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irch 31, 19-47 Personal and Confidential Honorable Homer £. Ckpehart, United Stcites Senate, Washington, D, C» INttr Senator Capehcrt: In line with your recent request, X affi transmitting tertwitfe ttB informal otitlicts of tiie proposal for retirement of the niajor portion of the capital stock of tae Federal Deposit Insurance Corporation and. a. plan for reduction of assessment on insured banks. Snould any part of this outline require further explanation, do nottetsltatato call a©. Sincerely, M. S. Eccles, Chairman. Enclosure OUTLINE OF PROPOSAL FOH RETIREMENT OF CAPITAL STOCK " OF FEDERAL DEPOSIT INSURANCE CORFORATIQflf The capital stock of the Federal Deposit Insurance Corporation now consists of 1150,000,000 subscribed by the United States and 3139,^99,556.99 subscribed by the Federal Reserve Banks. The surplus of the FDIC on June 30, 19^6, was about £704,000,000. It is proposed that the FDIC be .authorized and directed to return to the United states Treasury $100,000,000 of the ;150,000,000 capital stock subscribed by tne United States anu tnat it also retire tne capital stock subscribed by the Federal Reserve Banks amounting to 1139,^99,556-99• The latter amount, nowever would be paid to the United States instead of to the Federal Reserve Banks, since the Reserve Banks have in recent years replaced from earnings the amounts which tney subscribed to FDIC stock. This proposal would carry out trie recommendation made by the President in his Budget Message for Receipts for >,a/mc-nts by the United States of stock subscribed by it would be returned to the Corporation and cancelled, and certificate* of stock issued by the Corporation to the Federal Reserve Banks evidencing their subscriptions would aloo be surrendered to the Corporation and cancelled. It is further proposed that the annual rate of FDIC assessment, which is now 1/12 of one per cent of insured banks' deposit liabilities, be reduced to l/l5, or possibly l/20, of one per cent of deposit liabilities, beginning with the next semiannual MMHMMMN&t following the passage of the necessary legislation. This reduced rate would continue in effect until auditions to surplus of the Corporation bring its capital funds up to $1,000,000,000. No MtvMMfttli, on insured banks could then be levied unless :md until the capital funds should fall below tae amount of .1,000,000,000 by at least as much ^3 $10,000,000. Thereafter, auring any time when the amount of the capital funds was $990,000,000 or less on the last day of the preceding assessment period, tne FDIC would be authorised in Its discretion to levy assessments on insured bank3 as now provided by l^w at such rate as it deemed advisable but not in excess of l/l2 of one p^v cent per annua. These proposals could be incorporated into the law by appropriate auiendiaents to the statute relating to the FDIC (waich is section 12B of the Federal Reserve Act). *The net income of the Federal Deposit Insurance Corporation in 1945 aiaounted to 117 million dolla.s and the average net income for the period 1941-1945 was 83 million dollars. A decrease in its holdings of United States Government obligations by 239 million dollars woulci decrease its net income by not over 7 million a y^ar. 3/3V-47
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