assets to Equitable and the payment or the making by Long Beach of provision for payment of all creditor and other liabilities.

2. The proposed trust agreement (p. 2) states as an additional purpose, the facilitation of "the reorganization of Long Beach Federal Savings and Loan Association into Equitable Savings and Loan Association." This additional purpose is not contemplated by article XV. Under that article part of Long Beach's assets equal in value to the aggregate principal amount of all Long Beach share accounts are authorized to be sold to Equitable, and the net surplus remaining after such sale and payment of all Long Beach liabilities is either to be converted into cash and distributed to Long Beach shareholders or to be transferred to a trust for handling and distribution. In either case distribution to shareholders is required to be completed within 10 years after the close of the settlement escrow, and assets of at least $3 million must be retained during that period. Such trust is not related to Equitable, its only purpose being to permit the dissolution of Long Beach under paragraph (k) of said section 2 at an early date and in any event prior to the end of the 10-year period. The 10-year payout period was designed to permit the normal collection of the loans included in such assets without loss of value resulting from forced sales of such loans. Obviously the loans and other remaining assets cannot be distributed in kind to the shareholders. The required retention of $3 million in assets for 10 years is to provide security for Long Beach's liabilities and duties under the settlement agreement.

3. The proposed trust agreement (p. 2) states that the list of beneficiaries shall be subject to the approval of the board selected by the beneficiaries. It is difficult to understand the reason why such board, which is not a party to the trust agreement and whose existence is based on the agreement, should have any right to approve the list of beneficiaries who are specifically described in paragraph (h) of said section 2.

4. The first complete paragraph on page 3 states that the "rights, powers, and authority of beneficiaries herein shall be exclusively represented and executed by and through the duly elected board hereinafter named and provided for." Article XV does not contemplate depriving the beneficiaries of their lawful rights under the trust agreement and does not even mention said board. cordingly, this paragraph should be deleted or made subject to the right of any beneficiary to bring an appropriate legal action against the trustee for breach of its fiduciary duty under the trust agreement.

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5. In the second complete paragraph on page 3 is a sentence to the effect that no beneficiary shall "cast more than 50 votes except by proxy." It is believed that this is intended to mean that a beneficiary is entitled to cast up to 50 of his own votes and also to cast the votes of other beneficiaries as their proxy. However, this sentence should be clarified since it could be interpreted to mean that a single beneficiary could cast only up to 50 votes in person but could cast, by proxy, additional of his own votes based on the size of his account.

6. The proposed trust agreement fails to provide that the trust assumes and is subject to all liabilities and duties of Long Beach under the settlement agreement, as required by said subparagraph (vi).

7. The fourth paragraph under "Powers of Trustee" (p. 3) gives the trustee general authority to act in any manner "as could, or may, be done by a private individuals." Article XV requires that the trustee "shall be subject to all duties and responsibilities customarily imposed upon trustees under the law of California without limitation of liability for misconduct or negligence." (Italic added). This means that the trustee's duty to use in the handling of the trust assets the care, skill, prudence and diligence of an ordinarily prudent man engaged in similar business affairs may not be limited. That part of the fourth paragraph commencing with "and in all other respects" should be eliminated because it purports to give the trustee a discretion broad enough to constitute a substantial limitation of its liability for negligence.

8. In order to avoid any misunderstanding, it would be desirable to include in the section entitled "Accounting" (p. 4) a statement that the trustee shall furnish within a reasonable time such interim uncertified financial statements and information concerning the trust as may be reasonably requested by Insurance Corporation.

9. In order to remove any doubt in the matter, it is recommended that the following be inserted at the commencement of the paragraph under "Duty of Trustee" (p. 4):

"Notwithstanding anything herein to the contrary,".

10. The proposed trust agreement provides (p. 4) for termination of the trust either 12 years after its creation or upon the last to die of a designated group of persons, whichever event shall first occur, and that the trust may be terminated anytime prior thereto "after making provision for the discharge of all then remaining liabilities hereunder." This is completely contrary to subparagraphs (iv) and (v) of said paragraph (h). It is recommended that this entire section except the last sentence be deleted, and that the following be inserted in lieu thereof:

"This trust shall terminate on April 2, 1972."

11. In the first paragraph under "Trustee's Power to Borrow," it is recommended that the words, "including the initial purchase of the trust estate" be deleted or further clarified. Article XV does not contemplate that the trust estate shall be initially acquired by purchase since subparagraph (vi) expressly states that such distribution may be consummated by "the transfer to a trust for the benefit of the Long Beach shareholders of all assets of Long Beach remaining after said sale to Equitable of assets equal to all share accounts** *”. 12. Article XV authorizes the establishment of a trust which shall provide for the handling and distribution of the remaining assets to shareholders as such shareholders shall authorize, subject, however, among other things, to the condition that the trustee "shall be subject to all duties and responsibilities customarily imposed upon trustees under the law of California without any limitation of liability for misconduct or negligence." [Italics added.] This condition is a limitation upon the authority of the shareholders, and the shareholders are not authorized to change this condition which is designed for their protection. The proposed trust agreement contains several provisions in the sections entitled "Trustee's Power to Convey" and "Actions by Trustee" which require the trustee to take certain actions in conformity with directions from the Board. Such provisions definitely relieve the trustee of its duties and responsibilities and definitely limit its liability for negligence. They obviously have the effect of transferring trustee powers to persons with no or doubtful trustee responsibility. If Long Beach management contemplated such a radical change in the trustee's duties and responsibilities, the matter should have been expressly dealt with in article XV. Article XV makes adequate provision for the trustee, but is completely silent with respect to the Board which is all-important in the proposed trust agreement. The provisions giving the Board power to direct the trustee should be eliminated. In fact, the entire section "Trustee's Power To Convey" and the second paragraph of "Actions by Trustee" should be deleted. 13. The first paragraph (p. 8) under "Board" is subject to the comments contained in item 4 of this letter.

14. For reasons stated in item 12 of this letter, it is recommended that the second paragraph (p. 8) under "Board" be deleted.

15. Paragraph (f) on page 9 should be clarified to show that the trustee is not relieved of its duty and responsibility to handle and distribute the trust estate. (See item 12 of this letter.)

16. With regard to "Commencement of Trust" (p. 10), paragraph (h) of article XV provides that after assumption by Equitable of all Long Beach share accounts and payment or making provision for payment of all Long Beach liabilities, the net surplus, etc., shall be distributed to Long Beach shareholders. Subparagraph (vi) states that such distribution may be consummated by a transfer to a trust of all the assets remaining after the sale to Equitable. Consequently, the trust imposed upon the remaining assets does not commence until such remaining assets are transferred to the trustee. Accordingly, this "Commencement of Trust" section should be deleted or appropriately modified. However, there is no objection to execution of the trust agreement subject to its becoming effective upon transfer of the remaining assets to the trustee.

17. In order to remove any doubt, it is recommended that the following additional paragraph be added to the proposed trust agreement:

"In event of any inconsistency between this agreement and said article XV, the provisions of article XV shall control."

I have the following comments concerning the "Notice of Special Meeting" and letter both dated March 29, 1963:

1. Item 3 of the notice refers to consideration and acting upon "any form of merger, consolidation, conversion, sale of assets, pooling of assets or property, or other transactions between" Long Beach and Equitable "under said article XV or otherwise." Since the only transaction authorized with Equitable is a sale of part of Long Beach's assets under article XV, the other transactions should not be considered or acted upon at the meeting.

2. With reference to the third paragraph on page 2 of the letter, it should be made clear that any proxy given at any time prior to the meeting to or under the control of Long Beach management as well as the shareholders' committee will be voted for the plan and trust under article XV unless the member attends and votes or revokes the proxy in writing, in accordance with section 2(c) of article XV.

Sincerely,

GEORGE E. MONK.

COMPTROLLER OF THE CURRENCY,

TREASURY DEPARTMENT, Washington, D.C., February 15, 1963.

Copy of a letter addressed to an officer of a national bank.

This is in reply to your letter of February 4, 1963, concerning the rights of national banks to enter into financing agreements whereunder they purchase equipment leases, either with or without recourse, without any note or other evidence of debt being executed by the lessor in favor of the bank.

It is the position of this office that equipment leases constitute satisfactory evidence of debt for purchase by a national bank within the meaning of paragraph seven of 12 U.S.C. 24, if under a given lease agreement and assignment, (1) the obligations of the lessor have been fully performed, (2) the lessee is unqualifiedly obligated to pay rentals thereunder, and (3) lessor and lessee agree to save free the bank from any claims arising thereunder.

JAMES J. SAXON, Comptroller of the Currency.

COMPTROLLER OF THE CURRENCY,

U.S. TREASURY,

To the Presidents of All National Banks:

Washington, D.C., March 18, 1963.

We have been asked whether it is permissible under existing law and regulations for a national bank to enter into lease financing arrangements whereby the national bank would acquire title to personal property and would lease such property directly to its customer.

Our letters of February 1, 1963, and March 1, 1963, copies of which were circulated to all national banks, ruled that leases covered thereby are valid evidences of debt for national banks, and may be considered as installment consumer paper to which exception 13 of 12 U.S.C. 84 is applicable.

The leasing by the bank of personal property acquired upon the specific request of and for the use of its customer, and the incurring of such additional obligations as may be incident to becoming an owner of personal property and the lessor thereof, is a lawful exercise of the powers of a national bank and necessary to the business of banking. Such direct leasing is, with respect to its banking aspects, substantially the same as the present practice of financing personal property acquisition through a separate lessor.

It is our conclusion therefore that direct lease transactions, as above described, constitute legal and proper banking activities for national banks.

JAMES J. SAXON, Comptroller of the Currency.

COMPTROLLER OF THE CURRENCY,

U.S. TREASURY, Washington, D.C., April 30, 1963.

'Copy of a letter addressed to an officer of a national bank. Your letter of March 26, 1963, has reference to our earlier letter of March 18, authorizing the purchase of personal property by national banks incidental to a lease thereof.

You advise that you bank has been requested to purchase equipment at a price of $150,000, for which the lessee would immediately pay to the bank $50,000 and enter into a 36-month-lease agreement. This would result in a net expenditure by the bank of $100,000, which is $70,000 more than the bank's lending limit. You request our advice on whether the lending limit is applicable to the situation presented.

The purchase by the bank of personal property incidental to a lease thereof does not constitute a loan to the lessee, even if it is contemplated that title to the property will be transferred to the lessee upon termination of the lease.

Likewise, the fact that the sum of the lease rentals might exceed the bank's loan limit is without bearing, since such remittances are not repayments on a loan but payments for the use of property owned by the bank.

The amount of any one investment in personal property to be leased is a matter of judgment for the bank, acting upon the relevant circumstances of each An undue concentration in such investments is, of course, to be avoided. Sincerely,

case.

JAMES J. SAXON, Comptroller of the Currency.

STATE OF NEW YORK

(Print. 1025, 2149-Intro. 1025)

Introduced by Mr. HATFIELD

IN SENATE

January 14, 1963

(at the request of the Joint Legislative Committee to Revise the Banking Law)-read twice and ordered printed, and when printed to be committed to the Committee on Banks-committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT To amend the banking law, with respect to terminology of savings and loan associations

The People of the State of New York, represented in Senate and Assembly, do enact as follows:

Section 1. Subdivision three of section three hundred seventy-eight of the banking law, such subdivision having been added by chapter three hundred fortyone of the laws of nineteen hundred thirty-nine, is hereby repealed.

§ 2. Subdivisions four through ten, inclusive, of section three hundred seventyeight of such law are hereby renumbered, respectively, as subdivisions three through nine, inclusive.

§ 3. Section three hundred seventy-eight of such law is hereby amended by adding thereto a new subdivision, to be subdivision ten, to read as follows: [Explanation: Matter in italics is new; matter in brackets [ ] is old law to be omitted] 10. Notwithstanding any provision of this chapter, a savings and loan association, in its organization certificate, by-laws, advertising matter or any other instrument, document or other writing used in or in connection with its business, may designate its shares as "deposit accounts" or "savings accounts" its members as "depositors", its dues or share payments as "deposits", and its share capital as "deposit liability". The use of any term permitted by this subdivision shall not affect any right, duty, privilege or liability which either the savings and loan association or any member would otherwise have.

§ 4. This act shall take effect immediately.

LAW OFFICES OF HANSEN, HAZEN & LYNCH,

St. Paul, Minn., May 3, 1963.

Mr. ABRAHAM J. MULTER,

Chairman, Subcommittee on Bank Supervision and Insurance,

New House Office Building,

Washington, D.C.

DEAR MR. MULTER: It was a pleasure for me to be with the group representing the Independent Bankers Association and to discuss with you changes in present banking laws. I know of your past interest and I am anxious to be of help to you in this endeavor.

In line with our conversation, the Independent Bankers Association has been interested in strengthening national banking laws in several areas and I am submitting herewith on an informal basis some ideas on possible amendments with the thought that you and the lawyers on the staff might like to look at them

and to consider their advisability. The IBA has not taken formal action on these proposals, although it is believed that they would be supported. We will endeavor to determine as soon as possible the position of the IBA on these and other proposals before your subcommittee and will advise you further. In the meantime, our thought in transmitting this to you is to save time in considering these proposals.

BRANCH BANKING

In section 36 (c) is the essence of the dual banking system, but much of the difficulty arises from the narrowness of the requirements that national banks must follow State standards only "as to location." If these words were stricken from the first sentence of this section it would place national banks upon an equal plane with State banks as to branching. For example, in some States like North Dakota and Missouri, the State laws permit only "facilities" for paying and receiving purposes, instead of a branch office with full banking powers. The Comptroller ignores this restriction because it is not strictly a restriction as to "location."

*

BANK MERGERS

The 1960 Bank Merger Act (title XII, sec. 1828 (c) U.S.C.) provides near the end of the section, that "in the interests of uniform standards, before acting on a merger **the agency (for example, the Comptroller) shall request a report on the competitive factors involved from the Attorney General and the other two banking agencies referred to in this subsection * * *” Our suggestion is that this requirement could be strengthened by the addition of a sentence to follow which would read as follows:

"No merger shall be approved if the Attorney General and one of said other agencies or the other two agencies without the Attorney General are adverse to approval of the merger."

The Comptroller has ignored the adverse reports of the Attorney General and the other two agencies in a great number of mergers and has granted them in spite of the adverse reports on the competitive factors. This results in defeating the will of Congress and past practice has illustrated that it is necessary to have an enforcement provision along the line suggested.

BANK HOLDING COMPANY ACT (TITLE XII, SEC. 1841, U.S.C.)

Enclosed are alternate proposals for amendments of this act which are explained. The first proposal would be the most desirable, the second next most desirable, and the third would be the minimum strengthening required, in my opinion. The third proposal grows out of bitter experiences we have had in attempting to oppose acquisitions by holding companies. In connection with the third proposal there is also attached a specific proposal regarding procedures for notice and hearing on applications for acquisitions before the Federal Reserve Board.

NEW CHARTERS AND NEW BRANCHES

Much of the difficulty concerning the conduct of the Comptroller's office arises from the secrecy of the proceedings on application for new bank charters or de novo branches. For some unexplained reason the Comptroller is not under the Administrative Procedures Act and there are insufficient standards, no requirements for procedures, and no possibility for court review. The granting of charters should be as important in the public interest as licenses and permits from the FCC, the ICC, and the FPC. A bank charter is a grant of a permanenttype privilege at least as important as new television stations, trucklines, and public utilities. If there were adequate standards, due notice to all parties interested, a public hearing in which proponents and opponents have full status as parties in the proceeding with equal opportunity to present evidence and cross-examine the other's witnesses and a court review upon the record the result would be a more responsible processing of charters for new banks and branches and all concerned would feel that with such fully democratic procedures the applications will be decided upon the merits and not upon the whim of an administrator who may change his standards from day to day.

Under present procedures the granting of charters for new banks and branches is not subject to court review and the Comptroller need not reveal on what basis he made his decision. (See annotations to secs. 26 and 27, title XII, U.S.C.) This is an intolerable situation in a democratic society and should be corrected. This is a complicated matter for amendment of the statutes and at the mo