Only recently you have had the suggestion of the Honorable Oren Root, superintendent of banks of the State of New York, a proposal which is somewhat differently oriented.

The advocates of some of these proposals have attempted to impart an atmosphere of urgency for change far beyond any apparent need. While I would be the last to subscribe to the idea of drifting along when some matter needs our attention, I would suggest that we have available time for adequate consideration in other than emergency circumstances, and with full awareness of the impact of such changes as may be determined to be desirable.

With your permission, I should like first to address my remarks to H.R. 5874, Chairman Multer's bill, which is sometimes described as implementing many of the features of Governor Roberton's proposal.

With grateful acknowledgment for the opportunity to express our thinking which has been afforded by these hearings, I must in all honesty acknowledge that some of the suggestions have come to us so recently that we have been unable to give them the consideration and analysis which should be accorded them before representing to you the official position of the IBA.

I am sure you will appreciate in an organization of such magnitude it takes considerable time to analyze and clear the thinking on any particular subject.

Many of the proposals I am sure possess great merit. We would be remiss in our obligation to our members to represent views as being those of the association until there has been an opportunity for careful consideration and selection, as well as for explanation to our membership and solicitation of their ideas.

I would characterize our atitude at this point as one of open-minded

reserve.

With regard to H.R. 729 to establish a Federal Deposit and Savings Insurance Board, I have not difficulty in stating to you the opposition of the IBA.

When one considers what the history of the FDIC's influence has been on commercial banking, the concentration of control over financial institutions which would be brought about by this merger is almost frightening in its implications.

Decisions of this Board, in fact in some circumstances the decisions of one member of this Board, could have a far-reaching effect upon American business and upon the lives of every citizen.

If there were no other reason for being opposed to this legislation the foregoing would in itself be sufficient.

However, the background of the institutions which would be supervised is so divergent and in many instances so competitive as to make this merger seem undesirable.

The public image of the Federal Savings and Loan Associations which are the principal institutions with which the FSLIC is concerned has grown to be one of apparent simularity to commercial banks.

The informed segment of the public, of course, recognizes that the commercial banks are a place of deposit and have a demand obligation for the return of the public's money, including savings, in the latter case after a limited period of notice, whereas the savings and loan institution is an investment institution with no such legal obligation as res ime for the return of the savers money.

The fact that the public has come to believe in the availability of funds in the investment institutions has created a competitive problem of serious proportions for the commercial banking industry, as well as contributing to a broad diversion of savings moneys into institutions of limited lending powers.

This diversion diminishes the capacity of commercial banks which possess the greatest flexibility in channeling money into the areas of community needs.

To vest in one board the obligation to develop policy decisions involving such competitive and divergent types of financial institutions, we believe, imposes upon those men, determinations which are in the nature of judgments few people have the capacity to make.

Entirely aside from the foregoing policy considerations, there are many practical problems involved in this proposed merger which I am sure have been enumerated in great detail by other witnesses. There would appear to be few overriding advantages. Mr. MULTER. Thank you, Mr. Albig.

I would suggest that you do try to get your association to review all of the pending bills and come up with your specific recommendations and suggestions.

I have no right to even intimate that this committee may recommend the enactment of either of the two bills before us.

But if we could get to the point of deciding on the principle of the bills being good, we then certainly ought to have the advantage of the guidance and advice of your association as to the details of the bills before us.

I think you ought to, as early as possible, get the thinking of the association and submit it to us.

Mr. ALBIG. The wheels are already in motion in that area, Mr. Chairman. We will most certainly give you the benefit of our thinking.

Mr. MULTER. The record before us as of now indicates that the savings banks and the savings and loan institutions do have a similar requirement to that of the savings departments of commercial banks which permits them to require advance notice before paying out to a depositor in a savings bank or to a shareholder in a savings and loan association the moneys that they have with the bank or assoication. The practice has been, through these many years of good times, that none of these associations were required to exercise that right to demand notice.

As a matter of fact, even in the case of a few institutions that were taken over or liquidated, the insurance corporation was in a position to step in and either by transferring the account to another institution make it immediately available, or to make cash available to the shareholder or depositer, as the case may be.

So that distinction between the commercial bank savings accounts and these other thrift institutions is disappearing.

Mr. ALBIG. I am well aware, Mr. Chairman, that it has disappeared in practice.

Mr. MULTER. Yes, in practice only.

But, of course, as a matter of law, the right or the requirement exists that a bank or a savings and loan institution or mutual savings bank has the right to demand notice before paying out on a thrift account. Mr. ALBIG. That is quite correct, yes.

Mr. MULTER. Now, then, the last reference you make is—

investing in one board the obligation to develop policy decisions involving competitive and divergent types of financial institutions.

I think that makes out the case for separating the chartering and supervisory authority from the insuring authority, or does it not? Mr. ALBIG. Well, I think any contemplated merger of the insuring associations would almost of necessity, as you say, make a case for separating their supervisory powers from their insuring powers. The insuring powers under those circumstances would most certainly resemble an actuarial approach to the problem rather than examination and supervision.

Mr. MULTER. Isn't it time we got down to considering the two insuring corporations on an actuarial basis and making them actuarially sound, if they are not?

Mr. ALBIG. I certainly agree that is a question that should be explored with these many others that are being approached today. Mr. MULTER. The FDIC has always been hailed as an independent agency of Government, has it not?

Mr. ALBIG. It has been generally so regarded, I believe.

Mr. MULTER. You wouldn't want to see that independence taken

away.

Mr. ALBIG. I should be very reluctant as things are presently constituted to see that.

Mr. MULTER. Would you be in favor of making it more independent of the Federal Reserve System and of the Comptroller's office?

Mr. ALBIG. I think there would be support for that.

Mr. MULTER. Why shouldn't the same thing apply with the Federal Savings and Loan Insurance Corporation and its parent, the Federal Home Loan Bank Board, which today makes policy, determines when there shall be a new institution, determines when an institution shall be either merged or liquidated, determines what branches the existing institutions may have, determines how and when they will merge, why should that now be running the Savings and Loan Insurance Corporation?

Mr. ALBIG. I think you are suggesting the separation of the Federal Savings and Loan Insurance Corporation from the supervisory functions of the Federal Home Loan Board.

Mr. MULTER. Quite apart from whether the two insuring corporations should be merged.

Mr. ALBIG. Quite apart, yes.

Mr. MULTER. Any questions?

Mr. ST GERMAIN. No. I just want to commend the gentleman for his honesty on page 4, where he states that he would be remiss in his obligations to the members to represent the views as being those of the association until there has been an opportunity for careful consideration, and so forth.

Too frequently I find that before our committees we have officials of associations representing purported views of the association when actually they are the views of a few people, rather than of the association itself.

I commend the gentleman for his presentation this morning.

Mr. ALBIG. Thank you, Mr. St Germain. I am sure you have not sat in a convention of the Independent Bankers Association, or you

would understand quite clearly it is necessary to refer to the membership of the association before you express a view.

Mr. ST GERMAIN. I think that is wonderful.

Mr. MULTER. Mr. Lloyd.

Mr. LLOYD. This is not directly on your testimony, Mr. Albig, but since your association does appear so frequently before this committee, could you tell me what an independent bank is within the meaning of your association?

Mr. ALBIG. Yes, Mr. Lloyd.

We regard the definition of an independent community bank as one which restricts its primary area or business interest to the community in which it is located, rather than being a farflung system bank which may cover a large geographical area.

Mr. LLOYD. Would you allow as a member a State bank with branches?

Mr. ALBIG. We do indeed; yes.

Mr. LLOYD. Do you find yourself usually in harmony with the American Bankers Association views?

Mr. ALBIG. That is a very broad question, Mr. Lloyd. It would depend specifically on the issue. I should say that almost all of our members are members of the American Bankers Association.

Mr. LLOYD. I see so that it is not a competing organization. Mr. ALBIG. No; it is not a competing organization.

Mr. LLOYD. That is all.

Mr. MULTER. But you have on many occasions set forth positions different than that taken by the ABA on banking legislation.

Mr. ALBIG. Yes, Mr. Chairman; and I think that is quite understandable.

There are areas in which the philosophy of some particular issue is involved. The independent community banks may have one point of

view on that.

I might suggest as the opposite the Association of Reserve City Bankers might have another viewpoint on it.

We are both part of the ABA and we both support it. But the ABA finds itself in a position of having to try to represent two different interests in that situation.

Mr. LLOYD. Do you have national bank representation as well as State bank representation?

Mr. ALBIG. Yes; I myself am an officer in a national bank.

Mr. LLOYD. I don't know whether you have been in this particular line of fire, Mr. Albig, but do you know of any instance in which the State has granted a charter and in which the FDIC has denied the charter?

Mr. ALBIG. From my own knowledge, I do not. I have been told of many such instances by banking commissioners, State bank supervisors, and by bankers.

Mr. LLOYD. I have no further questions.

Mr. MULTER. Are there any savings banks that have membership in your association?

Mr. ALBIG. There was one savings bank. It seems to me I have heard that it might have withdrawn. I am not sure of that-especially over the issue of taxing of the earnings.

Mr. MULTER. I think while at one time many of the savings banks, if not most of them, were members of ABA, I think today most of the savings banks have withdrawn their membership from ABA, too, have they not?

Mr. ALBIG. Some are still members. I have some familiarity with the background of that.

My father's cousin, who has been before this committee many times, was one of the deputy managers of ABA, and his particular area of interest was in the savings division.

So I have had many associations through him with savings bankers, especially in the east.

Mr. MULTER. Thank you very much.

The committee will stand in recess until 10 o'clock tomorrow morning.

(Whereupon, at 11:45 a.m., the committee recessed to reconvene at 10 a.m., Wednesday, May 15, 1963.)