However, Mr. Multer's bill, H.R. 673, discussed in appendix A, is at least a step in the right direction by requiring Federal Deposit Insurance Corporation approval of the moving of the main offices of all insured banks, thereby creating some measure of uniformity.

I now come to the two bills specifically before this subcommittee for action. My long preamble was absolutely necessary, however, because as will now be evident, our opposition to these two bills does not lie in the policies which they reflect.

As I have already pointed out, the association specifically endorses many of these policies.

Our problem with these bills lies simply in the fact that, in our opinion, legislation already endorsed by the association, and introduced by the chairman of this subcommittee, reflects those policies better.

1. H.R. 729: There are, as we see it, three fundamental changes in existing legislation inherent in this bill.

The first change would be in the management of the FDIC by reason of sections 2, 3, and 6 of the bill. We heartily favor such a change to the extent it would remove the Comptroller from the Board, for the reasons which I have already given. However, we favor the approach of H.R. 673 introduced by Mr. Multer, rather than the provision contained in H.R. 729. We see considerable difficulty in the qualifications for members of the Board called for by H.R. 729. We have particular concern in having commercial banks regulated by a board, two of whose three members specifically would have no experience in commercial banking.

A second change called for by H.R. 729 would be the requirement for FDIC approval for insurance of National and State member banks, as well as for State nonmember insured banks as at present. We are, of course, in complete accord with this principle for the reasons which I have already given. Our proposed bill set forth in appendix A, based on a prior bill introduced by Mr. Multer, would accomplish this result.

A third change called for by H.R. 729 would be a combination of FDIC and FSLIC insurance.

We would venture the question of whether it is practical to completely divorce the regulatory functions over savings and loan associations, now performed by the Federal Home Loan Bank Board, from the function of insurance over these associations now directed by trustees consisting of the members of the board.

While I am on the matter of Federal savings and loan associations, however, I would like to comment upon one matter upon which I understand there was some discussion on the first day of the hearings relating to parity between Federal and State savings and loan associations in the matter of branches.

This has long been an important legislative goal of the association. Again, Mr. Multer has submitted legislation in this session of Congress to accomplish that result.

Our proposed bill in appendix A to this statement also accomplishes that result.

2. H.R. 5874: This bill is a basic implementation of the proposal of Governor Robertson of the Federal Reserve Board for a Federal Banking Commission.

We believe that bills already introduced by Mr. Multer and discussed in appendixes A and B to this statement would accomplish the policy results intended by H.R. 5874 in a better fashion.

Our legislation would eliminate the fragmentation of responsibility and resulting conflicts of policy inherent in the present three Federal agencies by requiring FDIC approval of all new insured banks and branches thereof; it would transfer approval authority over branches of State member banks to the FDIC, which we believe to be the more appropriate agency to handle this function; and it would strengthen the dual banking system by creating a uniformity of judgment on the Federal level in the FDIC and by making the FDIC completely independent of the Comptroller's Office.

Furthermore, the approach which we recommend would eliminate the present competitive disadvantages to State banks inherent in the necessity for two approvals required for State insured banks (by their supervisor and a Federal agency) as opposed to only one for National banks (by the Comptroller)-a needed change not inherent in H.R. 5874.

Such a duality of approval would also preserve something of the checks and balances inherent in our present regulatory scheme and would avoid the very natural deep-seated concern which all of us have with the danger potential in a concentration of power in a single Federal banking agency with all supervisory and regulatory power.

Furthermore, the very beneficial effect on the public of insurance by the Federal Deposit Insurance Corporation would be damaged if FDIC were completely submerged in a vast omnibus banking commission. I believe there is a strong possibility that FDIC would lose its very beneficial identity with the public, and that Congress should guard with great care that important identity.

Mr. Chairman and members of this subcommittee, I want to thank you, on behalf of the State bank supervisors, for the opportunity to appear and to express the views of the association.

Mr. Chairman, the other day when I appeared before you, you asked me to bring into this hearing certain material.

You asked that we prepare a summary of State law and practice on the subjects of notices, hearings, and judicial review. This was a little complicated because, as you know, the right of judicial review may be nonstatutory.

We sent out to all supervisors the day after your request a lengthy questionnaire on these subjects. We now have responses from 40 of the 50 States. However, we thought it would be better to wait until we have a complete response before preparing a summary for you.

However, in the event there is a question regarding any specific State, I have all the material here. You also asked that we submit to you, as to each of the 50 States, the criteria set out in State law for the approval of new banks and branches.

I have caused to be prepared excerpts from the 50 State statutes on this subject, and have 4 copies here.

Would you like one for the record, or how would you like this handled, Mr. Chairman?

Mr. MULTER. Well. Mr. Hughes, again, you have been most helpful to our commit

We will ma'

cipal stateme

our record the attachments to your prin

(The attachments referred to follows:)

ATTACHMENTS TO THE STATEMENT OF RANDOLPH HUGHES BEFORE THE HOUSE BANKING AND CURRENCY COMMITTEE ON H.R. 729 AND H.R. 5874 ON BEHALF OF THE NATIONAL ASSOCIATION OF SUPERVISORS OF STATE BANKS

A. Proposed legislation, substantially identical to legislation previously introduced by Mr. Multer, to amend the Federal banking laws in several respects, plus supporting memorandum.

B. H.R. 706, introduced by Mr. Multer, to amend the Federal Deposit Insurance Act to remove the Comptroller from the Board of the FDIC, plus supporting memorandum.

C. Excerpt from the testimony of Robert Myers, Jr., on behalf of the NASSB before the House Banking and Currency Committee, on the Banking Act of 1960. D. Excerpt from the testimony of Randolph Hughes on behalf of the NASSB before the House Banking and Currency Committee on "Conflicts Between Federal and State Banking Laws," May 1, 1963.

E. Proposed legislation to reverse the effect of Camden Trust v. Gidney, 301 F. 2d 521 (D.C. Cir. 1962).

APPENDIX A

REASONS FOR SUPPORT OF LEGISLATION TO AMEND FEDERAL BANKING LAWS IN SEVERAL RESPECTS TO STRENGTHEN THE DUAL BANKING SYSTEM

Proposed legislation.-The proposed bill is identical to H.R. 673 introduced by Mr. Multer in the 88th Congress, 1st session, except that it adds a new section 5. It also reflects bills introduced in both the House (H.R. 3331) and Senate (S. 2006) in the 87th Congress, and H.R. 9184 introduced in the 86th Congress. The important changes in existing law proposed in the bill are as follows:

A. BRANCH APPROVAL

The law. At present a State bank desiring to establish a branch must secure approval of the Federal Reserve Board, if it is a member bank, or of the FDIC, if it is a nonmember insured bank, in addition to securing approval from its own State supervisor. A national bank needs only to secure approval of the Comptroller of the Currency.

Proposed change.-Sections (1) to (3) of H.R. 673 provides that approval from the FDIC must be obtained before any insured bank can establish a branch, and eliminates the Federal Reserve approval authority over branches of State member banks.

Reasons for change.-(1) Uniformity in application of standards: There have been instances where a State supervisor has discouraged the establishment of a branch of a State bank at a particular location, only to find the Comptroller subsequently approving an application by a national bank for a branch in the same area. Placing with FDIC the ultimate approval authority on branches of all insured banks-State and National-will eliminate the existing conflicts of judgment between State supervisors and the Comptroller of the Currency.

(2) Competitive timing: The necessity for a dual approval of branches by State banks (supervisor plus Federal Reserve or FDIC) has resulted in instances where a national bank has been able to expedite an applicaton at the same location because it only has to seek one approval (Comptroller). The attached bill establishes competitive timing by requiring each to seek a dual approval-a State bank from the supervisor and FDIC and a national bank from the Comptroller and FDIC.

(3) Appropriate concern: The establishment of a branch is a matter of legitimate concern to the FDIC to the extent it affects the solvency of the bank it insures. The attached bill gives it authority to pass on branches of all insured banks, State and National, rather than just of State nonmember banks, as at present. Further, branching is not a matter of concern to the Federal Reserve Board, whose principal duties lie in the area of money and credit control. The attached bill removes the present authority of the Board to pass on branches of State member banks.

B. BRANCH DEFINITION

The law. The National Bank Act presently defines a "branch" without regard to Ntate law.

Proposed legislation.-Section 3 (b) of H.R. 673, requires the Comptroller to follow State law in defining a "branch."

Reasons for change.-The National Bank Act contains the clear and unequivocal mandate of Congress that there shall be competitive equality between State and National banks in branching, and that State law shall be the standard for the establishment of branches for both classes of banks. This policy can be evaded if the Comptroller can define a new banking office as a mere extension of an existing office (e.g. connected by a tube or tunnel) not requiring his approval, whereas such an extension would be considered a "branch" of a similarly situated State bank which it would be prohibited from establishing under State law.

C. FDIC APPROVAL FOR INSURANCE OF ALL BANKS

The law. Under present law the FDIC has nothing to say about the insuring of new national banks or State member banks. Insurance is "automatic" after the Comptroller charters a new national bank or the Federal Reserve admits a new State bank to membership. The FDIC only passes on the insurance of State nonmember banks.

Proposed legislation.-Section 5 of the attached bill provides that the FDIC must approve the insurance of all categories of insured banks-State and National.

Reasons for the change.-The FDIC, as the insuring agency, has a legitimate interest in approving the insurance of all banks for which it has an insuring responsibility. It is inconsistent with the dual banking system to allow national banks to be insured "automatically" after chartering by the Comptroller, but to require State nonmember banks to secure such approval from the FDIC after chartering by the State supervisor.

D. PARITY BETWEEN FEDERAL AND STATE SAVINGS AND LOAN ASSOCIATIONS

The law. There is no provision providing for branch offices of Federal savings and loan associations in the Home Owners Act of 1933. The courts, however, have held that the Board has the power to authorize such branches, North Arlington National Bank v. Kearney Fed. Sav. & Loan Ass'n, 187 F. 2d 564 (3rd Cir. 1951); First National Bank v. First Federal Sav. & Loan Ass'n, 225 F. 2d 33 (D.C. Cir. 1955); and, in doing so, is not bound by the policy incorporated in the National Bank Act whereby branches of national banks may only be granted to the extent permitted by State law to similarly situated State banks. U.S. ex. rel. State of Wis. v. First Federal Sav. & Loan Ass'n, 151 F. Supp. 690 (D.C. Wis. 1957) and cases discussed therein at 697-699.

Proposed legislation.-Section 4 of the attached bill establishes a parity between Federal and State savings and loan associations. In 1954, 1955, and 1958 (as part of the Financial Institutions Act) the Senate passed legislation limiting branches of Federal savings and loan associations to States where branches were allowed to State savings and loan associations and to mutual savings banks. This legislation did not pass the House.

Reasons for change.-The McFadden Act of 1927 recognized as an essential principle of the dual banking system that there must be competitive equality in the field of branching and that States must be left free to set the branch pattern for both Federal and State institutions. Judicial construction of the Home Owners Act of 1933, however, establishes precisely the opposite pattern for savings and loan associations. Federal savings and loan associations may establish branches without regard to State law. Accordingly, State associations in States with limited or prohibited branching powers are left at a competitive disadvantage with their Federal counterparts, or States are forced to legislate statewide branching, regardless of local conditions, simply to avoid such a competitive disadvantage. The Senate Banking and Currency Committee has said: "The Federal Government in perpetuating a situation whereby a governmental board may grant branches to federally chartered institutions without regard to the custom, law, or desire of the States is ignoring the rights of the States and sanctioning unfair competition." Senate Report No. 121, 85th Congress, 1st session, page 73. The question of branch privileges is one that is better determined by the States themselves because "various States have different conditions and requirements."

Senate Report No. 121, page 73. As the NASSB has previously testified, the present law substitutes "the dead level of Federal uniformity for each State's freedom of choice."

E. OTHER PROVISIONS OF PROPOSED BILL

Moving. The bill proposes to treat the approval of new branches and the moving of a main office or a branch in the same way-that is, to require FDIC approval before any insured bank makes such a move.

Examinations.-The bill proposes that the FDIC may consider reports of the Comptroller or the State supervisor in passing on branch applications. This would allow the FDIC to rely upon such examinations, if it so desired, and this avoids duplicate examinations.

Notice. The bill assures public notice of applications for new branches or moves, and any opposing banking, thrift, or savings institution must "be heard."

[H.R. 673, 88th Cong., 1st sess.]

A BILL To amend section 9 of the Federal Reserve Act, section 18 (d) of the Federal Deposit Insurance Act, section 5155 of the Revised Statutes, and section 5 of the Home Owners Loan Act of 1933

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the third paragraph of section 9 of the Federal Reserve Act, as amended (12 U.S.C. 321), is further amended by striking from the first sentence the words "Board of Governors of the Federal Reserve System" and inserting in lieu thereof the words "Federal Deposit Insurance Corporation," and by striking from the last sentence the word "Board" and inserting in lieu thereof the words "Federal Deposit Insurance Corporation". SEC. 2. Section 18 (d) of the Federal Deposit Insurance Act (12 U.S.C. 1828 (d)) is amended to read as follows:

"(d) No insured bank shall establish and operate any new branch or move its main office or any branch unless it shall have the prior written consent of the Corporation. The Corporation may grant such consent only after an application therefor has been approved by either the Comptroller of the Currency (in the case of a national or district bank) or by the appropriate supervisory State authority (in the case of a State bank). In granting or withholding such consent the Corporation shall consider the report of investigation made by either the Comptroller of the Currency (in the case of a national or district bank) or the appropriate supervisory State authority (in the case of a State bank) in approving such new branch. The factors to be considered by the Corporation in granting or withholding its consent under this subsection shall be those enumerated in section 15 of this Act. Before acting upon any application under this subsection the Corporation shall require the applicant to give appropriate public notice thereof and shall permit any other bank, or thrift, or savings institution to become a party to the proceeding and be heard in opposition to the application."

SEC. 3. (a) Subsection (c) of section 5155 of the Revised Statutes of the United States (12 U.S.C. 36 (c)) is amended (1) by inserting after "Comptroller of the Currency" in the first and second sentences thereof the following: "and subject to the provisions of section 18 (d) of the Federal Deposit Insurance Act", and (2) by adding at the end of such subsection the following new sentence: "Before acting upon any application under this subsection, the Comptroller of the Currency shall require the applicant to give appropriate public notice thereof and shall permit any other bank, or thrift, or savings institution to become a party to the proceeding and be heard in opposition to the application."

(b) Subsection (f) of such section is amended by inserting immediately before the period at the end thereof the following: ", except that any determination as to whether a new facility to be operated by a national bank will be a new branch requiring approval under this section, or part of an existing place of business not requiring approval, shall be made in conformity with such statutes, judicial decisions, rules, regulations, and decisions of the State banking supervisory agency, and opinions of the attorney general of such State as would be applicable to a determination of whether a banking facility to be operated by a State bank would be a branch under the law of such State".

SEC. 4. Section 5 of the Home Owners Loan Act of 1933 (12 U.S.C. 1464) is amended by adding at the end thereof the following new subsection:

"(1) No such association may establish a branch without the approval of the Board. The Board may grant such approval to an association in any State