan associations have banking hours and they advertise banking hours, not office hours. And their officers call themselves bankers, do they not?

Mr. COURSHON. Well, I think they had a sense of inferiority in the early days which, apparently, they have overcome. And I think they felt in the public's eye they would get acceptance faster if we looked like and appeared to be banks, because banks were there first.

But I must say that in the later years, in which my experience is, we haven't felt that sense of inferiority to the banks, and we haven't felt necessarily that we had to be called banks in order to get public acceptance.

We just felt we had to do a job.

Mr. MULTER. Your facilities for receiving and paying out moneys is almost the same in every instance as the banks. You have your tellers' windows, you have your loan officers

Mr. COURSION. Physically, yes, sir. Of course, as you know, we are not dealing with checking accounts and, therefore, so-called demand accounts.

But we treat our savings accounts as demand accounts, because we have the reserves and the assets and feel that we have the obligation to meet withdrawals as they are called for, and we have and we do.

Mr. MULTER. Of course you do as the savings banks also do, reserve the right to require notice from a depositor or shareholder.

Mr. COURSHON. Well, it is in the law. And, as a practical matter, we don't

Mr. MULTER. It is in your passbooks.

Mr. COURSHON. Because, again, our passbook is subject to the law. But as a matter of practice, we have not availed ourselves of that. And the so-called right to go on notice or on rotation has not been something that we have felt as an industry necessarily that we needed, because we felt we have had the strength to meet withdrawals as they are needed, because we have our own strong reserve, we have the reserves of the bank system, and then, of course, we have the backing of the Treasury to the extent that it is there.

Mr. MULTER. The savings banks proceed the same way.

Mr. COURSHON. Yes, sir. And I don't think that they feel any need. to be concerned with the right to go on notice, either.

Mr. MULTER. Most of the savings and loan associations refer to their shareholders as depositors, and the shareholders themselves refer to themselves as depositors.

Mr. COURSHON. Yes; and then you get a letter from some banker and he corrects you and tells you you are not depositors, you are shareholders, and then we write back an apology, and we get over that.

Mr. MULTER. Is there any difference as to the rate of dividends or interest that either of you may pay to a depositor or shareholder?