Mr. HUGHES. That is so. And, of course, the real tragedy about the present situation is that the present Comptroller hasn't attended a Board meeting of the FDIC for well over a year.

Mr. MULTER. Hasn't he delegated his deputy to attend?

Mr. HUGHES. Yes. If I were the Comptroller, I would consider it my responsibility to attend FDIC Board meetings.

Mr. MULTER. Whether it be the Comptroller or his deputy, it is the judgment and the vote of that individual, whoever it may be, in exercising his discretion and judgment in voting. He casts the vote of the Comptroller-whether it is the Comptroller personally or his deputy he must exercise his own judgment in casting the vote. Mr. HUGHES. That is my understanding.

Mr. MULTER. I don't like to put you in the position where you are pointing a finger at another Government official or officials, but the fact is there have been many instances where there was an application pending before FDIC involving a State bank, where the same group first had gone in and asked for an application, filed an application and sought a charter for a national bank, and been turned down by the Comptroller, which meant they could not go any further on the national level. They then went to the State level and applied for a charter, and the charter was granted on condition they get insurance. Then when they come in for the insurance, sitting on that same board is the Comptroller of the Currency-I am not attacking his good faith or judgment, in whose judgment there was no room for this new institution in that area.

Mr. LLOYD. Mr. Chairman-if I could make an inquiry at this time because I asked Mr. Hughes that specific question; and I believe he told me at that time that he was not entirely familiar, couldn't give me an answer. And so I would like to repeat it.

When the Federal Deposit Insurance Corporation passes upon the application of a local applicant for insurance, does the Federal Deposit Insurance Corporation decide as to whether or not a charter should be granted, or does it rather decide whether or not the applicant is qualified for Federal insurance?

And is there a difference in those two?

Or would you care to say?

Mr. HUGHES. Well, I don't like to speak for the FDIC, except to say that FDIC does not charter banks, it is an insurance corporation. Mr. LLOYD. That sounds reasonable.

Mr. HUGHES. Of course, the requirements, as far as insurance is concerned, are in the FDIC Act which they have to look to.

Mr. LLOYD. Completely aside from their charter qualifications? Mr. HUGHES. Well, they are guided by the requirements of the FDIC Act, which, of course, requires that they grant insurance only to sound institutions, based on the criteria set forth in the act.

I don't think they would ever give insurance to one that was not a sound institution.

Mr. MULTER. If you will yield to me, I would like to give you the legislative history of criteria for organizing national banks.

Up to the time of the enactment of the FDIC Act, there were no criteria set forth in the National Banking Act for the establishment of new banks.

When they wrote the FDIC Act, for the first time there was written into a Federal statute the standards to be applied in chartering a new

national bank. The strange part of it is that if you want to determine what is required, what standards must be met to get a new national bank chartered, you must go to the FDIC Act to get the standards. And those are the same standards that the FDIC must use in determining whether or not it should insure a new bank.

Mr. LLOYD. Well, I would like to say, Mr. Chairman, that I really wanted to know, actually, and perhaps you would make a statement, then, that the Comptroller, as a member of the Board of Directors of FDIC does in fact have the authority to grant or deny a charter to a State applicant.

Mr. MULTER. Not a charter.

Mr. LLOYD. The result would be that.

Mr. MULTER. Yes, you are quite right.

Mr. LLOYD. Then I will take your statement on that, because I really wanted to know the answer.

Mr. MULTER. Of course with this reservation, he only has one of three votes on the FDIC Board.

But, at the same time, here is a man sitting in on the inside executive sessions and he has tremendous influence.

Mr. LLOYD. His action then might conceivably result in the denial of an operating franchise.

Mr. MULTER. Yes.

Now, you have this additional situation. This, in my opinion, creates an unfair incentive between the State savings banks and the National banks—and which I think should not occur in a strong dual banking system.

If a group of people want a new charter on the national scene they go to one agency, the Comptroller of the Currency, and if he says yes, the FDIC must insure. They don't have to file two applications, they don't have to have their attorney go to two different places.

But if the same group wants a State charter, they must then file their application with the State people, and after that is completely processed there, they must go through the same thing all over again in the FDIC. It means double work, double application, doublecertainly more legal fees than with the one application.

Isn't that a fair statement, Mr. Hughes?

Mr. HUGHES. You are right. And not only the FDIC, but for member banks of the Federal Reserve System.

Mr. MULTER. Now, you touched upon the primary differences that occur in opinions and decisions as to branching and merging and granting of new charters.

Don't you also run into a difference of policy as to investment policy, as laid down by the National agency as against the State agency? Don't you have some conflict occurring in some States, if not in yours, as to what you think is good investment policy under your State statute and regulations as against what the Federal Reserve Board may decide should be done by a member bank, and what the Comptroller of the Currency may decide as to a National bank, and as to what FDIC may decide as to all banks which are insured?

Mr. HUGHES. Well, I can understand how their examination authory can be used by the Federal agencies to encourage banks relative their investment policies.

Some States have specific statutes relative to investments.

My State does not have any. And I will say this-insofar as I know, neither the Federal Reserve Board nor the Federal Deposit Insurance Corporation have ever entered in the investment policies of the banks of my State.

Mr. MULTER. Let me ask this, Mr. Hughes. Are your State banks permitted to make mortgage loans, not taking the mortgage as an additional security but making the mortgage loan on vacant land?

Mr. HUGHES. We have no restriction as to the type of security that may be used for a mortgage. Of course the National Banking Act does. We have no restrictions in my State.

Mr. MULTER. Well, I have in mind in the State of New York, the State banks are not permitted to make mortgage loans on vacant land. And that has been the rule up to a short time ago on National banks. in accordance with the Comptroller's regulations.

But a few months ago, he passed upon a particular situation which changes the rule in principle, that now permits National banks, even in the State of New York, to make mortgage loans on vacant land. That is the kind of policy differences that I had in mind.

Mr. HUGHES. Many States have different statutes which tend to regulate that sort of thing.

I do not see the need for it. And I would resist as a State supervisor, our legislature passing such laws.

Some real estate is worth more without property on it than it is with property on it.

Mr. MULTER. Let me ask you this. Should there be this difference is this good or bad-that you can have within the same State different rules as to mortgage loans, one assigned to the National bank where it can make the loan or cannot, and the other to the State bank? So you have a diversity of principle. You can go to the National bank and get one kind of loan, and you can go to the State bank and not get it, or vice versa.

Is that good or bad?

Mr. HUGHES. I would say that is certainly a competitive disadvantage, and it would seem that would be unnecessary.

Mr. MULTER. Would it be an unfair competitive advantage or disadvantage?

Mr. HUGHES. It might well be an unfair competitive advantage. Mr. MULTER. Just one other thing: You, in my opinion-of course, I start out with a little bias on my part toward your view-you have made out, in my opinion, a good case to take the Comptroller out of FDIC. Why doesn't the same thing apply to the Home Loan Bank Board, which is to all intents and purposes the same as the Comptroller with reference to the savings and loan associations and the FSLIC which is the insuring agency?

Why shouldn't they be separated, too? If the principle is good as to commercial and savings banks, why isn't it good as to savings and loan associations?

Mr. HUGHES. Well, as I understand the situation, regarding the Home Loan Bank Board, you have a manager of the Federal Savings and Loan Insurance Corporation, and he manages the Corporation under the laws passed by Congress.

Mr. MULTER. But the Board makes all of the policy decisions, and if there is any difference of opinion as between an applicant

or an institution that is being examined or supervised, and the insuring corporation, they go to the Board. This is the Home Loan Bank Board. And the Home Loan Bank Board has the final say.

Mr. HUGHES. Well, I doubt that you have the same competitive conflict as between Federal savings and loans and State savings and loans as you do between the State-chartered banks and nationally chartered banks.

Mr. MULTER. One last question.

Should the savings banks, the mutual savings banks, be treated any differently than the mutual savings and loan associations as to the insuring features or the insurance organization which insures them?

Is there any reason why savings banks should be in the FDIC rather than putting them in FSLIC?

Mr. HUGHES. Mr. Multer, this is another subject. I supervise mutual savings banks. A mutual savings bank is a bank. A savings and loan association is not a bank. There is a difference in requirements in most States as to reserves, as to liquid reserves, and that sort of thing, which is entirely different from that of the savings and loan associations.

I don't want to get involved in a real argument as between the two. There is a vast difference, in my opinion, between savings and loan associations and mutal savings banks.

There is a tendency to make it look as if both are very much alike. But at least in my opinion traditionally mutual savings banks in my State for many, many years had most of their assets invested in securities, whereas savings and loan associations generally do not invest in securities, but invested in mortgages.

There is a current tendency for mutual savings banks to go more into the mortgage loan field.

But I think there is a difference, and has been a difference historically. All I can say is that a mutual savings bank is a bank of deposit and, therefore, can be insured only by the FDIC.

Mr. MULTER. I am braver than you are, Mr. Hughes. I am a speaker at their luncheon today, and I am going to tell the savings bankers no matter what the differences heretofore have been, to all intents and purposes, they have disappeared today.

Mr. HUGHES. Mr. Multer, I am invited as a guest at that luncheon. I will be seated up there at the head table to listen to the discussion. Mr. MULTER. Mr. Patman?

Mr. PATMAN. No questions.

Mr. MULTER. Any other questions for Mr. Hughes?

Thank you very much. You have been very helpful.

We have one other witness for this morning. Mr. Albig.

We are very happy to have you here this morning; will you identify yourself for the record, and also the gentleman who is with you.

You may make yourself comfortable at the witness table and proceed to either read your statement or summarize it, as you please.

STATEMENT OF REED H. ALBIG, PRESIDENT, NATIONAL BANK OF MCKEESPORT, PA., AND CHAIRMAN, BANK STUDY COMMITTEE, INDEPENDENT BANKERS ASSOCIATION; ACCOMPANIED BY C. HERSCHEL SCHOOLEY, WASHINGTON MANAGER, INDEPENDENT BANKERS ASSOCIATION

Mr. ALBIG. Thank you, Mr. Chairman.

I shall be very brief, so you can keep that luncheon engagement. Mr. MULTER. Thank you, sir.

Mr. ALBIG. May I comment that I did not appreciate that Randy Hughes was as old as he is.

He talked about being a banker back in 1931 or 1932.

My name is Reed Albig. I am president of the National Bank of McKeesport, Pa., and chairman of the Bank Study Committee of the Independent Bankers Association.

Associated with me here today is C. Herschel Schooley, Washington manager of the Independent Bankers Association.

Thomas Milner, Jr., chairman of the legislative committee, has previously expressed to you his regrets that an unavoidable conflict of engagements has prevented his being here today to make this presentation.

Perhaps I should explain to you the functions of the Bank Study Committee of the IBA, since its purposes may not be distinctly apparent from its name.

This committee originated in the association 8 or 10 years ago, given a broad assignment to inquire into all matters relating to the banking industry which will and should be the concern of the men who make the policy in their banks.

An early study of the committee was concerned with the succession of ownership in banking in the United States, particularly as it might pertain to the large numbers of independent community banks who are members of our association.

Obviously this was very much involved with the succession of management, a matter which has been the concern of both bankers and supervisory authorities alike.

It was out of the findings of this committee that the senior bank officers seminar was brought into being, a study group which meets for 2 weeks yearly at the Harvard School of Business Administration. About 350 bankers who are at the policymaking level of their respective banks have participated in the past 5 years.

Among the most recent assignments given the bank study committee has been one to analyze the various recommendations to alter the structure of bank supervision, including but not limited to the recommendations of the report of the Commission on Money and Credit, the report of the Advisory Committee on Banking to the Comptroller of the Currency (of which I was a member), the report of the President's Committee on Financial Institutions (the so-called Heller Committee) which has only recently become available, the suggestions of the Honorable Erle Cocke, Sr., Chairman of the Board of the FDIC, the proposals of Governor Robertson of the Federal Reserve Board.