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FEDERAL HOME LOAN BANK ACT AMENDMENTS
HEARING
BEFORE
SUBCOMMITTEE N0.1
OF THE
COMMITTEE ON BANKING AND CURRENCY
HOUSE OF REPRESENTATIVES
EIGHTY-SEVENTH CONGRESS
FIRST SESSION
ON
H.R. 7108 and H.R. 7109
.(H.R. 7109 is superseded by H.R. 8277)
JULY 13, 1961
Printed for the use of the Committee on Banking and Currency
U.S. GOVERNMENT PRINTING OFFICE
72567 0
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Federal Reserve Bank of St. Louis
WASHINGTON : 1961
COMMITTEE ON BANKING AND CURRENCY
BRENT SPENCE, Kentucky, Chairman
WRIGHT PATMAN, Texas
CLARENCE E. KILBURN, New York
ALBERT RAINS, Alabama
GORDON L. McDONOUGH, California
WILLIAM B. WIDNALL, New Jersey
ABRAHAM J. MULTER, New York
HUGH J. ADDONIZIO, New Jersey
EUGENE SILER, Kentucky
WILLIAM A. BARRETT, Pennsylvania
PAUL A. FINO, New York
LEONOR K. SULLIVAN, Missouri
FLORENCE P. DWYER, New Jersey
HENRY S. REUSS, Wisconsin
EDWARD J. DER WINSKI, Illinois
MARTHA W. GRIFFITHS, Michigan
SEYMOUR HALPERN, New York
THOMAS L. ASHLEY, Ohio
JAMES HARVEY, Michigan
CHARLES A. V ANIK, Ohio
TOM V. MOOREHEAD, Ohio
J. T. RUTHERFORD, Texas
JOHN H. ROUSSELOT, California
WILLIAM S. MOORHEAD, Pennsylvania
WILLIAM W. SCRANTON, Pennsylvania
CLEM MILLER, California
JACOB H. GILBERT, New York
EDWARD R. FINNEGAN, Illlnois
ROBERT G. STEPHENS, JR., Georgia
FERNAND J. ST. GERMAIN, Rhode-Island
ROBERT L. CARDON, Clerk and General Counsel
JOHN E. BARRIERE, Majorit11 Staff Member
ORMAN s. FINK, Minorit11 Staff Member
ROBERT R. POSTON, Counsel
SUBCOMMITTEE
BRENT SPENCE,
WILLIAM A. BARRETT, Pennsylvania
HENRY S. REUSS, Wisconsin
THOMAS L. ASHLEY, Ohio
WILLIAM S. MOORHEAD, Pennsylvania
ROBERT G. STEPHENS, JR., Georgia
II
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Federal Reserve Bank of St. Louis
No. 1
Kentucky, Chairman
GORDON L. McDONOUGH, Ca!Uornla
FLORENCE P. DWYER, New Jersey
SEYMOUR HALPERN, New York
WILLIAM W. SCRANTON, Pennsylvania
CONTENTS
Page
R.R. 7018. A bill to amend the Federal Home Loan Bank Act and title
IV of the National Housing Act, and for other purposes______________
1
R.R. 7109. A bill to amend the Federal Home Loan Bank Act to simplify
and improve the election and appointment of directors of the Federal
home loan banks________________________________________________
4
Statement ofBubb, Henry A., chairman of the legislative committee of the United
States Savings & Loan League; accompanied by Stephen Slipher,
38
legislative director; and T. Bert King, Washington, counsel_______
Holifield, Hon. Chet, a Representative in Congress from the 19th
Congressional District of the State of California_________________
60
McMurray, Hon. Joseph P., Chairman, Federal Home Loan Bank
Board; accompanied by Ira Dixon, member, HLBB; Joseph Williams, member, HLBB; Clarence Smith, executive secretary,
HLBB; and William H. Husband, general manager, Federal Savings
and Loan Insurance Corporation__ _ __ __ __ __ __ __ __ _ __ _ __ _ __ _ __ _
5
Sherbourne, Everett C., vice chairman, Federal Legislation Committee, National League of Insured Savings Associations; accompanied by Bryce Curry, general counsel________________________
44
Additional data submitted to the subcommittee byFederal Home Loan Bank Board:
Election of directors for Federal Home Loan Banks by Districts
No. 1 through No. 11_ ___________________________________ 24-29
Analysis of draft dated July 13, 1961, of suggested amendments
to R.R. 7109____________________________________________
33
Suggested amendments to R.R. 7109, as introduced____________
35
Comparative draft of provisions of section 7 of Federal Home
Loan Bank Act as proposed to be amended by R.R. 7109_____
36
Federal Savings and Loan Insurance Corporation:
Estimated reserve position, document prepared in the office of the
comptroller_____________________________________________
47
United States Savings & Loan League:
Slipher, Stephen, legislative director, letter to Hon. Brent Spence,
dated July 17, 1961______________________________________
64
III
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
THURSDAY, JULY 13, 1961
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE No. 1 OF THE
COMMITTEE ON BANKING AND CURRENCY,
Washington, D.O.
The subcommittee met, pursuant to notice, at 10 a.m., in room 1301,
New House Office Building, Hon. Brent Spence ( chairman of the subcommittee) presiding.
Present: Representatives Spence, Barrett, Vanik, Moorhead of
Pennsylvania, Stephens, McDonough, Scranton, and Mrs. Dwyer.
Also present: Representative Multer.
Mr. SPENCE. The committee will be in order.
We have met this morning to hear testimony on H.R. 7108 and
H.R. 7109.
(H.R. 7108 and H.R. 7109 follow:)
[H.R. 7.108, 8-7fu Cong., lli!t sess.]
A BILL To ame.nd the Fedieral Home Loan Bank Act and titre IV of the National Housing
Act, and for other purpos,es
Be it enacted by the Senate and House of Representatii,es of the United States
of America in Oongress assembled, That subsection (c) of section 6 of the Fed-
eral Home Loan Bank Act, as amended, is hereby amended to read as follows :
" ( c) ( 1) The original stock subscription of each institution eligible to become
a member under section 4 shall be an amount equal to 1 per centum of the
subscriber's aggregate unpaid loan principal, but not less than $500. The bank
shall annually, as of the close of the calendar year, adjust, at such time and in
such manner and upon such terms and conditions as the Federal Home Loan
Bank Board may by regulations or otherwise prescribe, the amount of stock
held by each member so that such member shall have invested in the stock of
the Federal Home Loan Bank at least an amount calculated in the manner provided in the next preceding sentence ( but not less than $500) . If the bank finds
that the investment of any member in stock is greater than that required under
this subsection it may, unless prohibited by said Board or by the provisions of
paragraph (2) of this subsection, in its discretion and upon application of such
member retire the stock of such member in excess of the amount so required.
Said Board, in its discretion, may, by regulations or otherwise, provide for adjustments in amounts of stock to be issued or retired in order that stock may
be issued or retired only in entire shares.
"(2) The provisions of paragraph (1) of this subsection shall be subject to
the following limitations:
"(i) No member which is a member on the date of the enactment of this
paragraph (2) shall be permitted to reduce its stock to an amount which is
less than the amount held by it as of the close of such date, except that a
member may at any time reduce its stock to an amount which is not less
than 2 per centum of its aggregate unpaid loan principal as of the beginning
of the calendar year in which the reduction is made (but not less than
$500) : Provided, That if the amount to which such stock is so reduced is
less than 2 per centum of such member's aggregate unpaid loan principal
as of the close of the date of the enactment of this paragraph (2) such
reduction may be made only to such extent as said Board in its discretion
may by regulations or otherwise provide.
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FEDERAL HOME LOAN BANK A:CT AMENDMENTS
"(ii) Notwithstanding any oth.e:r; provision of this sub!'ll:!Ction, no action
shall be taken by any bank with respect to any member pursuant to any
of the foregoing provisions of this subsection if the effect of such action
would be to cause the aggregate outstanding advances, within the meaning of the last sentence of subsection ( c) of section 10 or within the meaning of regulations of said Board defining said term for the purposes of this
sentence, made by such bank to such member to exceed twelve times the
amounts paid in by such member for outstanding capital stock held by
such member.
"(3) Except as provided in subsection (i), upon retirement of stock of any
member the bank shall pay such member for the stock retired an amount equal
to the par value of such stock, or, at the election of the bank, the whole or any
part of the payment which would otherwise be so made shall be credited upon
the indebtedness of the member to the bank. In either such event, stock equal
in par value to the amount of the payment or credit, or both, as the case may
be, shall be canceled.
" ( 4) For the purposes of this subsection, the term 'aggregate unpaid loan
principal' means the aggregate unpaid principal of a subscriber's or member's
home mortgage loans, home-purchase contracts, and similar obligations.
"(5) The Federal Home Loan Bank Board, by regulations or otherwise, may
require each member to submit such reports and information as said Board,
in its discretion, may determine to be necessary or appropriate for the purposes
of this subsection."
SEC. 2 Subsection (1) of section 6 of the Federal Home Loan Bank Act, as
amended, is hereby repealed.
SEC. 3. Subsection (a) of section 404 of the National Housing Act, as amended,
is hereby amended to read as follows :
•• (a) The Corporation shall establish a Primary Reserve which shall be the
general reserve of the Corporation and a Secondary Reserve which shall consist
of the prepayments made by insured institutions pursuant to subsection (d) and
the credits made pursuant to the first sentence of subsection ( e).
" ( b) ( 1) Each institution whose application for insurance is approved by the
Corporation shall pay to the Corporation, in such manner as it shall prescribe,
a premium for such insurance equal to one-twelfth of 1 per centum of the total
amount of all accounts of the insured members of such institution plus any
creditor obligations of such institution. Such premium shall be paid at the
time the certificate is issued by the Corporation under section 403, and thereafter annually, except that under regulations prescribed by the Corporation
such premium may be paid semianually.
"(2) If, at the close of any December 31, the Primary Reserve equals or exceeds 2 per centum of the total amount of all accounts of insured members and
creditor obligations of all insured institutions as of such close, no premium under
paragraph (1) of this subsection shall be payable by an insured institution
with respect to its premium year beginning during the year commencing on
May 1 next succeeding such December 31, except that the foregoing provisiom
of this sentence shall not be applicable to any insured institution with respect
to any of the twenty premium years beginning with the premium year commencing with the date on which such certificate is issued.
"(3) The Corporation is authorized to prescribe such rules and regulations
as it may determine to be necessary or appropriate to accomplish the purposeli
and provisions of this subsection."
SEC. 4. Subsection (c) of section 404 of the National Housing Act, as amended,
is hereby repealed: Provided, That the repeal effected by this section shall not
affect any right existing on the effective date of such repeal.
SEC. 5. Subsection (b) of section 404 of the National Housing Act, as amended,
is hereby amended by striking "(b)" at the beginning thereof and inserting in
lieu thereof " ( c) ".
SEC. 6. Section 404 of the National Housing Act, as amended, is hereby
amended by adding thereto at the end thereof the following new subsections:
'' ( d) Each insured institution, except as otherwise provided in this section,
shall annually pay to the Corporation, at such time and in such manner as the
Corporation shall by regulations or otherwise prescribe, an additional premium
in the nature of a prepayment with respect to future premiums of such institution under sµbsection (b) equal to 2 per centum of the net increase in all accounts of its insured membe!s during the next preceding calendar year, less
an amount equal to any reqmrement, as of the end of such calendar year, for
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
3
the purchase of stock of the Federal Home Loan Bank of which such institution
is a member, calculated in accordance with the provisions of subsection (c) of
section 6 of the Federal Home Loan Bank Act and without regard to any net
increase during such calendar year in its holdings of such stock, and such prepayments shall be credited to the Secondary Reserve. The Federal Home Loan
Bank Board shall by regulations or otherwise provide for the furnishing to the
Corporation of all necessary information with respect to Federal Home Loan
Bank stock.
" ( e) The Corporation, in accordance with such regulations as it may prescribe, shall credit to the Secondary Reserve, as of the close of each calendar
year which begins on or after the effective date of this subsection, a return on
the outstanding balances of the Secondary Reserve during such calendar year
ns determined by the Corporation, at a rate equal to the average annual rate of
return to the Corporation during the year ending at the end of the month next
preceding the month of such close, as determined by the Corporation, on the
investments held by the Corporation in obligations of, or guaranteed as to prindpal and interest by, the United States. Except as provided in subsections (f)
and (g), the Secondary Reserve shall be available to the Corporation only for
losses of the Corporation and shall be so available only to such extent as other
accounts of the Corporation which are available therefor are insufficient for such
losses. No right, title, or interest of any institution in or with respect to its
pro rata share of the Secondary Reserve shall be assignable or transferable,
whether by operation of law or otherwise, except to such extent as the Corporation may by regulation or otherwise provide for transfer of such pro rata share
in cases of merger or consolidation, transfer of bulk assets as defined by the
Corporation by regulation or otherwise for the purposes of this sentence, and
similar transactions as so defined.
"(f) If (i) the status of an insured institution as an insured institution is
terminated pursuant to any provision of section 407 or the insurance of accounts
of an insured institution is otherwise terminated, (ii) a conservator, receiver,
or other legal custodian is appointed for an insured institution under the circumstances and for the purpose set forth in subdivision ( d) of section 401, or (iii)
the Corporation makes a determination that for the purposes of this subsection
an insured institution has gone into liquidation, the obligation of such institution to make prepayments under subsection (d) of this section, including any
prepayments as to which such institution is obligated at the time of such termination, appointment, or determination, shall cease, and the Corporation shall
pay in cash to such institution its pro rata share of the Secondary Reserve, in
accordance with such terms and conditions as the Corporation may prescribe by
regulations or otherwise, or, at the option of the Corporation, the Corporation
may apply the whole or any part of the amount which would otherwise be paid
in cash toward the payment of any indebtedness or obligation, whether matured
or not, of such institution to the Corporation, then existing or arising before such
payment in cash: Provided, Tha,t such payment or such application need not be
made to the extent that the provisions of the exception in the last sentence of
subsection (e) are applicable. The Corporation in its discretion may provide
hy regulations or otherwise for the reinstatement in whole or in part, upon sueh
terms and conditions as to payment or otherwise as it may prescribe, of the pro
rata share of an institution in the Secondary Reserve in the event that such
status or such insurance is restored by action of the Corporation or of a court
in reversing or setting aside such termination, or in the event that, after such
appointment or such determination, an institution is restored to operation as an
insured institution, and for the payment, waiver, or other treatment in whole
or in part of any prepayments which, in the absence of the first sentence of this
subsection, would have accrued under subsection (d) or would be payable
thereunder.
"(g) If, at the close of any December 31, the aggregate of the Primary Resen-e
and the Secondary Reserve equals or exceeds 2 per eentum of the total amount
of all aecounts of insured members and creditor obligations of all insured institutions bnt the Primary Reserve does not equal or exceed such 2 per centum,
no insured institution shall be obligated to make any prepayment under subsection ( d.) during the year beginning with May 1 next succeeding sueh close,
and each insured institution's pro rata share of the Secondary Reserve shall be
used, to the extent available, to discharge such insti-tution's obligation for its
premium under subsection (b) for the premium year beginning in i;mch year:
and the suspension of obligation to make such prepayments and the use of such
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FEDERAL HOME LOAN BANK A!CT AMENDMENTS
pro rata shares as provided in this sentence shall continue unless and until the
next to last sentence or the last sentence of this subsection shall become operative. Notwithstanding the foregoing provisions of this subsection, if, at the
close of any December 31 except any such close occurring at any time after such
a close as is referred to in the last sentence of this subsection, the aggregate of
the Primary Reserve and the Secondary Reserve is not at least equal to 1%, per
centum of the total amount of all accounts of insured members and creditor
obligations of all insured institutions, (i) the obligation of insured institutions
to make prepayments under subsection (d) shall resume on May 1 next following such December 31 and shall continue unless and until the first sentence or
the last sentence of this subsection shall become operative, and (ii) the use of
any insured institution's pro rata share of the Secondary Reserve under the first
sentence of this subsection shall terminate with respect to its premium under
subsection (b) for the premium year beginning during the calendar year commencing on May 1 next succeeding such December 31, and such termination shall
continue unless and until the first sentence of this subsection shall become
operative. If, at the close of any December 31, the Primary Reserve equals or
exceeds such 2 per centum, the Corporation shall, at such time (which shall be
the same for all insured institutions and shall not be later than May 1 next
succeeding such close) and in such manner as the Corporation shall determine,
pay in cash to each insured institution its pro rata share of the Secondary
Reserve and shall not, after such time, accept or receive further prepayments
under subsection ( d) ."
SEC. 7. This Act shall become effective on January 1 next following the date
of its enactment.
[H.R. 7100, S7th Cong., 1st sess.]
A BILL To amend the l!'ederal Home Loan Bank Act to simplify and Improve the election
and appointment of directors of the Federal home loan banks
Be in enacted by the Senate and, House of Representati-ves of the United
States of America in Congress assembled, That subsections (a) through (h) of
section 7 of the Federal Home Loan Bank Act (12 U.S.C. 1427) are amended
to read as follows :
"(a) The management of each Federal home loan bank shall be vested in a
broad of twelve directors, two-thirds of whom shall be elected by the members,
and the remaining one-third of whom shall be appointed by the board, and all
of whom shall be citizens of the United States and bona fide residents of the district in which such bank is located: Provided, That in any district which includes five or more States the board may by regulation increase the elective
directors to a number not exceeding thirteen and may increase the appointive
directors to a number not exceeding one-half the number of elective directors.
"(b) Each elective directorship shall be identified as representing the members from a particular State, and shall be filled by a person who is an officer or
director of a member located within that State, each of which members shall
be entitled to nominate a suitably qualified person for each such directorship
that will represent them, and each such office shall be filled from such nominees
by a majority of the votes which such members may cast in an election held
for the purpose of filling the initial term or expiring term of such office, in
which election each member from the State which that office will represent may
cast for each such office to be filled by the election a number of votes equal to
the number of shares of stock in the district bank required to be held by such
member as of the end of the calendar year next preceding the election. No
added voting strength shall be derived from stock ownership in excess of the
average required ownership of the members in the particular State.
"(c) The number of directors which the members from each separate State
in a bank district shall be entitled to elect shall be determined by the board
in approximate ratio to the percentage of the required stock of the district bank
held by the membership from that State at the end of the calendar year next
preceding the date of the election, except that the members from each State in
the district shall be entitled to elect at least one director, and no State shall be
entitled to more than six such elective directorships. Without regard to any
other limitation of this section, after determining as prescribed in the preceding
sentence, the number of directors which each State is entitled to elect, the board
shall add as many more such directors as may be necessary so that each State
in a district shall be entitled to at least as many elective directors as the number which represented that State on December 31, 1960.
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
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" ( d) Directors shall be elected for two-year terms, and shall be appointed for
four-year terms. No director may be elected consecutively for more than three
such terms. The board shall prescribe such rules and regulations as it may
determine to be proper for the nomination and election of directors.
"(e) The term of each elective or appointive director serving on the date this
amendment becomes effective shall not be affected by this amendment but shall
continue unchanged until its original date of expiration. The provisions of this
section, as amended, shall otherwise be applicable as of the date of enactment.
The term 'States' or 'State' as used in this section shall mean the States of the
Union and the District of Columbia.
" ( f) In the event of a vacancy in any appointive or elective directorship,
such vacancy shall be filled through appointment by the board for the unexpired term: Provided, That if any director shall cease to have the qualifications
set forth in subsection (a), or if any elective director shall cease to have any
qualification set forth in this section or in any regulation in effect on the date
of his nomination, the office held by such director shall immediately become
vacant, but such director may continue to act as such director until his successor
so appointed assumes the vacated office or the term of such office shall have
expired, which ever shall first occur.
" ( g) The board shall designate one of the directors of each bank to be chairman, and one to be vice chairman, of the board of directors of such bank.
"(h) If at any time when nominations are required, members shall hold less
than $1,000,000 of the capital stock of the Federal home loan bank, the board
shall appoint a director or directors to fill the place or places for which such
nominations are required, and the board may, prior to the filing of the certificate
mentioned in section 12, appoint directors who shall be respectively designated
by it as appointive directors and as elective directors, in accordance with the
provisions of this section."
Mr. SPENCE. Today we will hear, together, H.R. 7108, to strengthen
the resources of the Federal Savings and Loan Insurance Corporation, and H.R. 7109, to improve and simplify the procedures for electing directors of the Federal home loan banks.
Mr. Clerk, call the first witness.
Mr. CARDON. The Honorable Joseph P. McMurray, Chairman of
the Federal Home Loan Bank Board.
STATEMENT OF HON. JOSEPH P. McMURRAY, CHAIRMAN, FEDERAL
HOME LOAN BANK BOARD; ACCOMPANIED BY IRA DIXON, MEMBER, HOME LOAN BANK BOARD; JOSEPH WILLIAMS, MEMBER,
HOME LOAN BANK BOARD; CLARENCE SMITH, EXECUTIVE SECRETARY, HOME LOAN BANK BOARD; AND WILLIAM H. HUSBAND,
GENERAL MANAGER, FEDERAL SAVINGS AND LOAN INSURANCE
CORPORATION
Mr. McMuRRAY. May I have permission to have Mr. Williams and
Mr. Dixon, the other members of the Board, and Dr. Husband sit
with me?
Mr. SPENCE. Without objection permission is granted.
We are very glad to have you here. I am sure we all wish you great
success and happiness in the discharge of your new important duties.
I know that this committee will work in harmony with you and
will attempt to do everything possible to assist the Federal Home
Loan Bank Board perform the duties and functions that the law requires. It is in very safe hands with you as Chairman. Thank you
for coming.
Mr. McMURRAY. Thank you very much, Mr. Chairman.
725670-61~
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FEDERAL HOME LOAN BANK A:CT AMENDMENTS
First of all, I want to tell you what a pleasure and an honor it is
for me to appear before this very distinguished and powerful
committee.
As you know I spent many years on the Senate Banking and Currency Committee and we worked together for several long years on
many very important bills. Over the years I have gained great respect for the chairman of this committee and many members of the
committee.
I appreciate the friendship and the cooperation that every member
of the committee always gave to me. I hope that as Chairman of this
Home Loan Bank Board, I will live up to your high expectations,
and by my hard work and by the cooperation and help of the members and the staff of this Home Loan Bank Board I will do the kind
of a job which you will be proud of and which will benefit the
country.
Mr. SPENCE. I am sure the committee reciprocates in the sentiments
which you express.
Mr. McMuRRAY. Thank you very much.
I have with me ,Joseph J. Williams and Ira Dixon, the other two
members of the Board. Incidentally, I want to say that they have
been extremely helpful to me and have been also very patient with me.
I think the three of us together will be able to solve, I ho:r.e, most
of the problems that are confronting the Board, and we will make
every effort to solve all of them, but I hope that you will judge us on
our batting average and not on each specific problem that we attempt
to solve. I also want to say that the staff have been very helpful
tome.
I know from my own experience in working with congressional committees the significance of the deliberations that precede statutory
enactment. Especially do I recognize your great responsibility in
passing upon measures relating to financial institutions.
The obligations of those institutions are imposing, to say the least.
On the one hand, they have a key role in nurturing the growth of
our economy; on the other, they must at all times have a deep awareness and heedfulness of their accountability for the proper handling
of other people's money.
I would like to address myself first to H.R. 7108.
The first of these two bills, H.R. 7108, is intended to add new
strength to the Federal Savings and Loan Insurance Corporation,
which as you know insures, up to a statutory limit of $10,000, the savings of members of the public in savings and loan associations. This
bill has our wholehearted endorsement and I trust that it will be
found to merit your undivided support.
H.R. 7108 does not seek any appropriation of taxpayers' money.
On the· contrary, it proposes that msured savings and loan associations use some moderate amounts of their own funds to strengthen
even more the bulwark of insurance of their savings accounts; and
even those amounts will, in the typical case, represent merely a diversion of funds that would otherwise have been used for the purchase
of stock in the Federal home loan bank of which the institution is a
member.
If the requested legislation is enacted, the flow of savings into these
institutions should be further stimulated. In turn, since savings
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
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and loan associations invest the great bulk 0£ their funds in loans on
residential properties, the demands that fonds in the U.S. Treasury
be invested in the providing 0£ housing should be lessened.
May I add the further observation that legislation relating to
financial institutions should simultaneously contribute to both the
soundness 0£ their operation and their ability to meet economic needs.
I believe that H.R. 7108 will meet these twin objectives for the same
two reasons-because it adds to the safety 0£ insured savings and, at
the same time, should make more money available to accommodate the
housing program.
As you know, savings and loan associations lend primarily to the
average-income or middle-income groups and constitute the largest
single means 0£ pooling the savings 0£ the public for that purpose.
In the discharge 0£ these basic economic £unctions, they do much to
stabilize economic conditions and advance the public welfare.
Today, insured savings and loan associations have assets 0£ about
$70 billion, but more meaningful in terms 0£ public service is the
number 0£ people beins- served. Some 28 million persons have savings accounts in these mstitutions and the homes 0£ almost 7.5 million families are now being fimp1ced by the use 0£ these savings.
The contribution 0£ the savings and loan business to housing and to
the general economy may clearly be seen in its record during the fifties.
In that dramatic 10-year period insured savings and loan associations made mortgage loans in the aggregate amount 0£ $95,270 million
and received a gross flow 0£ savings in the amount 0£ $136,418 million.
The net gain in mortgage loans and savings from the close 0£ 1950
to the close 0£ 1960 was $45,630 million and $47,288 million respectively.
Turning to the specific features 0£ H.R. 7108, we may summarize
them as follows :
Under the proposed legislation, an insured savings and loan association would be required to make an annual payment to the Federal
Savings and Loan Insurance Corporation, in the nature 0£ a prepayment with respect to its future regular premiums. The annual rate
0£ the regular premium would remain unchanged at one-twelfth 0£ 1
percent 0£ the total amount 0£ all accounts 0£ the institution's insured
members plus its creditor obligations.
The annual prepayment should be equal to 2 percent 0£ the net increase in such accounts during the next previous calendar year less an
amount equal to any requirement, as 0£ the end 0£ that calendar year,
£or purchase 0£ stock 0£ the Federal home loan bank 0£ which the
institution is a member, as calculated in accordance with the bill.
The Corporation would be directed to establish a primary reserve,
which would be its general reserve, and a secondary reserve, to which
the prepayments would be credited. H the primary reserve and any
other accounts available for losses should be insufficient to meet all
losses 0£ the Corporation, the secondary reserve would be available
for that purpose. In other words, the prepayments would serve as
an additional reserve for losses.
It is proposed that the outstanding balances in the secondary reserve receive a return at a rate equal to the average rate on the Corporation's own investments in Government or Government-guaranteed
obligations. This return would not be paid in cash but would be adde<l
to the secondary reserve.
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FEDERAL HOME LOAN BANK A:CT AMENDMENTS,
When the aggregate of the primary reserve and the secondary reserve reached 2 percent of the total amount of all accounts of insured
members and creditor obligations of all insured institutions-assuming
that the primary reserve alone did not reach that percentage-the
prepayments would stop and each institution's pro rata share of the
secondary reserve would be used, so far as available, to discharge its
obligations for its regular annual premiums.
If the aggregate of the two reserves later fell below 1.75 percent,
the prepayments would be resumed and such use of the secondary reserve would cease. However, if the primary reserve itself reached 2
percent of this base, the Corporation would pay to each insured institution, in cash, the amount of its pro rata share of the secondary
reserve, and the premium prepayments would permanently cease.
The existing law makes the regular premium payable until the
Corporation's reserve fund equals 5 percent of all insured accounts
and creditor obligations of all insured institutions, and provides that
if at any time it falls below that figure the regular premium shall be
resumed until it is brought back to that point.
H.R. 7108, in effect, reduces this ratio to 2 percent but requires that
each insured institution pay the regular premium for at least 20 years,
in order to assure that newly insured institutions make a reasonable
contribution toward the building up of the Corporation's reserve.
As noted previously, provision is made for the deduction of required Federal home loan bank stock purchases from the 2-percentpremium prepayments. Under the Federal Home Loan Bank Act
as originally enacted in 1932, each member institution of a Federal
home loan bank was required to hold stock in its bank equal to 1
percent of the aggregate unpaid principal of its home mortgage loans,
subject to a required minimum. By legislation enacted in 1950, as
a part of the program for accelerating the retirement of the Government stock in these banks, the required amount of stock was approximately doubled, being increased to 2 percent of the aggregate unpaid
principal of the member's home mortgage loans, home-purchase contracts, and similar obligations.
The present bill, H.R. 7108, would reduce the 2-percent requirement to 1 percent. However, there would be no appreciable decrease
in the amount of stock now outstanding, as the bill provides that no
institution which is a bank member on the date of enactment of the
bill shall be permitted to reduce its stock to less than the amount held
by it at the close of that date, with two exceptions.
The first exception is that, subject to the $500 minimum to which
all members are subject, any such member may reduce its stock to
not less than 2 percent of the base as of the beginning of the year in
which the reduction is made and not less than 2 percent of the base
as of the close of the date of enactment.
This exception is intended to give equitable treatment to members
which, on the date of enactment of the bill, hold bank stock in excess
of the existing 2-percent requirement. The second exception allows
the Federal Home Loan Bank Board in its discretion to permit such
a member, subject to said minimum, to reduce its stock to an amount
less than 2 percent of the base as of the close of the date of enactment,
but not less than 2 percent of the base as of the beginning of the
year in which the reduction is made. This exception is designed to
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allow the Board to permit a reasonable degree o-f flexibility in proper
cases.
It is estimated that the ratio o-f stock to home mortgages would not
decline to 1 percent until approximately 1968. This would mean
that, in general, institutions which were Federal home loan bank
members on the date o-f enactment o-f the bill would not be required
to buy further bank stock until that time. However, new members
would immediately have to buy stock under the 1-percent requirement.
As has previously been noted, the annual premium prepayment by
an insured institution would be equal to 2 percent o-f the net increase
in all accounts of its insured members during the next previous calendar year, less an amount equal to any requirement, as of the end of
that calendar year, for purchase of stock of the Federal home loan
bank of which the institution is a member, as calculated in accordance
with the bill.
This does not provide a clear and specific method o-f treatment for
cases where the particular institution was not an insured institution
at the beginning o-f that calendar year but became an insured institution during that year. Accordingly, the Board hereby suggests the
following amendment to the bill to take care of those cases :
We recommend that on page 7 o-f your bill, line 2, strike out the
period and insert the following:
: Provided, That in the case of an insured institution which was not an insured
institution at the beginning of such next preceding calendar year the 2 per
centum aforesaid shall be 2 per centum of the net increase in all accounts of its
insured members during that part of said calendar year which begins with the
close of the day on which such institution becomes an insured institution and the
amount deducted from such 2 per centum under the foregoing provisions of this
sentence shall not exceed one-half of such 2 per centum as calculated in accordance with this proviso.
BASIC OBJECTIVES OF THE BILL
Now that the major technical aspects o-f H.R. '7108 have been noted,
it may be desirable to set forth its basic objectives.
First, it is believed that the amount of stock of the Federal home
loan banks now outstanding is more than sufficient to meet the criterion of adequate capitalization. And that is an understatement.
As of the present time the combined stock, reserves, and surplus of
the 11 banks amount to $1,186 million as compared with outstanding
consolidated obligations o-f $955 million. Now as you know, our
re~lations provide for the issuance o-f obligations up to 12 times the
paid-in capital stock and statutory reserves of the banks.
A basic stock-purchase requirement of 1 percent was considered
adequate when the Federal Home Loan Bank Act was originally
enacted, and we are convinced that it is entirely safe today to return
to a comparable figure provided such return is accompanied by safeguards such as those contained in the bill.
We believe that this reduction in the stock-purchase requirement
may result in the seeking of membership by eligible institutions which
have heretofore hesitated to join the system because of the 2 percent
requirement, and this may be said to be one of the objectives of the
bill.
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Second, while the stock of the Federal home loan banks has kept
pace with the rapid growth of their member institutions the reserves
of the Federal Savings and Loan Insurance Corporation have not.
On June 30, 1950, the ratio of the reserves of the Insurance Corporation to its potential liability was 0.843 percent; currently, the ratio
is 0.661 percent. The failure of the reserve ratio of the Corporation to
increase during the intervening period is caused solely by the rapid
growth of the insured institutions.
During the entire life of the Corporation its total expenses have
amounted to only 3.7 percent of its gross income while net insurance
losses have absorbed a mere 1.1 percent of the gross income. The
second objective, and the predominant objective, of H.R. 7108 is to
gear the growth of the reserves of the Federal Savings and Loan Insurance Corporation to the expansion of its insured institutions.
I am glad to say that there appears to be virtually unanimous agreement on the broad purposes of H.R. 7108 by all interested parties,
although there may be some divergence of views with respect to the
technical aspects. As you know, we shall be glad to furnish any additionrul information in response to your questions and to work wlth you
to any extent that you may desire.
I think, Mr. Chairman and members of the committee, that it might
be better if we stop at this point rather than my proceeding on to H.R.
7109, so that the questions relating to this bill might be asked at this
time.
I hope that I am able to answer them to your satisfaction. I£ not,
I have with me the two members of the Board and Dr. Husband, who
is the General Manager of the Insurance Corporation.
Thank you very much.
Mr. SPENCE. This bill will not impose additional assessments on
the members in excess of what they are now paying?
Mr. McMURRAY. Yes,sir.
Mr. SPENCE. The bill merely reduces the amount member institutions will be required to invest in Federal Home Loan Bank stock,
and requires insured institutions to m\lke premium prepayments of
roughly the same amount to strengtheii the resources of the Federal
Savings and Loan Insurance Corporation?
Mr. McMURRAY. That is correct, sir.
Mr. SPENCE. That is essentially what it does?
Mr.McMuRRAY. Yes,sir.
Mr. SPENCE. It has the approval of both Leagues?
Mr. McMuRRAY. That is true, sir.
Mr. SPENCE. It is an administration bill?
Mr. McMuRRAY. Yes, sir.
Mr. SPENCE. Mr. McDonough, have you any questions?
Mr. McDONOUGH. I am Yery happy to see you here this morning
and to wish you the best of luck, and I am sure that your administration will be of the same type of efficiency that you have displayed in
previous assignments, both in '\Vashington and in New York State.
Mr. McMuRRAY. Thank you very much.
Mr. McDONOUGH. I would like to know, Mr. McMurray, have you
looked over this recommendation of Mr. Holifield?
(The recommendation referred to above may be found on p. 60.)
Mr.McMuRRAY. No,sir,Ihavenot.
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The first time I heard about his recommendation was this morning.
Mr. McDoNorGH. He has filed here a letter with some notations
and suggestions concerning the administration of the Home Loan
Bank Board v,hich goes back to the problem that we had under Mr.
Fahey.
You are familiar with that, are you?
Mr. McMURRAY. Congressman Holifield, just in a moment, told
me what the purpose of the letter was, and I understand that it relates
to the Los Angeles Bank which was dissolved by Mr. Fahey.
Mr. McDONOUGH. Yes, the ·Los Angeles Bank and the Long Beach
Savings & Loan Association.
I have not read the notation thoroughly through, but I just wondered if you had come to any conclusions on the suggestions that are
made in it?
Mr. McDONOUGH. No, sir. I have not even had a chance to read the
recommendation. And so, with your permission, and the committee's permission, I would prefer to study it, and if the committee
desires, we will be glad to give the committee a considered judgment
with respect to that.
·
Mr. McDONOUGH. I think it is worthy of note, because it involved
a problem that was rather aggravating for a long time, both on the
local level and insofar as the Home Loan Bank Board is concerned,
as you know.
Mr. McMURRAY. This Board, as I do, has great respect for Congressman Holifield, and we know that he is a very long time student
of the Home Loan Bank Board and its operations.
So I am sure that anything he proposes is worthy of very serious
consideration.
Mr. McDoNoUGH. I di~ not hear all of your testimony, but I presume that you are fully m favor of R.R. 7109?
Mr. McMuRRAY. I have not yet testified on R.R. 7109.
Mr. McDONOUGH. Oh.
Mr. McMURRAY. But you have correctly judged, that I will support it.
Mr. McDONOUGH. That is all for the moment, Mr. Chairman.
Mr. SPENCE. Mr. Barrett?
Mr. BARRETT. Mr. McMurray, you seem to have no opposition from
either side this morning.
Mr. McMURRAY. Thank you very much.
Mr. BARRETT. Mr. McMurray, under the 1950 legislation it took
you about 8 years to retire the membership stock.
Under R.R. 7108 you indicate it will take about 20 years.
Is that right?
Mr. McMuRRAY. I think Dr. Husband had better answer that
question.
Mr. HusBAND. I£ you are referring to the stock of the Insurance
Corporation, which I think you are, Congressman, yes, sir. It took
about 8 years to retire the stock.
Mr. BARRETT. And now to build up a reserve you anticipate will
take about 20 years?
Mr. HusnAND. The 2 percent goal will be reached from between
1990 and 1995, years which I think we are both perfectly safe to
predict, because we will not be around to see the results.
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
Mr. McMuRRAY. Speak for yourself.
Mr. BARRETT. One point I would like to know is how you arrived
at this figure? What formula do you use ?
Mr. HusB.\ND. By applying the 2 percent prepaid premium while
continuing the one-twelfth of 1 percent regular premium during that
length of time, and allowing for the continued growth of the associations, we estimate it will take until approximately the 1990's to reach
the 2 percent goal.
Mr. BARRETT. That is all.
Mr. SPENCE. Mrs. frwyed
Mrs. DwYER. No questions.
Mr. SPENCE. Mr. Stephens?
Mr. STEPHENS. No questions.
Mr. SPENCE. Mr. Scranton?
Mr. SCRANTON. Mr. McMurray, you say, on page 2 of your testimony, that this legislation, if enacted, will mean a flow of savings into
the institutions, and it also, therefore, should mean that we would have
more private enterprise funds available for housing.
I certainly hope you are right, but have we any reason to believe
that this is true other than a generalization that it will strengthen-Mr. McMURRAY. Well, to the extent that you strengthen, as this bHl
would do, the Insurance Corp., it certainly should be an even further
inducement to the savers of our country to put their funds in the savings and loan associations, and those that are members of the Insurance Corp.
And I think it will do that and, therefore, stimulate the flow of
funds to these institutions, and in that way make more funds available
for home mortgages.
Mr. ScRANTON. In other words, your thought is based only on that
generalization, that it will strengthen them?
Mr. McMURRAY. Yes, sir. Yes, sir, but it is a generalization, I
think, th'lt is a sound generalization.
Mr. ScRANTON. Secondly, what is the reasoning behind changing
the present law that demands a 5-percent reserve, down to the 2
percent?
Mr. McMURRAY. The reserves o:f all our associations now, the average association, is something-I believe it is about 8 percent. They
are required to build these reserves up to 12 percent by allocating 10
percent in income each year to them.
And with this 2 percent, that will give you a reserve :factor we :feel
tqat is adequate to take care of any contingencies that are likely to
occur.
Mr. SCRANTON. It never got anywhere near the 5 percent at any
time, did it?
Mr. McMURRAY. That is right.
Mr. ScRANTON. On these exceptions that are made in the bill, just to
clear me up so that I thoroughly understand them, you state on page 6
that any member may reduce its stock to 2 percent o:f the base as of the
beginning of the year in which the reduction is made, and not less than
2 nercent o:f the base as o:f the close o:f the date of enactment, that
being the first exception.
Mr. McMURRAY. Yes.
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Mr. ScRANTON. And the second exception, as I understand it, and
I want to make sure I do, simply puts in the discretion of the Home
Loan Bank Board the decision to make that "and" an "or."
Is that correct?
Mr. McMuRRAY. To make it to what?
Mr. ScRANTON. "And" in the first exception to "or"-Mr. McMuRRAY. Well, the second exception relates to a later time
when conditions might change so that they want to reduce it.
If such an institution asks to reduce its stock to 2 percent, it then can
reduce it but not, in any case, less than 2 percent at the beginning of
the year in which the reduction was sought, subject to the discretion
of the Board, if a requested reduction would reduce the institution
stockholdings to less than 2 percent as of the date of enactment.
As Mr. Williams points out, that provision will take care of those
institutions getting small rather than large.
Mr. ScRANTON. Yes.
That is all the questions I have1 Mr. Chairman.
Mr. SPENCE. Mr; Moorhead?
Mr. MooRHEAD of Pennsylvania. Thank you, Mr. Chairman.
Mr. McMurray, on the stock ownership requirements~ as I understand it, a new member would be required to make purchases up to 1
percent, but an old member would have to continue its ownership at
2 percent.
Is that correct?
Mr. McMURRAY. Yes, sir. He would continue the stock that he has
and, in many cases-in all cases now, it is 2 percent.
But, from now on, new members coming in will only have to put up
1 percent in stock.
Mr. MOORHEAD of Pennsylvania. And the equalization between the
new members and the old members would be brought about by the
fact that the old members would not be required to buy new stock
and their stock ownership would gradually £all-Mr. McMuRRAY. That is correct, sir.
Mr. MooRHEAD of Pennsylvania. So that equality between old and
new members would be reached, as you estimate, by about 1968?
Mr. McMURRAY. Yes, sir.
Mr. MooRHEAD of Pennsylvania. Thank you.
Thank you, Mr. Chairman.
Mr. SPENCE. Mr. Multer?
Mr. MULTER. Thank you, Mr. Chairman, for the opportunity to
participate in this subcommittee's work, although I am not a member
thereof.
It seems to me, Mr. McMurray, that there should be a complete and
thorough review of the entire basic act, and it might be better to postpone action on this bill until your agency has done that, and then
come in at one time with the proposed amendments to every part of
the act which needs change or correction rather .than try to do this
piecemeal as we are doing now.
.
.
Is your agency presently undertakmg a study or review of the entire basic act ?
Mr. McMuRRAY. Congressman Multer, we have, as you know a task
force that has been set up, which is studying the whole Federal Home
Loan Bank Board and its operations and many of the problems with
72.567 o--m:--'3
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FEDERAL HOME LOAN BANK A:C'T AMENDMENTS.
which the Home Loan Bank Board is confronted. Subsequent to some
basic general studies of the problems with this group we are going
to have a management consultant firm or a team of experts study the
organization of the Board.
However, it seemed to us that since this specific bill has already
received the unanimous support not only of the task force, with whom
we discussed this bill, both the leagues, who have studied the bill over
a long period of time, the previous Board members and the Federal
Savings and Loan Insurance Corporation, we hope the Congress will
enact it now.
Also, it seems to me that this does not preclude any future changes
that we might make as a result of our study. I think it would greatly
strengthen the heart of the savings and loan industry, and it is something that I believe would be recommended by any group who studied
the Insurance Corporation.
Mr. MuLTER. Without in any way derogating the good faith of the
leagues, the national leagues ,vho represent the associations, this is one
instance where I discount their support of the bill, because that is obviously actuated by self-interest on the part of the associations concerned.
I think your concern, and our concern, must be the protection of the
public and the institutions. Rather than reducing the contributions
of the individual savings and loan associations we must think first
of strengthening the home loan banks and the Federal Savings and
Loan Insurance Corporation.
I think that must be your first desire and our first desire.
Mr. McMuRRAY. That is my purpose, sir. And I think both leagues,
in this instance specifically, and I might say :from my experience with
them in a lot of other ways, should be commended for their support
of this bill, because I do think it strengthens the FSLIC.
It makes what the insured institutions are doing for the public
that much more valuable and the public can have that much more
confidence in placing their funds with these institutions.
I think this is one of the cases where what is good for an association
is good for the bank, for the FSLIC, and good for the people.
Mr. MuLnm. N mv, let's analyze that for a moment.
There has been criticism of the Insurance Corporation's surplus and
reserves on the ground that they are not large enough. Obviously,
you think they are sufficie'nt or you would not be recommending the
passage of this bill.
But you point out in your statement, in support or the bill, that
you are going to reduce the resene funds :from 5 percent of the insured
accounts and credit obligations to 2 percent.
Now, that is not strengthening. That is weakeni'ng.
Mr. McMuRRAY. No, sir. No; ,ve do not reduce the reserves, the
5 percent was an objective before it ,His realized reserves of the institution would be what they are.
Mr. MuvrER. You do not reduce the dollar amount, but you do
reduce the percentage?
Mr. McMuRRAY. The present reserve of the FSLIC, sir, is approximately 0.66 and this is designed to increase the reserves to 2 percent.
So, on the contrary, it will bring up the reserves much more quickly
and, therefore, strengthen greatly the reserve of the FSLIC.
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Mr. MuL'l'ER. Well now, first we build up the capital of the banks
and on top of that we build reserves so that in the event of a catastrophe and you must use the money, the first call is on the reserves
then the next call is on the capital. That is the reason for the capital.
The reserves are something that you build up on top of the capital.
Mr. McMmmAY. That is right.
Mr. Murn'ER. Now, you are weakening that by this bill, are you not~
Mr. McMunRAY. No, sir. I think, sir, you are talking about the
stock in the home loan banks, which institution is separate from the
Insurance Corporation. The stock in the bank would be reduced
compared to·what it would otherwise be, but as we pointed out in the
statement, the capital of the Home Loan Bank System is already
extremely high.
In fact, its obligations or the notes that they have issued are less
than its capitalization. So that the Bank System is very very strong,
and you should have no fear about reducing it to 1 percent.
On the other hand, what we do is allow the associations rather than
buy more stock on the present 2 percent basis to prepay a part of their
future premiums so that the FSLIC will be that much stronger, and
their reserves will be that much greater.
Mr. MuvrER. Well now, how much in dollars and cents are we
talking about when we reduce it to 1 percent?
Mr. McMuRRAY. When we reduce-Mr. MurnER. Look at page 6 of your statement.
Mr. McMURRAY. Are you speaking now ofit is estimated that the ratio of stock to home mortgages would not decline to l
percent until approximately 1968?
Mr. MuLTER. Yes. How much will that be in dollarsMr. McMuRRAY. One percent to 1968?
Will there be any Dr. Husband?
Mr. HusBAND. There will be no reduction in the amount of the
stock, Congressman.
See, this bill provides that you cannot decrease the amount of stock
unless, by chance, a present member held 2½ percent. As a matter
of equity, you could bring him back to 2 percent.
So the amount of the stock will remain fairly constant except when
new members coming in who have to add to it. So the stock amount
should be larger in 1968-69 than it is today.
Mr. MuLTER. Yes, but I think what you are doing here runs counter
to everything we know about good banking practice.
Now, whether we call these savings and loan associations or not,
they perform a banking function.
They are performing a banking function, and I think, to a certain
extent, they must follow sound banking principles.
Now, throughout the history of banks in this country, as the business grows, as the deposits grow, as their investments grow, all of these
supervising agencies on the State level and National level insist that
they increase their capital as their deposits grow-that they increase
their capital and their reserves and their surplus.
Now, why does not the same thing apply to the home loan banks?
Mr. McMURRAY. I think that 2 percent stock purchase requirement,
in terms of our experience, would be greatly excessive. I think you
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are talking about a situation where, for example, if we were issuing
notes and obligations and pushing the line of 12 times the base capital,
your statement might be correct, but the fact of the matter is that
capitalization-a billion dollars, roughly, is supporting only $900 million in notes, and there is no bank that you can point to me that is in
a more sound condition than that.
As a matter of fact, if there is any criticism that can be made it is
that the home loan banks have not been doing their job in terms of
making better use of their capital.
Mr. MuLTER. Well, are you willing at the same time to amend the
law to restrict you so that you cannot issue obligations to 10 times-Mr. McMURRAY. 1Vell, you can, but 10 times would be, at the present
time, in the neighborhood of $10 billion-Mr. MuLTEI?. That is right. You only-Mr. McMuRRAY. And if we get into that condition then the question will come to increase it, hut at the present time and in the foreseeable future that is unlikely to come about.
And, in the meantime, what we have to do is strengthen the Federal
Savings and Loan Insurance Corporation so as to make it that much
stronger, so that people can have that much more assurance, if they
need this assurance, because, as a matter of £act, the experience has
been excellent, as I pointed out, I think it is a wise decision that the
Board has made and which Congressman Spence's bill attempts to
carry out, to use this-what is really surplus capitalization, if you
will-and to transfer it where it will be much more effective than
where it is now.
Mr. MuLTER. Yes, we have the utmost confidence in you and your
associates.
But we do not know who is going to succeed you, and if we do not
write into this bill now that we are going to cut back, as you asked
us, and do not cut back on your authority somebody in the next year
or the year after may issue this $10 billion in bonds or obligations.
Then what are we going to do? Are we then to try to stop it?
Then it is going to be too late.
Mr. McMURRAY. No. Even if that would come about it still would
not have any dire results, as I see it.
All you would do would be to limit it. You could not issue more
than $10 billion in notes or obligations.
In any event, $10 billion would be limited; and if the Home Loan
Bank Board, in its judgment, felt that we should issue, say, $20 billion in bonds, then ,ve could recommend such changes to the Congress to have such authority or we could, I believe-I am not sure
about this-but it miiht be that we would have the authority to
increase the required stock.
Do you know? 1Vould we still have to come back to Congress to
change the 1 percent to 2 percent?
Mr. HusBAND. Yes.
Mr. McMuRRAY. We would have to come back to Congress. So
at that time if the national situation was such that we were not getting sufficient funds through deposits or share accounts and we needed
to go to the market to get financing for housing, I presume the situation would be such that if we recommended it, that Congress would
be likely to approve our request for the increase in the stock to
2 percent.
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Mr. MuLTER. May I ask one further question, Mr. Chairman?
On page 8 you complain about the fact, while the stock of the Federal home loan banks has kept pace with the rapid growth in the member institutions, and that is proper-that is good banking-you also
complain the reserves of the Insurance Corporation have not.
Mr. McMuRRAY. That is right.
Mr. MuLTER. There is nothing you are doing here to increase the
reserves in the Insurance Corporation while you are cutting back
on the capital of the mother institution.
Mr. McMuRRAY. Now, you have here exactly the point. That is
exactly what we want to do.
We point out that the reserve ratios have gone down, and that is
the reason that we are recommending that rather than increase the
capitalization of. the home loan banks, we would rather increase the reserve situation of FSLIC so we would not have the situation of
0.843 in 1950 versus 0.661 in 1960.
We want to make it-instead of 0.661 we want to make it 2 percent.
And you have hit the very nub of the question.
Mr. MuLTER. And what bothers me is I do not see how you are
going to increase reserves of the Insurance Corporation while you
are cutting back the capital of the home loan.
Now it is true that increasing the capital or having that to continue to grow does not change the reserves in the Insurance Corporation, but I do not see anything here that is going to increase the reserves in the Insurance Corporation as you stop increasing the capital
of the-Mr. McMuRRAY. Because I wish to point out, Congressman, that
the FSLIC is another cor_poration and-Mr. MuLTER. That is right.
Mr. McMuRRAY (continuing). There are 11 banks and you are talking about their capitalization. And all we are doing is telling the
associations instead of buying stock in the banks pay that money into the FSLIC, because the banks have enough capitalization, and the
FSLIC does not have enough reserves. Therefore, we want the reserves strengthened, and that is the whole purpose of this bill.
Mr. MuLTER. Who owns the Insurance Corporation?
Mr. McMuRRAY. It is a Corporation that is owned by the U.S.
Government.
Actually, the U.S. Government did have funds in the FSLIC, and
they were retired from 1950 to 1958, so that the U.S. Government
does not have any funds in it.
There is a statutory authority to borrow up to $750 million from
the Treasury which may be regarded as an ultimate reserve.
Mr. MuLTER. Thank you, Mr. Chairman.
Mr. McMuRRAY. Shall I proceed with H.R. 7109?
Mr. SPENCE. You may proceed with H.R. 7109.
Mr.McMuRRAY. Yes,sir.
The second bill, to which I would direct my testimony, is H.R.
7109, introduced by the chairman, Congressman Spence, and it is
designed to simplify and make more workable the procedure for the
nomination and election of directors of the Federal home loan banks.
It has, we believe, very substantial support among members of the
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
savings and loan industry, and we recommend its enactment with certain amendments which will later be mentioned.
As you know, the capital stock of each of the Federal home loan
banks is owned by its member institutions, the original amounts of
Government stock having been long since retired.
Section 7 of the Federal Home Loan Bank Act provides that each
bank shall have a board of 12 directors, 4 to be appointed by the Federal Home Loan Bank Board for terms of 4 years and 8 to be elected
by the members of the bank for terms of 2 years. It provides that the
Board may by regulation increase to not more than 13 the number 0-f
elective directors of any bank having a district which includes 5 or
more States, defined for this purpose as the States of the Union and
the District of Columbia, and that in such case the Board may also
increase the appointive directors to not more than half the number
of elective directors.
The only bank which has had such an increase is the Federal home
loan bank of San Francisco, and to avoid undue complication my discussion will be confined to districts having the normal number of directors.
Under section 7, the eight elective directors are divided into four
<'ategories of two each. Two are to be elected by the members without
regard to classification, and are commonly known as direetors at large.
As to the remaining six, the Board is directed to divide each bank's
members into groups A, B, and C, representing respectively the large,
medium-sized, and small members on the basis of the aggregate unpaid principal of their home mortgage loans.
These three groups respectively nominate and elect two directors of
classes corresponding to the groups of the member institutions; that
is, group A members nominate and elect two directors of class A, group
B members two directors of class B, and group C members two directors of class C.
This method of nomination and election is in itself a complex matter, but it is made additionally complex by the equitable and practical
necessity of providing for representation of each State, in order to
prevent the occurrence of situations such as those in which all of the
elective directors of a bank might be representative of only one State,
or only a minority of the States, of the particular district, to the exclusion of other States.
As to this matter of State representation, the regulations of the
Board provide that, subject to certain other provisions, the Board,
in determining the results of balloting, will see that each State ( defined as I have mentioned) is represented on the directorate of its
district by at least the number of elective directors set forth in the
regulation. This minimum number ranges from one, generally applicable to districts having a large number of States, to three in the case
of certain districts composed of only two States.
The regulations·provide two methods for determining what State
a director represents. A director of class A, B, or C, who is required
by statute to be an officer or director of a member institution in the
?Orre~pondingly lettered group, is to be deemed to be from the State
m whwh such member is located. A director at larg-e, who is required
by statute to be a bona fide resident of the bank district. is to be deemed
to be from the State in which there is located the member of which he
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
19
is an officer or director, or, if he is not such an officer or director, from
the State in which he has established a bona fide residence.
Other provisions of the regulations further implement the providing of State representation. Candidates who receive, on the first
ballot, a majority of all votes cast for the directorships for which
they are running will be declared elected on that ballot, unless the required State representation would be impaired. If the required State
representation would not be maintained, the Board designates, for
each State which apparently would be inadequately represented, a
directorship or directorships to be filled only by a candidate from
that State, provided at least one properly qualified candidate from
that State has been voted for.
In giving this brief summary I have, of course, omitted a number
of detailed and specific matters that are covered by the regulations.
However, you can easily see that in some circumstances this method
may result in situations in which a candidate is declared elected, or
is admitted to a runoff confined to candidates from his State, where
he has received only one vote or a handful of votes and where some
other candidate from another State may have received a :plurality or
even a majority of the votes cast for the directorship. Situations of
this sort have at times aroused a considerable amount of resentment
on the part of persons thus passed over. At the same time, it is difficult to see how representation for the various States can be provided
within the framework of the existing statute without the production
of some such situations.
H.R. 7109 would provide a remedy by removing the basic cause of
these situations, namely, the existing division of the eight elective
directors _into four arbitrary classifications of two each. Under this
bill, all elective directors of a bank would be in one group, but would
from time to time be allocated by the Federal Home Loan Bank
Board among the States of the district in approximate proportion to
the required stock of the bank of the district held by the members
from the respective States, with a minimum of one such director and
a maximum of six such directors for each State.
However, each State would be entitled to at least as many elective
directors as the number which represented it on December 31, 1960,
and the Board would be directed to add as many directors as might
be necessary for this purpose.
Each directorship allocated to a particular State would be filled by
an officer or director of a member located within that State, and the
members located within that State would have the function of nominating and electing for that directorship. In such election, each member would have the right to cast a number of votes equal to the number of shares of stock of the bank of the district held by such member,
except that the bill provides that no added voting strength shall be
derived from stock ownership in excess of the average required ownership of the members in the particular State.
The Federal Home Loan Bank Board feels that the bill would provide a simple and equitable method for the nomination and election
of directors of the Federal home loan banks. In particular, the bill
would recognize the principle that voting should have some relationship to the amount of stock ownership, while at the same time it would
prevent any one member institution from exercising voting right~
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Federal Reserve Bank of St. Louis
20
FEDERAL HOME LOAN BANK A:CT AMENDMENTS
with respect to stock ownership in excess of the average required
ownership of members in its State.
Further, the allocation of the elective directorships to the respective States of the district would have definite advantages. First, the
members would more usually know the candidates they were voting
for, and this would permit them to exercise better judgment in casting their ballots.
Second, there would be greater interest in the elections, which
should result in greater participation by members in the voting process. Third, the bill would completely eliminate the possibility of
situations in which a dominant State within a district could control
the election of directors from other States, as is possible under the
present method of election.
The Board therefore recommends the adoption of the plan set forth
in H.R. 7109. However, the Board feels that a number of amendments to the bill are needed, not with a view to altering the method
set forth in the bill but for the purpose of assuring that the objectives of the bill may be effectively carried out.
Accordingly, there are presented herewith suggested amendments
which have been prepared for this purpose, together with an analysis
of these amendments and a comparative draft showing the changes
which would be made in the bill if the amendments were adopted.
The Board recommends that, with these amendments, H.R. 7109 be
enacted into law.
Time has not permitted the obtaining of advice from the Bureau
of the Budget with respect to this statement. Consequently, no determination has been made as to the relationship of the pending legislation or this statement to the program of the President, except that the
proposal on which H.R. 7108 is based was transmitted in draft form
to the Bureau of the Budget before its transmittal to the Congress,
and the Bureau advised that it would have no objection, from the
standpoint of the administration's program, to the transmission of
that proposed legislation.
Copies of this statement are being transmitted to the Bureau, and
you will be informed as to any advice that may be received.
Thank you very much.
Mr. SPENCE. Do you think under this system the interest of the
smaller associations will be well protected?
Mr. McMURRAY. Yes,,sir. A provision in there that no association
can exercise a voting right in excess of the average of all the associations would prevent one large association or two or three large associations from ganging up.
The smaller associations would still have the chance of being
elected, and we would expect that there still would be members on
the Board who would represent small associations.
Mr. SPENCE. Has there been any opposition to the present method
of electing directors?
Mr. McMuRRAY. Yes, sir, there have been difficulties about the
present methods.
It is highly complicated. I can tell you, I had to study long and
hard, and I hope I know it well enough; however, I have never been
through one of the elections, but the other Board members have, and
they tell me it is a very perplexing problem and this would greatly
simplify the election.
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
21
A lot more members would understand it and a lot more associations would vote, because at the present time a lot of them do not
exercise their right to vote.
Mr. SPENCE. Generally, the associations are in favor of this change.
Are there any members in the associations opposed to this bill?
Mr. McMURRAY. As far as we know, sir, we have not heard any
opposition, but there are some 4,700 associations, and in a democracy
like ours I would be surprised if you would not find an association here
and there that might have some objection.
But I think, generally, there is very substantial support for this
bilil, and I know that the two leagues are both in support of the bill.
Mr. SPENCE. I presume there might have been some opposition
to -it. Mr. McDonough?
Mr. McDONOUGH. Well, Mr. McMurray, I want to go back to this
letter that Mr. Holifield filed with the committee this morning, and
to ask:
In the adoption of H.R. 7109, how much of a change would that
make in the large jurisdiction o:f the San Francisco banks indirectly?
Mr. McMURRAY. No change at all.
Mr. McDONOUGH. In other words, it would not increase the membership?
Mr. McMURRAY. It already has the maximum membership now,
because that is the largest district, and has the largest number of
States as menibers o:f that bank.
So it would not be increased.
Mr. McDONOUGH. In his letter to the committee he indicates that
i:f the pending resolution before the Board can settle the Long Beach
Savings' cases or if they are not settled before this bill is passed, then
he will introduce legislation to accomplish that.
Now, is there any reason why that should not be settled before this
bill is passed ?
This is an administrative responsibi lity of the Board and it certainly should not require legislat10n.
Mr. McMURRAY. Again, I say I want to be responsive to your questions, but I have not read the letter, so it is hard for me to answer.
With respect to the Long Beach case, however, without discussing
what is going on, I do not see any need for legislation.
I think that it is well on the way to settlement.
Mr. McDONOUGH. In other words, you are familiar with the pending resolution before the Board •:for a proposal to settle the Long
Beach-Mr. McMuRRAY. Oh, very :familiar, sir.
Mr. McDONOUGH. And you do not think it is necessary that legislation be passed in Congress?
Mr. McMuRRAY. I certainly do not. It is hard for me to imagine
it, anyway.
Mr. McDONOUGH. That is all.
Mr. SPENCE. Mr. Barrett?
Mr. BARRETT. No questions.
Mr. SPENCE. Mrs. Dwyed
Mrs. DWYER. Mr. McMurray, has the controversy, as concerns
the New Jersey League, over the directorship representation on the
Board, been taken care of?
1
72667 0-61--4
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Federal Reserve Bank of St. Louis
22
FEDERAL HOME LOAN BANK ~CT AMENDMENTS
Mr. McMuRRAY. I am not acquainted with the controversy in New
Jersey.
So, Mr. Williams, do you want to answer the Congresswomen's
question?
Mr. WILLIAMS. I understand that you are correct. It has been
taken care of.
Mr. DWYER. Thank you, sir.
Mr. McMuRRAY. There are many things I still have to learn. I
have only been here 2 months, and I know of some of the controversies
and some of the problems and with some hard work and extensive
studying I hope I will soon be able to answer every question fully.
I hope that is the next time I appear.
. Mrs. DWYER. I might say that you are doing a very outstanding job,
sir.
Mr. McMURRAY. Thank you very much.
Mr. SPENCE. Mr. Moorhead?
Mr. MOORHEAD. Thank you, Mr. Chairman.
Mr. McMuRRAY. I would like to go back to your discussion with
Congressman Multer, when you stated that your bank had the power
to borrow $10 billion.
I would like to ask you what method you would go about using that
power to borrow from the securities market and, secondly, what would
be the circumstances and the use to which you would put this rather
large power?
Mr. McMuRRAY. The 11 home loan banks, based on their stock,
which we indicated was in the neighborhood of $1 billion, something
in excess of $1 billion, could issue up to 12 times that amount in consolidated obligations under our present regulations.
These are bonds that are sold in the open market just as other corporations and authorities do.
We already have consolidated bonds. Most of our financing, however, is done in short-term notes, and I would expect that in times of
need for home financing, assuming we do not have enough funds
coming in from the savers, that this power would be used to provide
for the needs of the homebuilding industry that would require such
funds to finance its programs.
Have I answered your question?
Mr. MooRHEAD. Except for the circumstances under which you
would need this authority.
Would this be in the time of great recession or would it be in the
time of more expansion, where the capital is hard to come by?
Mr. McMuRRAY. I am inclined, sir, to think that it would be happening more in the period of expansion, although, of course, the home
loan banks are a reserve system and in the event that there would b~
. a heavy withdrawal of funds, the consolidated bonds might be issued
to support the associations in carrying out their responsibilities and
meeting their withdrawals.
Mr. MOORHEAD. Thank you, Mr. Chairman.
Mr. SPENCE. Mr. Scranton?
Mr. SCRANTON. Mr. McMurray, I just momentarily would like to go
back to the chairman's question to you.
I, quite frankly, was not fully satisfied that these changes would
take care of what was, I think, presumably, a good provision in the
present system of allowing smaller savings and loans associations to
have representation on the Board.
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Federal Reserve Bank of St. Louis
FEDERAL HOME LOAN BANK ACT AMENDMENTS
23
Although most o:f the changes seem to make very good sense, and
you apparently eliminate this State problem which has been, I know,
a grave one, still, at the same time, do you not eliminate protection :for
the smaller associations ?
Mr. McMURRAY. Well, the number o:f smaller associations, in number greatly exceed the larger ones.
Mr. SCRANTON. Yes.
Mr. McMURRAY. And presumably the smaller ones would want to
be represented in a kind. o:f a democracy that would exist in this
operation also.
It would seem to me that the smaller ones would make certain that
they voted :for a person who represented a smaller-sized association.
And, indeed, I believe that the larger ones would see the sense themselves o:f having similar representation o:f smaller associations on such
a bank board. As Mr. Williams points out, the large ones cannot vote
any more than their average.
Now, Mr. Smith has some tables worked out which, I think, may
more graphically illustrate how .or what might happen under certain
circumstances.
Could you address yourself to that, Mr. Smith?
Mr. SMITH. Yes.
Mr. McMURRAY. Mr. Smith is assistant to the Board and has been
working on this bill and probably knows more about it than anyone
else on the Board.
Mr. SCRANTON. Mr. Smith, before you start, would you also tell us
a little bit in general about what has been the history o:f the elections themselves?
Have in the past, the small associations been voting regularly or do
they not vote very much?
Mr. SMITH. The smaller associations percentagewise, I am told, do
not vote in the proportion that the larger ones do.
Mr. SCRANTON. That was my understanding, too.
Mr. SMITH. We :feel that under this bill there will be a higher percentage o:f voting, however.
Mr. SCRANTON. Despite the :fact that they have an opportunity to
select one :from their own category under the present system i
Mr. SMITH. That is right. Yes, sir.
Now, this table I have here, was prepared something over a year
ago, when I first started working on this plan, and we are now in the
process o:f preparing one that would bring us up to date.
We could :furnish it to the committee, and it would show by districts
and by States what the voting strength o:f the above and below average associations would be under this bill.
Mr. ScRANTON. Instead of-Mr. SMITH. And alsoMr. McMuRRAY. I think it would be very helpful i:f you would
have that made a part o:f the record.
Mr. SCRANTON. Yes.
Mr. Chairman, i:f that were possible, I think it would be helpful
instead o:f taking the committee's time this morning.
Can we have this made a part of the record~
Mr. SrENCE. Yes. It will be inserted in the record.
Mr. Sl\nTn. Thank you.
(The tables referred to are as follows:)
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Federal Reserve Bank of St. Louis
Bleotion
Iombor
ot
Inat1-
~
.....
~
;.:e,,ine
25
Dlreotor-
?otol
Kortppa
Stook
Olrllerahip
State ,C: ot
Total Required
Stook OWMrahip
1606,161,21,6 1,212,322
.1-rap
llortgages
per
~
tl.4.096.m
21,51
7J.09
Loa. BIIDD
DISTRICT Bo. 1
1natitutl01111 Onr the .l'ftrari!
llor~:;e.gea
Peroent&ge
~ ~
16
37.21
___!!!!_
t41,B,175,363
~
73,94
Onr
..__!!I! .ldJu.ted Votinli stni~h
voiabli
Mort:gap•
t225,51,8,:,68
~
451,097
Percentap
58,61
Under
»er~
llorttjap•
1157,965,883
Vol:!!) StN!l!;h
Votable
Percentage
~
315,912
41,19
164,493
2,91'
3,289,058
32.00
57,154,017
69,49
26,310,064
52,6311
51.19
25,0912.444
50,105
J.,8.81
1,671,65'],236 3,343,310
59.31
9,490,063
50
20,41
l,lJ.4,660,084
66.68
474,903,150
91S,eo6
46,ce
556,999,152
l,115,998
53.90
9
26,47
J.43,5(,0,Bll
68,13
55,TIB,166
111,556
45.37
67,156,715
134,313
54.6}
82,21,6,1,61
l4Uu:ih.uaetta 176
1:.
..........
Total
~ ~
Conneoticurt
ot DirNtor• tor Federal Boa
Pvaualt to BR
Preua.t
H.a:ip•hiN
34
210,717 ,526
lo2l.435
7.l,ll
6,197,574
Rhode hland
9
211,779,114
lo23,558
7.51
23,531.01,
22.22
170,152,451
eo.34
47,062,ce6
94,124
53.06
41,626,663
83,253
46,94
35,665,761
71,332
1.27
4,458,220
12,50
26,712,479
74.90
4,458,220
8,916
33.24
8,953,282
17,907
66.76
Vermont
Propo'.ud
DiNotorahips
.lllooation ~ propoeed 4ireotor•hi~ ie bu;ed upon 1me tor-au.la ot a a.:lm.JJum ot one diJ"eo'torebip tor each atate plua
OM additional 4ir90'torahip tor the state ha.Ting the v-ateat peroentage taotor n-.1Ding at'ter allooatloo ot eaob
emaH 4ireo'torahJ,p • u follc,n , ..
.....
Ocmneotiout
1. 7208 .. 1 41:reotor ....
MuaMhuHtte
In Bapehin
Bhod.a Ialad
Veraont
4-7448 ... 1
.2:,36 ... 1
,5984 -
•
-
.6oo8 - 1
.1016 • 1
~
....
,,
.Preaent
Ineti-
D1reot01"-
,
..........
Total
?otol
~ ~
Stook
11lortpp• 01111•:r•hip
, 1208
•7208
•;l08
.::a;xz
3.71.J48 - 1 41Notor -
2,74b8 .. l dinotor -
l,7W.S
.zico:
-
::!
Bomber
....
l
,:IIXIX
:!
-.....
---·
State % of
Total Required
per
stoolc Ownerehie ~
:!
ai.c.1;;10G ot J>1Noto:re tw rederal Bom Lo• Banka
Pw-■ Ullld to BR 7109
llUltituti01U onr the .l'nl!:!(!
11ortgagea
Peroent•
~ ~
_!!!!_
J>lSTRIO! Ro, 2
Offr ,l-n,r!fi! ~ullted Vo~ stren~
vota.bie
~
~
~
74-43
1662, 933, 106
1,325,866
54-06
Perom:i.t-e
New J•r•ey
236
4
12.203,552.259 4,J,a7,105
36-43
t9,337,086
71
,o.08 tl,640,1"',758
ll:e• York
210
4
3, 790,99], T15 7.582.000
l<!,68
10,052,,eo
55
26.19 2,761,761,96}
73,311
99",880,990
1,985.762
49.59
.89
7,626,553
14-29
78.46
7,626,553
15,253
39.08
P\l.erto Rioo
53,3115,873
106,772
41,888,503
Uni!er .lnrage Voting StNngth
vatabie
~
PeroeDtage
Mortgage•
11,497,310
22,995
Propohd.
D1:reotor 11hie11
60,12
.lllooation ot proposed di1'eotorabip• :la baaed upon 'the toraala ot a m.n.1- ot Clll9 direotorabip tor each Rate plue
one additional directorship for the state hanng the greatest peron'tege tc1:or naaining a.tar allooation of ..ch
ezoe,, direotorahip. a, foll0W"11-
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Federal Reserve Bank of St. Louis
12/30/60
-·
of
lnllti•
~
~
......,..
....,
.....
State
Di........
~
.....
.........
.....
PemlSyl-nnia
476
liest Virgim•
6
7109
State"~
!otJal.Bllqi.d.re4
....
52,606
2,919.881,696 5.8'9•.,,,,
30
...
.lffr&p
JIOl"tgage•
O...nbip Btook OlmllHhil?; ~
126,,.,,,138
!>el•._.
lhotio:a. of l):1.reotcw• tor Federal Boa Loa 8&ubl
Par•\IUl'll to BR
'51,56}
175,781,}74
4
6.1:,1,.205
1"6
5,86o.l,l,6
10
~
~
,.........
On1" .&.w:rap
.ldi::tt.Votillr; 8trenf5!!
~
~
l2l,05J,992
eo.oi.
'9.~.6'16
19.727
65.l!7
50.67 2.'45,652.190
80.3'
895.59',930-
1.191.188
6o.9'
150,50},61,6
74-24
58,604,1,6o
117,209
56.Ja
37,50
'3-287,891!
9'·5'
5.6}
Zc!:. "i::u&g.
Jutiw'tlam
~~
D?S'?IICf lfo. ,
,,_,,
lllder
.twraro1!:i.1Dg lw!'9h
Kortpp•
~
t5,2li9,1"6
Pero.tap
Propo■H
Dil"ector■hip■
10.lilB
571,,229,506 1,11,8,169
16.277,728
90,555
J.lloa aticm of Pf'OpoMd clireotonhip■ t• be■ed upon the tOl'lllll.a ot a m1ntmm ~ ou Gireot'orahip tor ■■ob lltate plu
ODE1 additional diNctorahip tor the state hfling 'tba gN&'best peroentage f•'bor rea1nizlg an.. allo oatia:o. of emb
ez:ceu d1reotor1h1p, u followat•
l>■ l■Wllff
.0672 •
.Bl(IC s: 8 direoiloN -
9'•5'-C s: B
PezmaylvUia
Wert Virr;inia
•
5.6'%s:B
l direotor •
-
- 7.bl24 • l
J604-1
-
~
.z:a:a:
6.lt824 • 1 4ireatw - 5.U124 - 1 clireotor - 4.lt824 - 1 41Notor .:ica:z
~
~
PmllUL JK1B lAllf
--- --.....
.
or
...,
l):1.reotor-
~
~ ~
"1
Al•D. or Columbia 24
iaonee ■
-
....,
.........
..... ..... "., .........
........
!a1:d . .'faired.
Owaenhip stoo:t Olllienb12 ~
:n.ttaa ot
,.la824 - l
~
directer -
2.b824 - 1
~
dJraotar
2
un: srnm
Direlrtor■
tor hdaNl Parlllllmt'toB~
Lo-. 8aab
==■-=■iiE■.ge
Jut:ttutiou
~~
~
~
!!!!!!Cf ••• It
Ont".l'NHp~To'!!f.Btngth
Jlortep•
~
1-ro■utap
,.£in& ftreDgtb
1bW' . . .
11o:rt1ae•
.!!!!!!:!!.
P9ro■ ntap
690.m
lo-61
te."19,16'
15
'6-59
t2'11,959,"'7
78."19
1126-287.l,16
252-275
6'.27
ffl-226,'51
111>,16}
98),989-260 1,967,979
1},15
l,o,999,552
6
25.00
"'5,997,'12
64,6}
· 216,997,'12
ISl,w.;
"1.Ja
31,8,008,955
696,018
58,59
2,222,715,369 4.l,16,li31
29.71
20,ooJ,.JM
1,675,505,798
75.37
61,0,782,816
1.281,566
547,1,09,571 1,oc;L,.819
1,6.07
58,}6
t:,1,5,185,678
}6,7}
Georgia
9'
809,002,7'1! 1,618,016
10.112
8,699,169
"
28.S,
20
21,51
565.22).188
69.86
17',98},380
-,i.7,967
"1,61i
"·"
2li,,799,5U.
1,B'/,599
llar)'lNJ4
162
1,015.167-274 2,0,0,915
i,.57
6-268-255
916,872,11,8
90.29
265,266,710
526.m
72.76
98,585,126
197,170
27.2lo
1,057,013,127 2,114,0127
11,.1}
12,7'5,105
"'
25-9'
21
25,50
J,J,8,518.1"l9
lll,W.
267.ld7.205
"4,874
50,5'
608.1!64-268 1,216,529
69.J,7
"2
}1.1,J
:,i,},'IIIO.J.16
70.12
154,0W..286
508,089
51.27
111>,l,l,o,l,61
~.881
1,8,7}
19
'5,19
109,550.li68
78,64
196,)66,748
,io,m
62,}5
118,564.1,811
257,129
}7,65
Floricla.
II'. Carolina
111
.,
a. Caroliu
70
la90,li.«>,906
980 ....
6.55
T:lrgiAia
54
558,0111..956 1,u.6,1~
7.li6
..,,,-
7,ooe,015
,
.lllooaticm of propoaod cl1notorllhips h buecl 1IPOll the f'oral1a or a amt.. of 0116 additional d:lNatol'ahip tor
•=•as clireotorahip,
~
th■
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29,71~ s: 8
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-
.'698 - 1 d1ntnw l..O,ZO - 1
•
2.r,68 • 1
.86j6 - 1
=t:: ~
.5Rlt0 • 1
.'968 - 1
;;!
••h
diNo'torsbip tor
nat. plm
pwomtap hotor rudJwag .,._. all.ooatiaa ot
toll01JSi1.za::a:
.0520
1,r,68
.axa
::
.a:a
.a:a
••b
Propo-■ 4
l):1rec,tarshi2!
lhmber
ct
lnsti•
........
.....
88
Ohio
,.
5'
2
-·-...
Btdlo-ot
'total bquin4
Stoot Dmerabit ~
,.._1"111 -
L-.n Ban
P'llrnat-•7109
Imti.tutian■
llortege•
Ownerahip
t618.209,632
1,236,419
10.i.,
t7,Cl!5,109
l,.7]2,68}.lo,l
9~.367
79,5'
10,178.58:?
U9
594,962,265 1,189.925
10.al,
11,225,'JU,
1"
2
~
-·
Total
Required
Total
l>ireotor~ ~
lleni.ca ot Direotar• tor
Onr the .a.wn.,e
iiorig,i.p ■
hroaii&p
Uncler .A.wr,::g Stz.ongth
Onr A-nr!I! !!3utle4 V!?!!:!I lltreD«l;b
votabli
_.!!!!,_
llorlpp•
~~
~
26.11, ~ . 9 9 0
70.24 t'.161.S77,507
23
!!!!!:!!..
llortgap•
Pvoentap
,.,.1,.;
1,6,16
25.70 ,.w.i.11,."'1
7'.ai!
1.au,251.2511
2,1,22.503
1,11.79
26..i,!
78,67
157,159.~
31",l"O
l,t;e,056.081
5
DlmtICt lo.
,.;.,,
tl0,,987,61,2
!!!!!:!!..
ftr0111n;tap
Propo■.cl
Mnotor ■hil!■
'67,975
53.21,
l.271,569,690 2,51.,,1'9
51.21
6
25',812
44.67
2•
126.906,1114
2•
••h
.UlooatiO'll of propoHcl clireotorahip■ is bu•d upon the forad& or • adll1- ot cme d1Notor■h1p t.nata plu
one a.dditiODal dil"eotor ■hip for 'the ■Rte h&Ting tb9 gnaW■t i-romtap
na&inhlg after al.lo onicn or Hoh
e:imeH dinotor ■Mp, u follow,-
,_tor
- -·-..... --Tctal
er
Inllti-
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Indi ...
lliohigan
Tctal
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~ ~
112
68
!!!!39!!-......
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ftoolc o-n■ nb:1.2;
-.....
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flll
Direotore fOI' h6ff&l Pm-111mt 1lo D '7109
Dlfffll:1Cf lo. 6
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p,r_
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5
t1.i.,o;i.74,785 2,86o.950
"9.20
t&,316,71"
16
26.16
t95','78.1'38
66.65
074.251<.1:,0
71,8,5""
l,5.96
'
l,477,19',5'1 2,954.'87
50.80
21.12,.i.,i.
21
:,o.ea
1.075,71,1,512
72.11!
1156,191!,UI,
912.'84
5,.19
A.wrTot!:£" StnmA:
llortpp■
!voeDap
~
Pliroentap
........
Dino1:or ■hip■
J.llooation of propo ■ecl Ureotor■h1ps t■ baaed apcm tile .tonmla of • aill1- of Olla 41Notor■h1p for ••h stat. plu
one adiltional clireotonhip for the ■ta:b■ h■.'rillg 'ti. .gnat. ■t paremtage taotor rea.1ni:4g after allooatioll of . .h
•meas direotor ■hip, a■ followa,-
J.$.20'.,C z 8 clireotol'e 50.SO,C a: 8
•
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:,:.9360 - 1 d:1-.,tor ,b..06IP -~
•
~
=
2.9'6()
J•o6h0 •-i, cl1Nctor
..
-
-
2.936() • 1 direotor 2.06lp
,.
-
1.9'6()
1.9360 .. 1 41notor 2.06la0 - 1 dir.otor - l.06LO
.,.
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-
.9360
.9'60 • l
l.ofU) • l dinotor -
-y=
.061,p
=,:
4!.notor -
n:a • b
.06wJ
,:=
-....
- --..... ..... -..... .......--_
. -·
......
ot
Director~ ~
-•-
~
:llinoi•
l:taocmain
w.
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9.298,'58
l,,,S,96,- 2.,IITl.'#1!1
tar
h ..nl. -
,__-'"°•7109
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lllstitatiau ONr ti. .&ftrap
ioriiai-•
por
llortpp•!!!!!!:!!!!f_ Slaalc o-enld.p ~
tlll.961..971
15,098;711,'16 lll,197."'2
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1,1,5
lla1:l• d
119
~
25.5913,811,,095,'91!
lt1
,-.a, 961.,916,5!111
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74,81 11,304,8'1,518
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7
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tlDder . .
lkripp■
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50,'9 11,2114.615,9'!4
2,569,2,i
49.61
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374.047.053
71,8,091,
11,.12
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T01i!m' Strgtk
DiNotorahip■
6
,.
.Ulooatimi ot proposed dil'eotorabip■ la llu■ 4 apa 1111 r....ia or • lda1- of om 41no~llldp hr ••h n■- plu
one ac!ditional di.J'eOtorahlp for the
baTbac 1119 . - - - ,.... . . . . ho1;or ...-ta1ng .rll■J' al.looaticm of ••h
UD■ H direator■hlp, u tollowau-
.-ta•
79,20ll x 6
eo.eo,c z 8
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•
........
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··•• Dalmta
80
60
126
12
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•
l.66lt0 .. 1
-
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..... .........
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llarbpp•
:I
&ftnp
at--■"
of
'l'ota1
BequiN4
por
S'hOt Dlmer■b:il!: ~
llorigage ■
t601!,r/6.111! 1,204.3512
1.'98.99ia.379 2,797.989
141,381!.lll1
&,912.747
.66la0
:I
3,"60 - 1 ..,_..., -
.~
2,"60 - 1 .66l,O
:!
""'·*
125.11!5
etc!:.......Ziiiaii
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hroentap
17,5127,2012
24
:,o.oo
J61.:,o6
53.91
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16,134.736
13
21.67
666.243,357
79.61
235.751,5!4
471,sa,
51.512
11.103.1,0
27
21.i.,
993,7'2.199
71.0,
299. 784,510
599,569
4-29
11.820.,091!
4
6'"77
47,260,Jl,6
11..561
1,91
4-779,057
4
"·"
:,0.77
90,167,,se
W..056.1,a!
70.0,
19.u.6.228
,....._t.ge
,.J981o -
~
~
16.28
16.2a,lse...........,-1.J,61!4-1........,._ .l,l,e4
,J/,Ql,
33.oi,Jl s 8
•
- 2.61i,1! - 1
•
- 1.61,312
1.61&,1 - 1 ....,...., lo2,l,8JI s 8
1
- •• - . - 1 ......... - 1.'981o
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1,"60 - 1 ....., .... -- •3~
Oftr .A.fllrap ~ .vat mg
Jlortee•
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11147,7",191!
1180,6512.~
74-35
Ql.ooatioa ot propoMd. 41.reotor■Jd.pa 1a -■-4 llpClll the f'orad• ot • .1111:dam. of om dinotor-abip tsr •Nh nabt plu
_. Mld.itionel tiree'torahip tor b
*"'- i..mc 11119 gre&'N. .
tmtor na1mA& ■tll■ r 1111ooat1cm ot e■i,h
...... dlnotorahip, . . ton.....
·--·.........
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-
2
.66la0
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-
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-
m..ot1m of Direo1;ora tor ~ral. . _ Loa Bllllm
Pm-■-- U BR 7109
1,088,00l,.256 2,176,169
1J
5,"60 - l - - - 4-"60 - l ......... -
an.-r- .661/J
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.........
6,"60 - l -
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1lldeJ'
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JlortpgH
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1154.l,l,2,950
:,oe,11116
1,6.09
221.e&.0.899
w.,.611!
1,8.1,6
57.J,e
lol!,512
lt<J5,2(e.180
810,524
l,8.00
51,216,713
102.i.,,
512.00
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ot
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~ ~
. ...,...
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stat• • or
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-.....
llortgage•
491,W.;
7.70
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66
746,370,119 1,496,71,D
23.47
6,701,976
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,i.
223.476,9:ll
7.01
6.572,910
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l,1,6,956
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~
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28.00
t,57,886,973
64-31
t68,~.45B
137,Wl'r
43-96
t67 ,625,397
175,251
56,04
32
37.21
544,166,066
72,71
276,/,63,296
556,927
57,69
2~.202.033
1,D8,1,D4
1,2.31
23.53
153,564,586
66.72
52.ss,.2ao
105.167
1,2.93
69.694,'1,5
139,769
57,07
28.57
91,952,227
71.65
36,667,614
73,335
50.19
36,364,l,26
72,769
49,61
27,47 1,'1,B,91?4,266
73.17
506,369,632
1.012.179
50.59
494,650.545
969,301
49.l,1
21
126,336,655
256,673
4,112
6,111.269
6
233
l,84,~574,Bll
3,667,150
57.60
7,912,336
64
•• Me:a:1.oo
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'245,512,370
hstitutlon• =g::.J.-~entap
per
~
t4,910,247
~
:n.ot1o:a. ot Dino-ton tor recleral Hoa, LOIID. Baka
Pur•ll&llt to BR 7l09
9
Propoaed
Di.reotor •hi:ee
2•
4
.illooaticm ot propohd direotorahlp• b buad upon ti. tonml.a of a m.n1.JIIIII. of one clireoiiorship tor noh •t•te plus
one additional d.irMiiorllhip tor the state having the greatest peroentage taotor :reaa.iDing after allooa.tion of Hoh
e:meH direotorllhip, u tollowt-
...........
..........
Louisi.11119.
lliHiHippi
T-.
~
7. ~ z 8 dinotors -
.6160 .. l direotor -
7.0J.%z 8
-
.5608 •
57.~ z 8
-
2,.i.r,c z 8
•
4-<2% z 8
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•-r
ot
Pre••nt
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~ ~
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llortre•
- 1.8776 .. 1
•
-
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-
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-
.z:a:z
~
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.fr776
.6776
l
.3216 - 1
4-62lt0 "' 1
:,.&40 •
l 1)1notor -
:I
-.....
Stat.~ ot
llortp.ge•
Total Bequind.
per
Stoolc Ollnerehil:?: ~
.8776
2.6ela0 .. l 41N10tor -
:I
.8776 - 1
1.62140 • 1 dino'tor -
:I
.62li0
41notor •
:I
!leotioa of DinletoN tar- hdu-al. Bo. Loan Bank9
Ptuw.-nt to BR 7109
In•Ututione Oftr the .tnr!E!
Jlol"tpgH
Pl,roeirtag.
~
!!!!!!!.
_!!!!_
DISTIUOT Bo. 10
Onr .mn.p Adi::!tt.Voting St:Tngtb
~
~
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Anr!fi! Vot!:!fj Stre!!£!:h
Pl,roe11tage
llortge.p•
Votabie
~
Pero•ritw
45,67
52
161,},'1,4,561 1,266,665
29.67
t12,372,ou
14
26,91?
tlm,724,9:12
77,37
tl73.206,154
:,1,6,1,16
54,33
tl45,619,629
291,239
96
654,1,81,039 1.,oa.962
30.18
6,617,511
23
23.96
447,751,706
66.l,1
156,6112,753
313,606
i.,.13
206,729,331
l,13,"59
56,67
r.ebruka.
36
293,055,l,66
586,lll
13.51
7,711,966
21.05
219.!l?B.529
74,74
61,695,666
123,391?
16-~
74,026,9:19
14B.054
54,54
Oklahoo&
54
577,676,633 1,155,354
26,64
10,697,719
18.52
1,03,664,637
69,66
106.m.190
21,.95L.
36,07
173,992,196
'1.7,9114
61.93
::olo::-ado
t&::11as
10
J.llooatioii ot propoaed d.ireotorahip• 1s busd. upoa. ti. formula ot a m1n1mDl ot ou cll.reotorabip tor Hoh Rate plu
o:.e ad.di tional dil"&Otoruip tor the .-t..te ha.Ting the greate..t pero,nrtap taotor Na1n1Dg U'ter allooation of ..oh
direotonhlp. aa follow,•
•=•H
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•
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-
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Federal Reserve Bank of St. Louis
2.'736 • l direotor 2.41li4 • l
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1.37:36
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1.0808 • l
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2.1,12 .. l
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1.1,12
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11,127.671
7
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'9,,IIR,,ffl
119,166
.61
5,911.178
19,687,1116
Ji.lol
,a.i,&.l,18
l&J.411.IIIO
116,"7
'9-9l
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200,619
9'1.6iill.le 1,16'.197
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69.9'
261.,603
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1.a6','IIO
85,9111!
116.er,
9l.l/lll.J.16
l,JO,IU,599
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2.54
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75.97
2,518
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75.91
66.05
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30
FEDERAL HOME LOAN BANK ACT AMENDMENTS
Mr. SCRANTON. But you are, generally, convinced that this new
proposal here is not going to eliminate-the word should not be "eliminate"-but it is not going to deteriorate the position of the smaller
savings and loan associations i
Mr. McMURRAY. If I thought so, I would not be supp01ting the
bill.
.
Mr. SCRANTON. All right.
That is all.
Mr. SPENCE. Mr. Stephens i
Mr. STEPHENS. Thank you, Mr. Chairman.
I would like to ask this question in respect to the voting on the
members under this proposal :
Will the voting be done on the basis of each institution having one
vote or will it be based on the amount of stock that each institution
hasi
Mr. McMuRRAY. It would be on the latter, sir, on the amount of
stock that each institution held, except that where the institution is
a larger institution its votes would only be equal to the average of
all the associations in that State.
Mr. STEPHENS. But that would give a larger voting power to the
larger institutions in the electing of a member i
Mr. McMURRAY. Yes, sir. It would give a larger voting power
but not-above average, it would not give the largest institution, for
example-assuming that you have one institution that has the votes
representing $200 million in home mortgage loans, that institution
would not have, comparing it with one which had, say, $50 million in
home mortgage loans, it would not have four times as many votes.
As a matter of fact, it might only have the same amount of votes
or maybe the $50 million institution. It might be that the average
for the State would be $25 million or $30 million, and, in that event,
any institution that had $25 million or $30 million would be equal
in voting power to a larger institution say with $200 million.
Mr. STEPHENS. Thank you, Mr. Chairman.
Mr. SPENCE. Mr. Multed
Mr. MULTER. Thank you, Mr. Chairman.
I know, Mr. McMurray, it is unfair to ask you to comment on the
letter of Congressman Holifield, that you have not even had a chance
to read, but I am wondering whether or not you or your associates
on the Board could give us an off-the-cuff opinion as to why you
should not create a 12th district again and divide the present 11th
district into two districts, as it was originally, particularly having in
mind the tremendous growth on the west coast.
Mr. McMuRRAY. Congressman Multer, I would, speaking for myself, hate to give you an off-the-cuff reaction because, as you know, I
want to be the best Chairman the Federal Home Loan Bank ever had,
and to do that I have to work hard and I have to study hard.
And this is a very important question, and this is one of the questions that I am going to discuss with the task force, and one that I
am going to study very carefully. When we come up with an answer
it will be the kind of an answer that I hope that you will say is the
best answer that could be devised.
And while I would like to give you an answer, I hope that you will
refrain from pressing the question at this point.
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
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Mr. DrxoN. I just wanted to say, in connection with the San Francisco district, of course, most of your assets are in California, and 'it
is very involved. The statute provides that we cannot divide '·the
State.
So, in any way that you divide that district, you get one very weak
bank district and you get one very strong one, unless the Congress
would see -fit to give us the authority to divide the State, which I am
not recommending at this time-but that is one of our problems in
that particular district.
Mr. MULTER. Thank you very much.
I a:rn wondering with reference to the bill itself, 7109, whether or
not this accomplishes what seems to be the trend in banking circles
the world over.
The home loan bank system is the central bank system for the savings and loan associations of the country.
Mr. McMmmAY. That is correct, sir.
Mr. MULTER. Now, the trend has been in banking circles, throughout the free world that the central banking system should be wholly
owned by the Government and wholl:y operated by the Government.
This is in the opposite direction. This is giving more control to
the banks or the associations that are members and own stock in the
home loan banks.
If I recall correctly, there are only two countries in the world today
where the central banking system is not wholly owned by the Government in which it operates.
In one case it is wholly privately owned and in the other case it is
half owned by the Government and half by the private banks. And
in every other government the central bankmg system is a government
operation.
.
·
Now, are we not getting away from the home loan bank system
being a completely Government operation by giving more control to
the members 1
Mr. McMuRRAY. No, sir; this does not make any change in control,
does not make it any different than it is now.
It is true that it is not a central bank in the sense the European
institutions are, but all this does. is change the method of electing the
directors that presently do operate the individual banks.
But the fundamental question of whether it should be completely
owned by the Government or not has long since been resolved when
this legislation was enacted, and I think, in our American scene, it
is a good way of doing it.
I think that each country has its own way of solving i~s.own J?roblems, and it seems to me that our method, where we utilize private
enterprise together with Government, doing a teamwork job, is the
most effective way of solving our own problems in a democratic way.
Mr. MuLTER. What I am suggesting is that the central banks in most
of the countries, outside of the United States, are now following our
Federal Reserve central bank system, and the governments are now
owning and operating the Federal bank system just as we do in our
Federal Reserve System.
The Federal Reserve banks today are wholly owned by the U.S.
Government; and I am wondering whether or not we should not, since
the home loan bank system is a central banking system for a segment
of our banking industry, is not this the time to review that and $ay
let's make this more like our Federal Reserve System 1
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
Mr. McMURRAY. Well, it is not too much unlike our Federal Reserve System.
The 12 Federal Reserve banks have on the Board three members
representing banks, three members representing commerce, agriculture, and industry, and the three members who represent the public.
We have three members-one-third of our members tha.t are public
members, and the other two-thirds, who are representing the associations. The president of the bank is appointed on the recommendation of the bank's board of directors, subject to our approval.
So that the Federal Home Loan Bank Board, which is a Government agency, does have an overseeing responsibility and approval of•
their action. So to some extent, the Government is not involved, and
to some extent it is.
In other words, it is not a completely private-enterprise-dominated
program.
Mr. MuLTER. In your operations, and when I say "your" I mean
the way the Board has operated heretofore, and I am sure, it will
operate hereafter, there is no discrimination as between the various
types of associations that are members of the Home Loan Bank System or of the savings and loan corporation.
The stock companies and the mutuals are treated alike, are they not i
Mr. McMURRAY. Yes, sir.
Mr. MULTER. Is there any provision made so that the stock companies can also have representation on the bank boards i
Mr. McMURRAY. Oh, yes. There is no discrimination at all. If
they are members they are entitled to be elected.
I am advised that there are members on a number of boards that
are from stock companies.
.
Mr. MOLTER. And I think it is safe to say that to the extent you
can exert your influence you try to have the stock companies come in
and be members of the System i
Mr. McMURRAY. And if the savings banks, for example, would
become members of the System, as I hope they will, I hope that they
will also be represented on the boards of the Federal home loan banks.
Mr. MOLTER. Thank you, Mr. Chairman.
Mr. SPENCE. Mr. McDonough?
Mr. McDONOUGH. I have just one little brief question.
Mr. McMurray, do you see anything in H.R. 7109 that would postpone or interfere with the settlement of the Long Beaah Savings &
Loan Association case?
·
Mr. McMuRRAY. No, sir; not at all.
Mr. SPENCE. Mr. McMurray, do you consider the home loan banks
as central banks, comparable to the Federal Reserve?
Your purposes are limited and your powers are limited to a particular purpose and, it seems to me, that the rules that apply to Federal
Reserve banks would not apply to home loan banks.
Mr. McMURRAY. A Federal home loan bank is not a bank in the
same sense as a Federal Reserve bank.
Mr. SPENCE. No, it is for a limited purpose?
Mr. McMURRAY. That is correct. That is correct, but insofar as
it is a "Reserve System" for its members and insofar as its structural
organization is concerned, it is similar to it.
And I think that is what the Congressman was referrin~ to and
that is what I answered.
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
33
I think we both understood that there is a substantial difference
in a central reserve system as such.
Mr. SPENCE. But what has been the losses of the Federal Savings
and Loan Insurance Corporation with reference to its income i
Mr. McMuRRAY. The losses, I am advised, are l~io percent since
the Corporation was instituted, which is a wonderful record-Mr. SPENCE. Yes, itis.
Mr. McMuRRAY. And shows how well the institutions or the associations have been doing their job.
And I feel that it is a reflection of the good supervision of the
Home Loan Bank Board over these many years.
Mr. SPENCE. And while the obligations of the Members of Congress are primarily to look after the interests of the people, I think
when they attempt to pass constructive legislation in behalf of these
organizations they are representing their people in the best way
possible.
I want to congratulate you and the members of the Board on the
splendid work you have done and the splendid accomplishments that
have resulted from the operation of the Federal Savings and Loan
Insurance Corporation. It has given confidence to the people and
has encouraged them to deposit their money in institutions which
hav~ provided funds for the constr:uction of homes. I thank you for
commg.
Mr. McMuRRAY. Thank you very much.
Mr. SPENCE. I wish you success m the future.
Mr.McMuRRAY. Thankyou.
And, Congressman Spence, I want to say that I, over the course of
many years as a student of banking myself and then since I went to
work for the Senate Banking Committee, now, almost 15 years ago,
have observed you and I know that what you have done generally for
the country, and specifically for the savings and loan industry and
the Federal Home Loan Bank Board, will always be a monument to
your great work in the Congress.
And as Chairman of the Home Loan Bank Board, I want to thank
you publicly for what you have done for this wonderful enterprise
in our country.
Mr. SPENCE. I did not say that for that fine response, but I accept it.
(An analysis attached to the statement of Mr. McMurray follows:)
ANALYSIS OF DRAFT DATED JULY 13, 1961, OF SUGGESTED AMENDMENTS TO
7109, 87TH CONGRESS, AS INTRODUCED
H.R.
The above-mentioned draft would make the following changes in that part of
H.R. 7109 which would amend subsections (a) through (f) of section 7 of the
J<'ederal Home Loan Bank Act, as amended.
Subsection (a).-The suggested amendments to subsection (a) would clarify
the references to the Board and would add to a new proviso to the subsection.
This new proviso would provide that if at any time the number of elective
directors of any district is not at least equal to the number of States in such
district the Federal Home Loan Bank Board shall exercise its authority to
increase the number of elective director,s so as to provide a number of at least
equal to the number of States in the district.
Such a provision is suggested because the first sentence of subsection ( c), as
it would be amended by the bill, provides a minimum of one elective director
for each State, but does not make clear how this minimum number is to be
provided if there are more than eight States in the district.
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FEDERAL HOME LOAN BANK .A:CT AMENDMENTS
Subsection ( b) .-The amendments to this subsection would ( 1) clarify the
provisions as to nominating and voting rights of bank members in the election
of elective directors and (2) substitute "plurality" for "majority" as the determining factor in such elections, thus carrying out what would seem to be the
actual intent of the subsection. The bill provides that each elective directorship
shall be filled in "an election," and this provision, coupled with the absence of
any provision for runoff elections, would indicate that runoffs are not contemplated. On the other hand, if runoff elections are not to be held, it would appear
to be necessary that elections be decided on the basis of pluralities, as distinguished from majorities.
Subsection ( c) .-Besides minor clarifying changes, the amendments to this
subsection would do the following :
(1) They would make clear that where an additional directorship is added to
assure that a State will not lose the representation which it had on December
31, 1960, such additional directorship will expire at the end of its first term.
There would appear to be no need that such added directorships be permanent;
rather, it would seem that such directorships should be established when needed
and should expire at the end of one term.
(2) They would add a new provision that the Board shall, with respect to
each bank member, designate the State in the member's district in which such
member shall, for the purposes of this subsection and subsection (b), be deemed
to be located. Such a provision is necessary to take care of such members as
may be located in Guam, Puerto Rico, and the Virgin Islands, and to take care
of any members that may be admitted in the future under the provision of subsection (b) of section 4 of the Federal Home Loan Bank Act that, if demanded
by convenience, an institution may, with the approval of the Board, become a
member of the bank of a district adjoining the aistrict in which such institution's
principal office is located. The amendment provides that if the principal place of
business of an institution is located in a State of the district of the bank of
which it is a member it shall be the duty of the Board to designate that State as
the State in which such member shall, for said purposes, be deemed to be located.
Subsection ( d) .-Besides minor clarifying changes, the amendments here suggested are as follows :
,
(1) The provision of the bill that no director may be elected consecutively
"for more than three such terms" would be clarified. The clarification would
make clear that the prohibition is to be applicable regardless of whether such
elections have taken place before or after, or partly before and partly after, the
date of enactment of the bill. It would also make clear that, in order for the
prohibition to apply, there must have been service under each of the three terms
but that it is not necessary that the entire period of each term have been served
( this latter qualification is needed in order to prevent evasion).
(2) The Board would be given express authority to make rules and regulations
with respect to the breaking of ties and with respect to the inclusion of more
than one directorship on single ballot, and with respect to the methods of voting
and of determining the results of voting in such cases. The need for such
authority is believed to be obvious.
Subsection ( e) .-Besides clarifying changes, the amendments to this subsection would supply needed authority in the Board to make transitional adjustments. These transitional adjustments would include (1) temporary extensions of terms of elective directorships, (2) deferments of the effective date of
provisions, or parts of provisions, of the amendments enacted by the bill, and
( 3) temporary continuance of existing provisions or parts of provisions.
Subsection (f) .-In the bill, this subsection provides in part that if any director ceases to have the qualifications set forth in subsection (a), or if any
elective director ceases to have any qualification set forth in the section "or in
any regulation in effect Qn the date of his nomination," the office held shall immediately become vacant but such director may continue to act as such until
his successor so appointed assumes the vacated office or the term of such office
shall have expired, whichever shall first occur. The quoted language would
be eliminati!d by the suggested amendments, since the bill would omit the existing provision of subsection (a) that additional elective directors shall be apportioned as nearly as may be in the same manner and order as is provided for the
apportionment of elective directors under subsections (c) and (d). Also, minor
technical changes would be made in the language of this subsection.
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
35
SUGGESTED AMENDMENTS TO H.R. 7109, 87TH CONGRESS, AS INTRODUCED
Page 1, after line 5, strike out all of paragraphs "(a)" to "(f)," inclusive, and
in lieu thereof insert the following :
"(a) The management of each Federal home loan bank shall be vested in a
board of twelve directors, eight of whom shall be elected by the members as
hereinafter provided in this section and four of whom shall be appointed by
the Federal Home Loan Bank Board referred to in subsection (b) of section 17,
hereinafter in this section referred to as the Board, all of whom shall be citizens of the United btates and bona fide residents of the district in which such
bank is located: Provided, That in any district which includes five or more
States the Board may by regulation increase the elective directors to a number
not exceeding thirteen and may increase the appointive directors to a number
not exceeding one-half the number of elective directors: Provided further, That
if at any time the number of elective directors in the case of any district is not
at least equal to the number of States in such district the Board shall exercise
the authority conferred by the next preceding proviso so as to increase such elective directors to a number at least equal to the number of States in such district.
" ( b) Each elective directorship shall be designated by the Board as representing the members located in a particular State, and shall be filled by a person
who is an officer or director of a member located in that State, each of which
members shall be entitled to nominate an eligible person for such directorship,
and such office shall be filled from such nominees by a plurality of the votes
which such members may cast in an election held for the purpose of filling such
office, in which election each such member may cast for such office a number of
votes equal to the number of shares of stock in such bank required by this Act
to be held by such member at the end of the calendar year next preceding the
election, as determined pursuant to regulation of the Board, but not in excess
of the average number of shares of stock in such bank required by this Act to
be held at the end of such calendar year by the respective members of such bank
located in such State, as so determined. As used in this subsection and in subsection (c) of this section, the term 'member' means a member of a Federal
home loan bank which was a member of such bank at the end of such calendar
year.
" ( c) The number of elective directorships designated as representing the
members located in each separate State in a bank district shall be determined
by the Board in the approximate ratio of the percentage of the required stock,
as determined pursuant to regulation of the Board, of the members located in
that State at the end of the calendar year next preceding the date of the election to the total required stock, as so determined, of all members of such bank
at the end of such year, except that in the case of each State such number shall
not be less than one and shall not be more than six. Notwithstanding any other
provision of this section, if at any time the number of elective directorships so
designated as representing the members located in any State is not at least
equal to the total number of elective directorships which, on December 31, 1960,
were filled by officers or directors of members whose principal places of business were located in such State, the Board shall add to the board of directors
of the bank of the district in which such State is located, and shall designate
as representing the members located in such State, such number of elective directorships as shall be necessary to cause the number of elective directorships
designated as representing the members located in such State to equal said total
number. Any elective directorship so added shall exist only until the expiration
of its first term. The Board shall, with respect to each member of a Federal
home loan bank, designate the State in the district of such bank in which such
member shall, for the.purposes of this subsection and subsection (b) of this
section, be deemed to be located, and may from time to time change any such
designation, but if the principal place of business of any such member is located
in a State of such district it shall be the duty of the Board to designate such
State as the State in which such member shall, for said purposes, be deemed
to be located. As used in the second sentence of this subsection, the term 'total
number of elective directorships' means the total number of elective directorships on the board of directors of the bank of the district in which such State
was located on December 31, 1960, and the term 'members' means members of
such bank.
" ( d) The term of each elective directorship shall be two years and the term
of each appointive directorship shall be four years. If any person, before or
after, or partly before and partly after, the date of the enactment of this sen-
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FEDERAL HOME LOAN BANK A:CT AMENDMENTS
tence has been elected to each of three consecutive full terms as an elective
director of a Federal home loan bank in any elective directorship or elective
directorships and has served for all or part of each of said terms, such person
shall not be eligible for election to an elective directorship of such bank for a
term which begins earlier than two years after the expiration of the last expiring of said three terms. The Board is hereby authorized to prescribe such rules
and regulations as it may deem necessary or appropriate for the nomination
and election of directors of Federal home loan banks, including, without limitation on the generality of the foregoing, rules and regulations with respect to
the breaking of ties and with respect to the inclusion of more than one directorship on a single ballot and the methods of voting and of determining the results
of voting in such cases.
"(e) Each term, outstanding on the date of the enactment of the amendment
to this section abolishing the division of elective directors into classes, of an
elective or appointive directorship then existing, shall continue until its original date of expiration, and any elective or appointive directorship in existence
on said date shall continue to exist to the same extent as if it had been established by or under this section on or after said date. The Board in its discretion may extend any such term of an elective directorship for not to exceed
one year from such original date of expiration, but term shall in such event
be deemed to become vacant at the close of such original date of expiration, if
it shall not sooner be or become vacant. The Board, to such extent as it may
deem to be in the public interest, may make deferments of the effective date
of any provision, or any part of any provision, of this section as amended by
said amendment, and may, with respect to any subject covered by any such
deferment, continue in effect any provision, or any part of any provision, of
this section as in effect immediately prior to said date, but no such deferment
or continuance shall be effective for a period longer than two years from said
date. The terms 'States' or 'State' as used in this section shall mean the States
of the Union and the District of Columbia.
"(f) In the event of a vacancy in any oppointive or elective directorship,
such vacancy shall be filled through appointment by the Board for the unexpired
term: Pr()'l)ided, That if any director shall cease to have the qualifications set
forth in subsection (a), or if any elective director shall cease to have any qualification set forth in this section, the office held by such director shall immediately become vacant, but such director may continue to act as such director
until his successor assumes the vacated office or the term of such office expires,
whichever shall first occur."
Page 4, line 20, strike out "$1,00,000" and in lieu thereof insert "$LOOO.0OO".
COMPARATIVE DRAFT OF PROVISIONS OF SECTION 7 OF FEDERAL HOME LOAN BANK
ACT AS PROPOSED TO BE AMENDED BY H.R. 7109, 87TH CONGRESS, AND AB PROPOSED TO BE AMENDED BY DRAFT AMENDMENTS DATED JULY 13, 1961
[Bracketed matter is in H.R. 7100 but not in saidl draft amendments; italicized matter is
In said draft amendments but not in H.R. 7,1.09]
"(a) The management of each Federal [home loan bank] Home Loan Bank
shall be vested in a board of twelve directors, [two-thirds] eight of whom shall
be elected by the members as hereinafter provided in this section [,] and [the
remaining one-third] four of whom shall be appointed by the [board] Federal
Home Loan Bank Board referred to in subsection (b) of section 11, hereirw,fter
in this seotion referred to as the Board, [and] all of whom shall be citizens of
the United States and bona fide residents of the district in which such a bank
is located: Pr()'l)ided, That in any district which includes five or more States the
board [Board] may by regulation increase the elective directors to a number not
exceeding thirteen and may increase the appointive directors to a number not
exceeding one-half the number of elective directors : Provided further, That if
at any time the number of elective directors in the case of any district is not
at least equal to the number of States in such district the Board shall e/l!ercise
the authority conferred by the ne/l!t preceding proviso so as to increase such
elective directors to a number at least equal to the number of States in such
district.
·
"(b) Each elective directorship shall be [identified] designated by the Board
as representing the members [from] located in a particular State, and shall be
filled by a person who is an officer or director of a member located [within] in
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
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that State, each of which members shall be entitled to nominate [a suitably
qualified] an eligibl,e person for [each] such directorship [that will represent
them], and [each] such office shall be filled from such nominees by a [majority]
plurality of the votes which such members may cast in an election held for the
purpose of filling [the initial term or expiring term of] such office, in which
election each such member [from the State which that office will represent]
may cast for [each] such office [to be filled by the election] a number of votes
equal to the number of shares of stock in. [the district] such bank required by
this Act to be held by such member [as of] at the end of the calendar year next
preceding the election [. No added voting strength shall be derived from stock
ownership], as determined, pursuant t-0 reguiation of the Board, but not in
excess of the average [required ownership of the members in the particular
State] number of shares of stock in such bank required by this Act to be held,
at the end of such calendar yerw by the respective members of such bank located
in such bank located in such State, as so determined. As used in this subsection
and, in subsection (c) of this section, the term 'member' means a member of a
Federal Home Loan Bank whioh was a member of such bank at the end, of such
calendar year.
" ( c) The number of [ directors which] elective directorships designated, as
representing the members [from] located in each ,separate State in a bank district [shall be entitled to elect] shall be determined by the [board] Board· in the
approximate ratio [to] of the percentage of the required stock [of the district
bank held by the membership from], as determined pursuant to regulation of the
Board, of the members located in that State at the end of the calendar year next
preceding the date of the election to t:he total required stock, as so determined,
of all members of such bank at the end of such y.ea,·, except that [the members
from each State in the district shall be entitled to elect at least one director,
and no State shall be entitled to more than six such elective directorships] in
the case of each State such number shall not be less than one and shall not be
more than siil!. [Without regard to any other limitation of this section, after
determining as prescribed in the preceding sentence, the number of directors
which each State is entitled to elect, the board shall add as many more such
directors as may be necessary so that each State in a district shall be entitled
to at least as many elective directors as the number which represented that
State on December 31, 1960] Notwithstanding any other prouision of this IJ'ection,
if at any time the number of elective directorships so designated as representing
the members located in any State is not at least equal to the total number of
elective directorships whio,h, on December 31, 1960, were filled, by officers or
directors of members whose principal places of business were located in such
State, the Board shall add to the board of directors of the bank of the district
in which such State i8 located, and shall designate as representing the members
located in such State, sudh number of electiv,e directorships as shall be necessary
to cause the number of elective directorships designated as representing the
members located, in such State to equal said total number. Any elective directorship so added shall e(l!iBt only until the e(l!piration of its first term. The
Board shall, with respect to each member of a Federal Home Loan Bank, designate the State in the distriot of such bank in which such member shall, for the
purposes of this subsection and subsection ( b) of this section, be deemed to be
located, and may from time to time change any such designation, but if the
principal place of business of any such member is located in a State of such
distriot it Bhall be the duty of the Board to designate such State as the State
in which such member shall, for said purposes, be deemed to be located. As
11,sed in the second sentence of this subsection, the term 'total number of elective
directorships' means the total number of elective directorships on the board of
directors of the bank of the district in -which such State was located on December
31, Jf!60, and the term 'members' means members of such bank.
" ( d) [Directors shall be elected for two-year terms, and shall be appointed
for four-year terms. No director may be elected consecutively for more than
three such terms] The term of each elective directorship shall be two years and
the term of each appointive directorship shall be four years. If any person,
before or after, or partly before and partly after, tlle ifate of the enactment of
this sentence, ,Jias been elected to each of tltrec consecutive full terms as an
elective director of a Federal Home Loan Bank in any elective directorB'hip or
elective directorships and has served for all or part of each of saia terms, such
person shall not be eligible for election to an elective directorship of such bank
for a term wltich begins earlier tltan two-years after the ea:piration of t~ie last
ea:piring of said three terms. The [board shall] Board is hereby authorized to
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
prescribe such rules and regulations as it may [determine to be proper] deem
necessary or appropriate for the nomination and election of directors of Federal
Home Loan B1111ks, inclur1ing, without limitatio# O'II the generality of the foregoing, rules and rcgul11tio11s 1vith respect to the brcal.:ing of ties a11d with respect
to the inclusion of more than one dirr:ctol'ship on a single ballot and the methods
of 1mting and of determining the results of voting in such cases.
" ( e) [The term of each elective or appointive director serving] Each term,
outstanding on the date [this amendment becomes effective] of the enactment of
the •amendment to this section abolishing the division of elective directors into
classes, of an elective or appointive directorship tlteti ewisting shall [not be
affected by this amendment but shall] continue [unchanged] until its original
date of expiration, and any elective or appointive directorship in existence on
said date shall continue to exist to the same extent as if it had been established
by or under this section on or after said date. The Board in its discretion may
extend any such term of an elective directorsh>ip for not to exceed one year from
such original date of expiration, but such term shall in such event be deemed to
become vacant at the close of such ori_qinal date of expiration, if it shall not
sooner be or become vaca,nt. The Board, to such extent as it may deem to be in
the public interest, ma11 make deferments of the effective date of a,ny provision,
or an11 part of an11 provision, of this section as amended by said amendment, and
,may, with respect to any subject covered by any such deferment, continue in
effect any provision, or any part of any provision, of this section as in effect
immediately prior to said date, but no such deferment or continuance shall be
effective for a period longer than two years from said date. [The provisions of
this section, as amended, shall otherwise be applicable as of the date of enactment.] The term 'States' or 'State' as used in this section shall mean the States
of the Union and the District of Columbia.
"(f) In the event of a vacancy in any appointive or elective directorship, such
vacancy shall be filled through appointment by the [board] Board for the unexpired term: Provided, That if any director shall cease to have the qualifications
set forth in subsection (a), or if any elective director shall cease to have any
qualification set forth in this section [or in any regulation in effect on the date
of his nomination], the office held by such director shall immediately become
vacant, but such director may continue to act as such director until his successor [so appointed] assumes the vacated office or the term of such office [shall
have expired] expires, whichever shall first occur."
Mr. SPENCE. Mr. Clerk, call the next witness.
Mr. CARDON. Mr. Henry A. Bubb, chairman of the legislative committee of the 1Tnited States Savings & Loan League.
STATEMENT OF HENRY A. BUBB, CHAIRMAN OF THE LEGISLATIVE
COMMITTEE OF THE UNITED STATES SAVINGS & LOAN LEAGUE;
ACCOMPANIED BY STEPHEN SLIPHER, LEGISLATIVE DIRECTOR;
AND T. BERT KING, WASHINGTON COUNSEL
Mr. SPENCE. We are glad to hear you, Mr. Bubb.
Mr. BUBB. Mr. Chairman, my name is Henry A. Bubb, and I appear here today as chairman of the legislative committee of the
United States Savings & Loan League.
I have with me, Mr. Stephen Slipher, our legislative director in
Washington, and T. Bert King, our ·washington counsel.
I am also president of the Capitol Federal Savings & Loan Association of Topeka, Kans.
The United States Savings & Loan League supports H.R. '7108
and H.R. 7109 and urges their enactment. While these two bills will
be helpful to the savi·ngs and loan industry as a whole, their effect on
individual associations would be very minor. For instance, these
measures do not in any way affect the lending, investment, or operating powers of associations.
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Federal Reserve Bank of St. Louis
FEDERAL HOME LOAN BANK ACT AMENDMENTS
39
H.R. 7108 proposes a strengthening of the Federal Savings and
Loan Insurance Corporation. H.R. 5721, an earlier introduction dealing with the same general subject matter, was developed by the United
States Savings & Loan League in consultation with other industry
groups. H.R. 7108 is an official administration measure and differs
in detail rather than in substance from the league proposal. In the
interest of avoiding unnecessary complications, the U.S. league has
agreed to accept in toto the administration bill.
H.R. 7108 is designed to provide additional strength and resources
for the Federal Savings and Loan Insurance Corporation which insures savings accounts in 4,200 savings and loan institutions. All of
us realize that much of the success and growth of our industry is due
to the public confidence resulti:ng from insurance of accounts and we
are proud of the great record of the Insurance Corporation. Chairman Spence's bill is designed to make certain that the Corporation
can continue its great contribution in the years ahead.
The principle of the Spence bill has been recognized and endorsed
by the U.S. league and numerous State and regional leagues. It has
the nearest approach to universal support in the savings and loan
industry as it 1s possible for any significant legislation to have.
Because of the very rapid growth of insured savings accounts and
because of the repayment of original U.S. Treasury capital out of
the FSLIC income, 1950-58, the ratio of the Corporation's reserves
to liabilities has fallen from 1.2 percent in 1949 to less than 0.7 of 1
percent at the present time. H.R. 7108 would rapidly boost this ratio
by requiring insured associations to make prepayments of premiums
into a secondary reserve of the Corporation.
These prepayments would amount to 2 percent of the net annual
increase in savings. Prepayments of about $150 million a year a,re
the expected result, so that the combined reserves of the Corporation would reach 1 percent by .1963 and 1½ percent about 1966. This
increase in reserves would place the Insurance Corporation in an extremely strong position.
From the individual association's point of view, the prepayments
to the Insurance Corporation will not constitute any added expense of
commitment of additional funds because this bill proposes to suspend
the present requirement that associations purchase additional-stock in
the Federal home loan bank each year. In effect, this measure channels the funds that would normally go into the bank system into the
Insurance Corporation.
We note that the earnings on prepayments would not be paid in
cash, but would be credited to the secondary reserve. If this credit
were made to the individual prepayments, thus reducing each association's required prepayment the following year, it would, of course,
realize an immediate return on the association's investment.
If this is not so, the associations will be denied any return for their
prepayment premiums such as they now receive from their Federal
home loan bank stock.
I must say that the industry in originating this legislation was always under the impression that inasmuch as the Corporation would
be earning on the prepaid premiums that these earnings would be
paid to the associations.
We thought that the earnings would, at least, be as high as the dividends we now receive on our Federal home loan bank stock.
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
We would be glad to supply an appropriate amendment to implement this change if after further study it appears necessary.
(See letter of July 17, 1961, on p. 64.)
For many years it has been recognized that the Federal Home Loan
Bank System is overcapitalized. As far back as 1955 the industry
and the administration recommended a reduction of required stock
building from 2 percent to 1 percent as is provided in the proposed
legislation before the committee. Even with the lower capital requirement the Federal home loan banks would have capital ratios far
in excess of comparable Government agencies.
In conclusion, we recommend the enactment of H.R. 7108 because
it gives important additional resources and flexibility to the Federal
Savings and Loan Insurance Corporation and will enable that insuring agency to continue its outstanding service to the savings public
during the decade ahead.
H.R. 7109 revises and simplifies the procedures for electing directors
to the 11 Federal home loan banks. It makes the following changes
in election procedures :
1. It allocates to each State a specific number of seats on the board
of directors of its regional bank in proportion to the ratio of that
State's assets. In other words, if a State has one-fourth of the bank
district assets it would be entitled to one-fourth of the directorships.
Under the present law, aside from the requirement that each State
have at least one director, the division of directorships among the
States is left to chance-or more accurately, left to friendly and
sometimes not so friendly politicking between the States.
For instance, in my own district the four States, Colorado,
Nebraska, Oklahoma, and Kansas, are collectively entitled to ei~ht
directors. Each State must receive one director but the remainmg
four seats could conceivably all go to one State. Under the proposed
law the distribution would be determined by relative size of the savings
and loan business, giving Colorado 2, Nebraska 1, Oklahoma 2, and
Kansas 3.
The law also provides that no State would have a number of directors less than it had on December 31, 1960. A further provision
prohibits consecutive election to the board for more than three 2-year
terms.
Now we are recommending that limitation for the Federal home
loan banks directors but not for the Congress. I just wanted to make
that clear.
There are a great many able men in the industry and we do not
feel that one man should serve on the Board for an indefinite period.
Mr. McDoNOUGH. Does that apply to Congressmen?
Mr. BUBB. No, sir. No, sir; not at all.
Under the present law member associations are divided into classes
according to size and all the associations in the district vote for the
director in their particular size group. Under the proposed bill these
classifications would be abandoned and each State would elect its
own director or directors.
This makes good sense, because the associations in each State have
much more opportunity to know the qualifications of the candidate
from their own State. We could never understand why it made good
sense under the present law for the member associations in Ohio and
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Federal Reserve Bank of St. Louis
FEDERAL HOME LOAN BANK ACT AMENDMENTS
41
Tennessee to have the controlling voice in the selection of the director
from Kentucky-to use Chairman Spence's district as an exam'(>le.
We think that confining the elections to the given State will brmg
more interest to the elections and improve on the voting record, which
indicates that only about 54 percent of the associations cast ballots
in the director elections.
The final major portion of the bill would give to each association
voting strength proportionate to its stockholdings in the bank, but
with the limitation that no institution shall have voting strength
in excess of the average voting strength of its State. For example,
if the average association holds 100 shares of bank stock, even an
association owning 1,000 shares of stock could vote a maximum of
100 shares. This limitation effectively prevents the larger associations from dominating elections.
This legislation has been approved by the governing bodies of the
league and we recommend its enactment.
In closing, let me again express the appreciation of the industry :for
the constructive interest that the chairman and members of
this committee have always shown in the development of sound savings and loan legislation.
Mr. SPENCE. How do the members of the league stand?
Mr. BUBB. How do the members of the league stand?
Mr. SPENCE; Yes, sir. Have they ever taken any vote on the
matted
Mr. BUBB. Yes, sir. We have had it before our various conventions and committees and I think Chairman McMurray answered that
as well as it could be.
There are so many members that you might find a few here or there
that might have some disagreement but, as a whole, they are all in
favor of it.
Mr. SPENCE. An overwhelming percent?
Mr. Bunn. Oh, yes, sir; an overwhelming percent.
Mr. SPENCE. How many members own more than 2 percent of the
stock?
Mr. Bunn. That, I could not answer exactly, but I doubt if very
many do.
Mr. SPENCE. This merely means a transfer on-Mr. Bunn. The return on the investment is not good enough to invest any more than you have to.
Mr. SPENCE. Mr. McDonough?
Mr. McDONOUGH. Well, I know Mr. Bubb here. He has always
been a very constructive and informative witness on every occasion
this committee has met concerning savings and loan legislation and
homebuilding legislation.
I have no questions, but I am very happy to have him here.
Mr. BuBB. Thank you, Congressman.
Mr. SPENCE. Mr. Barrett?
Mr. BARRETT. Mr. Bubb, I just want to ask you one particular
question:
Do you know any way that one could attain perpetual membership under this new bill?
Mr. Bunn. On the· board of directors of the regional bank?
Mr. BARRETT. Yes.
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FEDERAL HOME LOAN BANK A:CT AMENDMENTS
Mr. Bunn. No; I do not.
Mr. BARRETT. That is all.
Mr. SPENCE. Mrs. Dwyer?
Mrs. DWYER. No questions, Mr. Chairman.
Mr. SPENCE. Mr. Moorhead?
Mr. MooRHEAD. Mr. Bubb, on page 3 of your testimony you take
your own district as an example and state that it would be possible
for each of the four States to have one director but the remaining four
seats could conceivably all go to one State. I gather that you are
critical of that possibility and propose that that 1s one of the reasons
for this legislation.
Is that correct?
Mr. Bunn. That is correct; yes, sir.
Mr. MooRHEAD. Yet, Mr. Bubb, if any district has that situation
this bill would continue it because it provides that no State shall be
reduced in representation on the Board.
Mr. Bunn. That is correct. Fortunately, none have it right now.
It has happened in the past, however, but where they are frozen
at the present number now there are also additional directors added
to take care of that, under this new bill, for the States that do not
have their proportionate share.
Mr. MooRHEAD. Do yo,u think it is advisable to freeze this disproportionate share that may have occurred for some reason and be in
existence on December 31, 1960?
Mr. Bunn. Well, I think it is advisable if we want t6 get the bill
passed; yes, sir.
Mr. MOORHEAD. I thought that might be the reason for it.
Thank you very much.
Mr. Bunn. Yes, sir.
Mr. SPENCE. Mr. Scranton?
Mr. ScRANTON. You seem to pass over lightly your proposed
amendment. Do you not take it seriously?
Mr. Bunn. The amendment to H.R. 7108 or H.R. 7109?
Mr. ScRANTON. H.R 7108
Mr Bunn. No, I take it very seriously. Yes.
Mr. SCRANTON. Precisely what would it be?
Mr. Bunn. Well, there seems to be a misunderstanding on our part
with H.R. 7108 as to how the dividends will be paid on this secondary
reserve in the Insurance Corporation.
As it stands now, as you know, the associations purchase 2 percent
•of their home mortgages in the Federal Home Loan Bank System for
which each bank pays dividends on that 2 percent.
Now, of course, ·we are willing to take 1 percent of that. As a
matter of fact, it will be a little more than the 1 percent of -home paid
mortgages, because the savings is a higher percentage of assets than
the mortgages are.
We are willing to take a little more and invest that in tfie Insurance
Corporation to make it stronger, but the associations feel that this
bill should be clarified so that they will have or they will receive
earnings on that from the Insurance Corporation just as they receive
them now from the Federal home loan banks. In selling this bill,
we have told the _members that it will cost them very little more in
order to make this change from the Bank System to the Insurance
Corporation.
·
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FEDERAL HOME LOAN BANK .&CT AMENDMENTS
43
And that is the reason that we suggested the amendment.
Mr. ScRANTON. Have you presented it to anybody else?
Mr. BuBB. The amendment?
Mr. ScRANTON. Yes.
Mr. BuBB. No, sir; we have not.
I think the national league will testify on it when they testify, but
we do not know whether the original bill has that intent or not.
We, frankly, just discovered it in reading it last night.
Mr. SCRANTON. You do plan, though, to present a pro,posed
amendment?
Mr. BUBB. Yes, sir.
Mr. SCRANTON. Very well.
Mr. BUBB. Yes, sir.
(NoTE.-As indicated in the letter from Mr. Slipher appearing on
page 64, it was later determined that such an amendment is not
needed.)
Mr. SPENCE. Mr. Stephens?
Mr. STEPHENS. I have no questions, Mr. Chairman.
Mr. SPENCE. Mr. Vanik, have you any questions?
Mr. VANIK. Mr. Chairman, I ha,ve one question. Is it not time we
approach this problem by increasing the insurance on deposits to,
perhaps, $20,000?
At the time the law was enacted with a $10,000 ceiling, the purchasing price of the dollar had one value and it is about half of that value
now. In effect, we are insuring $5,000 at the old values.
Wouldn't higher insurance contribute more to the increase of deposits in your institutions many of which are now advertising insurance above $10,000 with various private companies.
Why shouldn't Federal coverage be extended to cover at least
$20,000 in deposits?
Mr. BUBB. You are absolutely right, Congressman.
Of course, we are all for having it raised to $20,000. And I think
if it were raised to $20,000 it would be considerably more money put
into the System which would mean there would be more money for
the homebuilding industry in the United States.
But, unfortunately, we have been told that we cannot raise the limit
on FSLIC unless we raise it on ]fDIC at the same time, and the commercial banks and the FDIC have opposed the bill.
That is the reason we have not been able to get our limit raised to
$20,000.
Mr. V ANIK. I thank you.
Mr. BuBB. Thank you.
Mr. SPENCE. We thank you very much.
Mr. BuBB. Thank you ve.ry much, Mr. Chairman, as it is always a
pleasure to appear before you· and this committee.
Mrs. DWYER. Mr. Chairman, and members of the committee, I am
very happy to welcome to the committee this morning Mr. Everett
Sherbourne, a distinguished citizen of the district that I am privileged
to represent, and also an outstanding member of the savings and loan
industry in New Jersey; Mr. Sherbourne.
Mr. SPENCE. -Mr. Sherbourne, you may proceed.
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
STATEMENT OF EVERETT C. SHERBOURNE, VICE CHAIRMAN, FEDERAL LEGISLATION COMMITTEE, NATIONAL LEAGUE OF INSURED
SAVINGS ASSOCIATIONS; ACCOMPANIED BY BRYCE CURRY, GENERAL COUNSEL
Mr. SHERBOURNE. Mr. Chairman, and members of the subcommittee, I want to acknowledge that very gracious statement from my
Congresswoman, who has an outstanding reputation in the State of
New ,Tersey, not only in the county from which she comes.
I supported her and I have followed her with a very great interest.
I suppose there could have been no greater compliment paid to me
than that one which just came from you.
Thank you very much, Congresswoman Dwyer.
My name is Everett C. Sherbourne. I am president of the City
Federal Savings & Loan Association of Elizabeth, N.,T., and vice chairman of the Federal legislation committee of the National League of
Insured Savings Associations, and I apnear today as spokesman for
the league. I am accompanied by Mr. Rryce Curry, general counsel
of the national league.
I want first, Mr. Chairman, personally and on behalf of the membership of the national league, to express appreciation to you and the
members of your committee for the interest and fair consideration
always given to proposals affecting our business.
I might also say in the beginning that we heartily endorse and
support the bills now under consideration.
Of the 2 savings and loan proposals currently before your committee, H.R. 7108 is by far the most important. In essence it would shift
the flow of funds from an overcanitalize<l Federal Home Loan Rank
System to the Federal Savings and Loan Immrance Corporation which
has an inadequacy of working capital. H.R. 5721 would accomplish
the R<tme obiective, and it. makes little difference to us whether this
or the latter administration-approved version is adopted, although,
there are technical improYements in the administration's approved
version which are desirable.
During the period 1932-50, mPmhers of the Federal Home Loan
Rank system were required to hold stock in the regional banks equal
to 1 percent of the aggregate of the unnaid principal of the subscribers' home mortgage loans. In 1950 this figure was increased to
2 percent in order to accelerate thP retirement of the Governmentowned stock in the bank system. No other reason was advanced for
the increase. No one suggested that the 1950 leg-islaticm was based
nnon innderiuacv of c<tpitaliz<ttion of t.he system.
Rv Hl5fi ri 11 of the Government-owned stock in the system had been
retired and bills to red1we the stock purchaEe recmirements had the
snpport, of the FedPral Home Loan Rank Roard and the imvings and
lorin business.
There can be little doubt, in our judgment, that the regional Federal
home loan banks are overcapitalized. The ratio of capital to liabilities is much higher than that of typical Government corporations. The
ratio of capital to outstanding debentures has never been less than
1 to 3 and today outstanding debentures of the Bank System are less
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Federal Reserve Bank of St. Louis
FEDERAL HOME LOAN BANK ACT AMENDMENTS
45
than its surplus and reserves. In the Federal intermediate credit
banks, the ratio is about 1 to 9 and in the Federal National Mortgage
Association, about 1 to 8.
The reserves of the Federal Savings and Loan Insurance Corporation, on the other hand, are less than seven-tenths of 1 percent of insured liability. From the standpoint of the loss experience of the Corporation, we do not believe the reserve would be inadequate. The
total amount disbursed by the Insurance Corporation for insurance
losses since 1934 is about 1.1 percent of the Corporation's cumulative
gross income. There is, however, an inadequacy of working capital.
The Insurance Corporation does not sit idly by, wait for a loss to
occur, and then pay out insurance to the insured account holders.
Under section 407(f) of the National Housing Act, the Corporation
is authorized to make loans to or purchase the assets of an insured
institution in order to prevent a default or to restore a defaulted institution to normal operation.
Under limited circumstances the Corporation is authorized to make
contributions to prevent or cure a default. Use of this section may
involve substantial cash disbursements without ultimate loss to the
Corporation. The reserves of the Corporation that may be used under
this section may be tied up for varying periods of time and thus not
available to take care of losses that might occur.
The Corporation has served the public and our business well over
the years and we want to make certain that it has the resources to continue to accomplish the objectives for which it was established. This
bill would do just that. Under the most conservative estimates, the
ratio of reserves to insured liability would reach 1.50 by 1965 and
would exceed 2 percent hr, the end of this decade. We hope the
committee will report the bill favorably.
The second bill before your committee, R.R. 7109, would change the
method of electing directors to the Federal home loan banks. This
bill, in our judgment, represents a procedural and substantive improvement over existing methods, and we recommend its adoption.
Since my testimony would be largelr. repetitious of what has already been said to the committee, we will terminate our formal testimony at this time and will attempt to answer any questions the committee may have.
Mr. SPENCE. Thank you very much, Mr. Sherbourne, for your statement.
The overwhelming sentiment of your institutions, the National
League of Insured Savings Associations, is in favor of the bill?
Mr. SHERBOURNE. Yes, sir; they are very much in favor of the bill.
It has been approved at a convention of the league, and also has
been formally, unanimously, approved by the board of governors of
the league.
Mr. SPENCE. Mr. McDonough?
Mr. McDONOUGH. I thank you for appearing, Mr. Sherbourne.
I appreciate your statement, and I have no questions.
Mr. SHERBOURNE. Thank you.
Mr. SPENCE. Mr. Barrett?
Mr. BARRETT. I just want to say, Mr. Sherbourne, if you voted for
Congresswoman Dwyer you helped elect one of the finest women now
serving in Congress.
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FEDERAL HOME LOAN BANK A:CT AMENDMENTS
Please convey this sentiment to all of her constituents.
Mr. SHERBOURNE. I certainly shall, sir. I suppose you have already
guessed the fact that I am a Republican, and, therefore, we find such
information rather useful.
Of course, I might also say, Mr. Spence, that I always work on the
premise that southern Democrats and northern Republicans have very
much in common.
Mr. SPENCE. Well, we all have a very high opinion of you.
Mrs. DWYER. Mr. Chairman, I do not have any questions, but I do
want to thank my very distinguished Democratic colleague for his
very kind remarks.
Mr. SPENCE. Mr. Moorhead?
Mr. MooRHEAD. I have no questions, Mr. Chairman.
Mr. SPENCE. Mr. Scranton?
Mr. SCRANTON. Just one.
Mr. Sherbourne, do you have any concern about this new arrangement for the election of Board members from the standpoint of the
small savings and loan associations?
Mr. SHERBOURNE. None at all, sir.
I actually think that the present situation unduly favors these
small associations. For example, the division between the States of
New York and New Jersey is such that half of the directors from
New Jersey must be class C and the other half then class A and B
associations can only be represented through the directorship at large.
And we have had unusual situations that developed through this
classification system.
I recall one of the finest directors of the bank was coming up for
his second term. The State of New Jersey was unanimously m favor
of his being elected, but when the announcement came out, he was no
longer class C but he had become class B.
Class B directorships were entirely from New York. So he had
to retire.
Mr. SPENCE. Mr. Stephe·ns?
Mr. STEPHENS. I have no questions, Mr. Chairman.
Mr. SPENCE. Mr. Vanik?
Mr. V ANIK. No questions, Mr. Chairman.
Mr. SPENCE. That concludes the testimony and we thank you very
much.
( A document entitled "Estimated Reserve Position," prepared in
the Office of the Comptroller, Federal Savings and Loan Insurance
Corporation, follows:)
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
47
ESTIMATED RESERVE POSITION
After Giving Effect to the Provisions of
A BILL (H.R. 7108)
To Amend the Federal Home Loan Bank Act and Titie IV of the National Housing Act
FEDERAL SAVINGS AND LOAN INSURANCE
CORPORATION
F O R E II O R D
IN ADDITION TO THE SPECIFIC ASSUMPTIONS REFLECTED ON THE EXHIBITS AND SCHEDULES
CONTAINED HEREIN 1 THE GENERAL ASSUMPTIONS LISTED BELOW WERE ALSO USED IN PREPARING THE ESTIMATES•
NO INSURANCE LOSSES.
PREMIUM INCOME COMPUTED ON ANNUAL BILLING BASIS AT RATE
OF
lJ'.
or
INVESTMENT INCOME BASED ON ANNUAL AVERAGE RATE OF RETURN OF
OPERA.Tl NG EXPENSES BASED ON CURRENT RAT£
3. 7" or
or
1/12TH
3,1'..
EXPENDI TUR[ EQUAL TO
PREMIUM INCOME.
MORTGAGE LOANS HELD ESTIMATED AT
NET HOME MORTGAGES ESTIMATED AT
'Jf;/, or
tp/,
TOTAL SAVINGS CAPITAL.
OF MORTGAGE LOANS HELD.
THE RESERVE RATIOS REPRESENT THE PERCENT OF DOLLAR RESERVE TO TOTAL SAVINGS CAP1 TAL (ALL ACCOUNTS
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or
INSURED MEMBERS) AND CREDITOR OBLIGATIONS.
PREPARED IN THE OH I CE OF' THE. COMPTROLLER.,
FEDERAL SAVINGS ANO LOAN INSURANCE. CORPORATION
48
FEDERAL HOME LOAN BANK ACT AMENDMENTS
PART
1
ASSUMES ANNUAL GROWTH IN SAVINGS (NEW MONEY) OF $
5.5
BILLION
PLUS DIVIDENDS AT ANNUAL RATE OF '3'/,
EXHIBIT A
ESTIMATED AOOlEGATE (PRIMARY & SECONDARY) RESERVE POSITION
(NEW MoNEY) Of'$ 5•5 BILLION PLUS DIVIDENDS
ASSUMES ANNUAL GROWTH IN SAYINGS
Ji'
AT
DOLLARS IN MILLIONS
AQQREGATE Of' PRIMARY
PRIMARY RESERVE
SECONDARY RESERVE
&
SECONDARY RESERVE
DEC,
31
RESERVE
RATIO
RESERVE
RATIO
(A)
(A)
(o)
(o)
RATIO
llESERVE
1960
38o.9
0.622
380.9
1961
441.1
o.641
441. 1
o.641
1962
509.0
0.665
1963
511'.".o
1964
669-5
1965
0.622
149. 7
0.196
658.7
0.861
0.692
308.5
0.365
476. 7
0.514
893.5
1,146.2
1.057
o. 722
~3.0
o.r.;4
654, 7
o.647
1.401
1966
865.9
0.787
842.9
o. 767
1,417.7
1, ]08,8
1.554
1967
978. 7
0.823
1,041.8
0.876
2,020.5
1,699
1.236
1968
1,101.9
o.86o
1,251.9
0.977
2,353.8
1.837
1969
1,236.0
0.898
1,473.7
1.071
2,709.7
1,969
1910
1,381.5
0.937
1,697.4
1.151
3,078.9
2.o88
(A) SEE UHIBIT ISo
(a)
IEE EXHIBIT Co
(NOTE)
IT IS ESTIMATED THAT AGGREGATE RESERVES WOULD SE REDUCED TO 1~ IN 1975 AT WHICH TIME
ASSESSMENT WOULD BE RESUMED, ANO THAT THE PIU MARY RESERVE ALONE WOULD REACH ~-IN
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1993•
49
FEDERAL HOME LOAN BANK ACT AMENDMENTS
EXHIBIT B
ESTIMATED PRIMARY RESERVE POSITION
IN SAVINGS (NtW MoNtY) Of' ♦
AsSUMES ANNUAL GRO\JTH
5•5
BILLION PLUS DIVIDENDS AT~
DOLLARS IN MILLIONS
p
or
31
I
R
A
M
PREMIUM
BECH NN I NG
DEC.
'
R
.'
INCOME
EXPENSES
-
$
1960
$
R
TOTAL
' '
NET ADDITION
LESS
INCOME
TEAR
y
R
INVESTMENT
DUR I NG YEAR
SVGS.
.END OF
CAPITAL ANO
CREO I TOR
RESERVE
YEAR
OBLIGATIONS
RATIO
3&l.9
61,262.0
0.622
-
1961
3&l.9
50.0
12.1
1.9
6o.2
441.1
68,f)o4.o
o.641
1962
441 .1
56.0
14.o
2.1
67.9
509.0
76,567.0
0.665
1963
509.0
62.1
16.2
2.3
76.0
585.0
84,557.0
0.692
1964
585.0
68.4
18.6
2.5
84.5
669.5
92, 7&l.o
o. 722
1965
669.5
75.0
21.3
2.8
93.5
763.0
101,244.o
o. 754
1966
763.0
81.6
24.3
3.0
102.9
865.9
109,956.0
o. 787
1967
865.9
88.5
27.6
3.3
112.8
978.7
118,923.0
0.823
1968
978.7
95.6
31.1
3.5
123.2
1,101.9
128,153.0
o.86o
1969
1,101.9
102.9
35.0
3.8
134. 1
1,236.0
137,654.o
0.898
1970
1,236.0
110.4
39.2
4.1
145.5
1,381.5
147,43,.0
0.937
EXHIBIT C
ESTIMATED SECONDARY RESERVE POSITION
(Nt'w MoNEY} Of'$ 5.5 BILLION
ASSUMt:9 ANNUAL GROWTH IN SAVINGS
.'
PLUS DIVIDENDS AT~
DOLLARS IN Ml LL IONS
C
"
0
D
' "
y
R
DEC.
BtGINNtNQ
Nt:T PREM! UM
INVESTMENT
31
OF' YEAR
PRtPAYMtNTS
INCOME
E
s
E
"
'
NET ADDITION
DURING YEAR
TOTAL
E
ENO
or
YEAR
(,)
1961
$
1962
-
$
-
$
-
svas.
CAPITAi. ANO
CREDI TOR
OBLIGATIONS
RESERVE
RATIO
68,flo4.o
146.8
2.9
149. 7
149. 7
76,567.0
0.196
1963
149. 7
151.3
7.5
158.8
308.5
84,557.0
0.365
1964
308.5
155.8
12.4
168.2
476. 7
92, 7&l.o
0.514
1965
476. 7
16o.5
17-5
178.0
654. 7
101,244.o
o.647
1966
6'.,4. 7
165.3
22.9
188.2
842.9
109,956.0
o. 767
1967
842.9
170.2
28. 7
198.9
1.041.8
118,923.0
0.876
1968
1,041.8
175.3
34.8
210.1
1,251.9
128,153.0
0.977
1969
1,251.9
1Bo.6
41 .2
221.8
1,473.7
137,654.o
1.071
19]0
1,473.7
176.0
47. 7
223. 7
1,697.4
147,434.o
1.151
(A) SEE SCHEDULE 2.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
50
FEDERAL HOME LOAN BANK ACT AMENDMENTS
SCHEDULE
1
INSUUNCE PREMI\M BASES • REGULAR ANO PREPAYMENTS
ASSUMES ANNUAL GROWTH IN SAVINGS (NEW MONEY) Of'$
5.5
BILt..lON PLUS DIVIDENDS AT
JJ'
IN MILLIONS Of' DOLLARS
SAVINGS
NET
DEC.
BEGINNING
31
OF' YUR
CAPITAL
TOTAL SVGSo
CAP! TAL AND
INF'LOW
END
NEW' MONEY
DIVIDENDS
58,662.0
5,500.0
1,842.0
7,342.0
66,oo4.o
5,500.0
2,063.0
73,567.0
5,500.0
81,357.0
89,380.0
or
CREDI TOR
CREDITOR
YEAR
OBLIGATIONS
• 58,662.0
$ 2,6oo.o
$ 61,262.0
66,oo4.o
2,8oo.o
68,8o4.o
7,563.0
73,567.0
3,000.0
76,567.0
2,290.0
7,790.0
81,357.0
3,200.0
84,557.0
5,500.0
2,523.0
8,023.0
89,380.0
3,400.0
92, 78o.o
5,500.0
2,764.0
8,264.o
97,644.o
3,6oo.o
101,244.o
109,956.0
TOTAL
OBLIGATIONS
97,644.o
5,500.0
3,012.0
8,512.0
1o6, 156.0
3,8oo.o
1o6, 156.0
5,500.0
3,267.0
8,767.0
114,923.0
4,000.0
118,923.0
114,923.0
5,500.0
3,530.0
9,030.0
123,953.0
4,200.0
128,153.0
123,953.0
5,500.0
3,8o1.o
9,301.0
133,254.0
4,400.0
137,654.0
133,254.o
5,500.0
4,o8o.o
9,58o.o
142,834.o
4,6oo.o
147,434.o
DERIVATION
or
SCHEDULE 2
PREMI\M PREPAYMENTS
"5SUMES ANNUAL GROVTH IN SAVINGS (Ntw MoNtY)
or$ 5.5
BILLION Pt.us DIVIDENDS
.u
3'
IN MILLIONS Of' DOLLARS
YEAR
END I NO
DEC.
31
GROSS PREMIUM
PREPAYMENTS
NET SAVINGS
GROSS PRCM I UM
MOIUQAQE
INrLOW
PREPAYMENTS
LOANS HELD
<•)
NET HOME
MORTGAGES HELD
(a)
CIANI< STOCK
REQUIREMENTS
(c)
BANK STOCK
PURCHASES
(o)
•
LESS IIANK STOCK
PURCHASES
(E)
1961
• 7,342.0
$ 146.8
63,364.o
57,028.0
1962
7,563.0
151.3
70,624.o
63,562.0
636.0
1963
7,790.0
155.8
78,103.0
70,293.0
703.0
1964
8,023.0
16o.5
85,8o5.o
77,225.0
772.0
16o.5
1965
8,264.o
165.3
93,738.0
84,364.0
844.o
165.3
$ 1,141 .o•
• 146.8
151.3
155.8
1966
8,512:0
170.2
101,910.0
91,719.0
917.0
170.2
1967
8,767.0
175.3
110,326.0
99,293.0
993.0
175.3
1968
9,030.0
18o.6
118,995.0
107,096.0
1,071.0
1969
9,301.0
186.0
127,924,o
115,132.0
1,151.0
10.0
176.0
1970
9,58o.o
191.6
137,121.0
123,409.0
1,234.0
83.0
1o8.6
(A) SEE SCHEDULE 1.
(r,) ~
Of' NET SAVINGS INF'LOWo
(c) 1:C
Of' NET HOME MORTGAGES HELD.
(o)
VEAR END REQUIREMENT LESS
(c)
PAYMENT DUE
~
(F'SLlc) MAY 1 NEXT.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
*~
MINIMUM REQUIREMENT
NI NIMUM REQUIREMENT
12/31/61.
12/31/61.
18o,6
51
FEDERAL HOME LOAN BANK ACT AMENDMENTS
2
PART
ASSUMES ANNUAL GROw'TH IN SAVINGS (NEW MONEY) OF
$
6.0 BILLION
PLUS DIVIDENDS AT ANNUAL RATE OF 3'f,
EXHIBIT D
ESTIMATED AGGREGATE (PRIMARY & SECONDARY) RESERVE POSITION
ASSUMES ANNUAL GROWTH IN SAVINGS
(NE..,,
MONE.Y) OF'$
DOLLARS
6.0
JI,
BILLION PLUS DIVIDENDS AT
IN MILLIONS
AQGREGATE Of' PRIMAR'I'
PR I MARY RESERVE
&
SECONDARY RESERVE
SECONDARY RESERVE
DEC.
31
RESERVE
RATIO
RESERVE
RATIO
(A)
(A)
(e)
(e)
RATIO
RESERVE
1960
3&,.9
0.622
3&,.9
0.622
1961
441 .3
0.637
441 .3
0.637
0.863
1962
509.8
0.657
16o.1
0.206
669.9
1963
586.9
0.681
329.8
0.383
916. 7
1.064
1964
672.8
o. 709
509.6
0.537
1,182.4
1.246
1.412
1965
768.2
o. 739
699.9
0.673
1,468.1
1966
873.5
o. 771
901.1
o. 796
1,774.6
1.567
1967
989.2
o.&J5
1,113.8
0.907
2,103.0
1.712
1968
1,115.8
0.81/1
1,338.5
1.009
2,454.3
1.850
1969
1,253.9
0.878
1,575.6
1.103
2,829.5
1.981
1970
1,404.2
0.916
1, 777-8
1. 16o
3,182.0
2.076
(A) S£E EXHIBIT Eo
(e)
SEE EXHIBIT f'o
(NOTE)
IT
IS ESTIMATED THAT AGGRCGATE RESERVES WOULO BE REDUCED TO
ASSESSMENT WOULD BE RESUMED,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
AND THAT TllE PRIMARY RE.SERVE
1,2-;t:
IN
1975
AT WHICH TIME
ALONE WOULD REACH
2%
IN
1993•
52
FEDERAL HOME LOAN BANK ACT AMENDMENTS
EXHIBIT E
ESTIMATED PRIMMY RESERVE POSITION
ASSUMES ANNUAL GROWTH IN SAVINGS (NEV MoNEY)
o,- $ 6.0
BILLION PLUS DIVIDENDS AT
3'
DOLLARS IN MILLIONS
••
DEC.
BEGINNING
OP' YUR
31
I
•
y
E
•
LEH
INCOME
INCOME
EXPENSES
.
.
•
1960
• •
M
INVESTMENT
PIIEMI UM
•
•
12, I
.
E
y
TOTAL SYGSo
CAPITAL ANO
E
£ND Or
NET ADDITION
DURING VEAR
YEAR
.
CREDI TOR
RESERVE
OBLIGATIONS
RATIO
380,9
61,262,0
0.622
1961
380,9
1,9
60,4
441.3
69,312.0
0,637
1962
441.3
56,5
14. 1
2,1
68.5
509.8
77,597,0
0.657
1963
509.8
63, 1
16.3
2.3
77, 1
586.9
86,125.0
0.681
1964
586,9
69,8
18. 7
2.6
85,9
672.8
94,903.0
o. 709
1965
672,8
76, 7
21,5
2.8
95.4
768.2
103,938,0
0, 739
50,2
1966
768.2
83.9
24.5
3.1
105.3
873.5
113,238.0
0, 771
1967
873,5
91.3
27,8
3,4
989.2
122,811.0
1968
989.2
98.8
31.5
3, 7
115. 7
126,6
1,115.8
132,665.0
0.805
o,841
1969
1,115.8
106.5
35.5
1,253.9
142,809.0
o.8-,S
1,253.9
114.6
39,9
3,9
4,2
138,1
1970
150,3
1,404.2
153,251, 1
0.916
EXHIBIT F'
ASSUt,IES ANNUAL GROWTH
.
DCC,
31
BEGINNING
or YEAR
PLUS DIVID£NDS AT
3"
DOLLARS IN MILLIONS
E
C
0
N
•
NET PREMfUM
PREPAYMENTS
.. . .
y
E
INVESTMENT
INCOME
E
•
y
NET ADDITION
OUfllNG YEAR
TOTAL SVQS,
E
CAPITAL ANO
END
or
YEAR
CREDI TOR
OBLIGATIONS
RESERVE
RATIO
!•)
•.
1961
1962
ESTIMATED SECONO,IRV RESERVE POSITION
IN SAYINGS (NEW MoNEV) OF'$ 6,0 BILLION
157.0
•.
•.
69,312.0
160.1
160.1
77,597.0
o.206
169. 7
329.8
86,125.0
0.383
1963
160,1
161.7
3.1
8,o
1964
329.8
166.6
13.2
179.8
509,6
94,903.0
0,537
1965
509.6
171.6
18. 7
190.3
699,9
103,938.0
0.673
1966
699,9
176,7
24.5
201.2
901.1
113,238,0
o. 796
1967
901,1
182.0
30. 7
212, 7
1,113.8
122,811.0
0.907
1968
1,113.8
187,5
37.2
224. 7
1,338.5
132,665.0
1,009
1969
1,338.5
193, 1
44.o
237. 1
1,575.6
142,809.0
1.103
1970
1,575.6
151,9
50,3
202,2
1,777,8
153,251,0
1,160
(A) 11:1 SCHEDULE ~.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
FEDERAL HOME LOAN BANK ACT AMENDMENTS
53
SCHEDULr.
3
INSURANCC PRCMIIJM OASES - RCGULN~ AND PREPAYMENTS
ASSUMES ANNUAL GROWTH IN SAVINGS
(NE\rl MoNcv) OF
IN MILLIONS
SAVI
31
i 6.o
TOTAL SVQS,
CAPITAL AND
INFLOW
ENO OF
BEGINNING
or
YEAR
3'/,
DILLION PLUS DIVIDENDS AT
DOLLARS
CAPITAL
NET
DEC,
or
CREDI TOR
CREDITOR
YEAR
OBLIGATIONS
$ 58,662.0
$ 2,6oo.o
$ 61,262.0
66,512.0
2,8oo.o
69,312.0
8,085.0
74,597.0
3,000.0
77,597.0
8,328.0
82,925.0
3,200.0
86,125.0
8,578.0
91,503.0
3,400.0
94,903.0
8,835.0
100,338.0
3,6oo.o
103,938.0
109,438.0
3,8oo.o
113,238.0
118,811.0
4,ooo.o
122,811.0
9,654.0
128,465.0
4,200.0
132,665.0
3,944.o
9,944,o
138,409.0
4,400.0
142,8cl9.o
4,242.0
10,242.0
148,651.0
4,600.0
153,251.0
TOTAL
NEW MONEY
DIVIDENDS
58,662.0
6,000.0
1,85o.o
7,85o.o
66,512.0
6,000.0
2,085.0
74,597.0
6,000.0
2,328.0
82,925.0
6,000.0
2,578.0
91,503.0
6,000.0
2,835.0
100,338.0
6,000.0
3,100.0
9,100.0
109,438.0
6,000.0
3,373,0
9,373.0
118,811.0
6,000.0
3,654.o
128,465.0
6,000.0
138,409.0
6,000.0
OBLIGATIONS
SCHEDULE
DERIVATION Of PREMIUM PREPAYMENTS
(Ntw MONEY) or • 6,o Bl LLI ON
ASSUMES ANNUAL GROYTH IN SAVI NQS
PLUS 01 VI DENOS AT
lJ
1'
IN Ml Lll ONS OF DOLLARS
YEAR
ENDING
DEC,
NET SAVINGS
GROSS PRE.Ml UM
MORTGAGE
INF'LO\I
PREPAYMENTS
LOANS HELD
(•)
31
NET HOME
MORTGIAQES HELD
(e)
BANK STOCK
REQUIREMENTS
BANK STOCK
PURCHASES
(c)
(0)
$ 1, 149,0•
•-
GROSS PREMIUM
PREPAYMENTS
LESS BANK STOCK
PURCHASES
(E)
1961
• 7,85o,o
$ 157.0
63,852.0
57,467.0
1962
8,085.0
161. 7
71,613.0
64,452.0
645.0
1963
8,328.0
166.6
79,608.0
71,647.0
716.0
166.6
171.6
$ 157.0
161, 7
1964
8,578.0
171.6
87,843.0
79,059.0
791.0
1965
8,835.0
176. 7
96, 324.o
86,692.0
867.0
176. 7
1966
9,100.0
182.0
105,o6o.o
94,554.0
946,o
182.0
1967
9,373.0
187-5
114,159.0
102,653.0
1,027.0
187-5
1968
9,654.0
193. 1
123,326.0
110,993.0
1,110.0
1969
9,944,o
198.9
132,873.0
119,586.0
1,196.0
47.0
151,9
1970
10,242.0
204.8
142,705.0
128,435.0
1,284.o
88.o
116.8
(A) SEE SCHEDULE
(a) ~
(c)
1:.-
3•
Of' NET SAVINGS INFLOW.
Of' NET H,OME MORTQAQES HELD.
(D) 'l'EAR END REQUIREMENT LESS
(E) PAYMENT DUE
(F'SLI
c)
MAY
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1
2'°
*~
MINIMUM REQUIREMENT
MINIMUM REQUIREME:NT
NEXT.
12/31/61,
12/31/61,
193. 1
54
FEDERAL HOME LOAN BANK ACT AMENDMENTS
ASSIMES ANNUAL GROWTH IN SAVINGS (NEli l«>NEY)
or$ 6.5
BILLION
PLUS DIVIDENDS AT ANNUAL RATE OF '3f,
E>CHIBIT Q
ESTIMATED AQll!EGATE (PRIMARY & SECOHDMY) RESERVE POSITION
ASSUMES ANNUAL GROWTH IN SAYINGS (NEW MoNEY) Of'$
6.5
31'
BILLION PLUS DI YI DENOS AT
DOLLAll:S IN MILLIONS
PRIMARY RESERVE
AGGREGATE OF PRIMARY
SECONDARY RESERVE
&
SECONDARY RESERVE
DEC.
31
RESERVE
(•)
RATIO
<•>
RESERVE
RATIO
(o)
(a)
Rl;HflYE
•
RATIO
3&>.9
lill1.4
0.622
1961
1962
510.5
o.649
qo.4
1963
588.5
0,671
1964
675.9
0.697
1965
0.725
7'15.1
1,518.3
1966
m.2
880.8
1.256
1.424
o. 756
0.823
1,840.1
1.579
1967
999.4
o. 789
959.3
1,185.8
0.936
2,185.2
1.725
1968
1,129,,5
0,823
1,-211. 7
1.039
2,554.2
1.862
1969
1,271.7
1,426.6
0,859
1,676.9
1,859.2
1. 133
1,169
2,9'18,6
0,897
1.992
2.066
1960
1910
(A) HI
ci.632
3&>.9
441 .4
0.622
0.217
68o.9
o.866
351 ,2
o.4oo
542.6
0.559
0.699
939.7
1,218.5
0.632
3,285.8
EXHIBIT He
(11) SEE EXHUI T I•
1975
(NOTE) IT IS ESTIMATED THAT AQCIREGATE RESERVES WOULD 8E REDUCED TO 1a. IN
AT WHICH TIME
ASHSBMENT WOULD IIE RESUMED, AND THAT THE PRIMARY RESERVE ALONE WOULD IIEACH ~ I»,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
199'
1.071
55
FEDERAL HOME LOAN BANK ACT AMENDMENTS
EXHIBIT H
ESTIMATED PRIMIRY RESERVE POSITION
ASSUMES ANNUAL GROWTH IN SAVINGS (NEW MONEY) Of'$
6.5
BILLION PLUS DIVIDENDS AT
JC'
DOLLARS IN MILLIONS
•
p
BEGINNING
or YE:AR
D£Co
31
I
"
INCOME
•-
1960
.•
•
V
I NVtSTMENT
INCOME
PREMIUM
E
•
EXPENSES
•-
E
.
V
TOTAL SVGSo
E
END
NET ADDITION
LESS
DURI NQ YEAR
•-
CAPITAL AND
CREDI TOR
DBL I QA Tl ONS
o,
YEAR
RESERVE
RATIO
)80,9
61,21>2,o
0.622
1961
3Bo.9
1.9
6o.5
441,4
69,819.0
0.632
1962
441 .4
57. 1
14, 1
2, 1
69.1
510,5
78,627.0
o.649
1963
510.5
64. 1
16,3
2,4
78.0
588,5
87,693.0
0.671
1964
588.5
71.2
18.8
2.6
87.4
675.9
97,025.0
0.697
1965
675.9
78.6
21.6
2.9
97-3
773.2
106,631 .o
o. 725
1966
773.2
86.1
24. 7
3.2
107.6
8Bo.8
116,519.0
o. 756
1967
8Bo.8
94,o
28. 1
3,5
118,6
999.4
126,698.0
o. 789
1968
999.4
102,0
31.9
3.8
130. 1
1,129.5
137,176.0
0.823
1969
1,129.5
110.3
36.0
4. 1
142.2
1,271.7
147,963.0
0.859
1970
1,271.7
118.8
40.5
4.4
154.9
1,421>.6
159,067.0
0.897
12,1
50,3
EXHIBIT I
ESTIMATED SECONDARY RESERVE POSITION
ASSUMES ANNUAL GROYTH IN SAVINGS (NEW MoNEY) Of'$
6.5
BILLION PLUS Dl'IIDENDS AT
JC'
DOLLARS IN MILLIONS
•
OtC.
31
1961
1962
E
BEGINNING
or YEAR
C
0
N
0
NE:T PREMl UM
PREPAYMENTS
.. . . . '
V
INVESTMENT
INCOME
E
E
NET ADDITION
DURI HG YEAR
E
TOTAL SYGSo
END
or
YEAR
CAP! TAL ANO
CRtDI TOA
OBLIGATIONS
RESERVE
RATIO
(•)
•
•-
167.1
•-
3.3
8.6
•-
•
69,819.0
1]0,4
1]0.4
18o.8
351.2
87,693.0
o.4oo
542,6
97,025.0
0.559
78,627.0
0.217
1963
170.4
172.2
1964
351.2
14.1
191.4
1965
542.6
177-3
182.6
19.9
202.5
745,1
106,631 .o
0.699
1966
745, 1
188.1
211.1
214.2
116,519.0
0.823
1967
969.3
193.8
32. 7
221>.5
9'59-3
1,185,8
121>,698.o
0.936
1968
1,185.8
199.6
39.3
238.9
1,424.7
137,176.0
1.039
1969
1,424.7
205,6
46.6
252.2
1,676.9
147,963.0
1.133
1970
1,676.9
129. 7
52.6
182.3
1,859.2
159,067.0
1.169
(A) SEE SCHEDULE
6,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
56
FEDERAL HOME LOAN BANK A:CT AMENDMENTS
SCHtDULE
5
INS~ANCE PREMIUM BASES • REGUI.IR AND PREPAYMENTS
ASSUMES ANNUAL GROWTH IN SAVINGS (NEW MoNEY) OF
•
y
A
I
DEC,
ISEGINNINQ
31
Of' YEAR
.
N
N
t
T
$ 6.5
Bl LLI ON PLUS DI VI DENOS AT
s
A
C
•
I
T
A
L
TOUL SVGS.
CAPITAL ANO
CREDI TOR
I N F' L O W
END Of'
NEW MONE:Y
3'
IN MILLIONS OF' DOLLARS
01 VI DENOS
TOTAL
196<>
CREDI TOR
YEAR
OBLIGATIONS
$ 58,662.0
$ 2,6oo.o
$ 61,262.0
69,819.0
OBLIGATIONS
1961
58,662.0
6,500.0
1,857.0
8,357.0
67,019.0
2,800.0
1962
67,019.0
6,500.0
2,108.0
8,608.o
75,627-0
3,000.0
78,627,0
1963
75,627.0
6,500.0
2,366.0
8,866.o
84,493.0
3,200.0
87,693.0
1964
84,493.0
6,500.0
2,632.0
9,132.0
93,625.0
3,400.0
97,025.0
1965
93,625.0
6,500.0
2,906.0
9,4o6.o
103,031 .o
3,6oo.o
106,631.0
1966
103,031 .o
6,500.0
3,188.0
9,688.0
112,719.0
3,8oo.o
116,519.0
1967
112,719.0
6,500.0
3,479.0
9,979.0
122,698.0
4,ooo.o
126,698.0
1968
122,698.0
6,500.0
3,778.0
10,278.0
132,976.0
4,200.0
137,176.0
1969
132,976.0
6,500.0
4,087.0
10,587.0
143,563.0
4,400.0
147,963.0
1970
143,563.0
6,500.0
4,4o4.o
10,904.0
154,467.0
4,6oo,o
159,067.0
SCHEDULE
6
DERIVATION Of rREMIUM PREPAYMENTS
ASSUMES ANNUAL GROWTH IN SAVI NQS (New MONEY) or
$ 6.5
Bl LL I ON PLUS DI VI DENOS AT
JC
IN MILLIONS OF' DOLLARS
YEAR
ENDING
NET SAVINGS
GROSS PREMIUM
MORTGAGE
DEC,
INFLOW
PREPAYMENTS
LOANS HELO
31
(,)
NET HOME
MORTGAGES HELD
(e)
BANK STOCK
BANK STOCK
CIROSS PRCMI UM
PREPAYMENTS
LESS BANK STOCK
PURCHASES
REQUIREMENTS
PURCHASts
(c)
(o)
(t)
-
$ 167.1
$ 1, 158.0-
•
167. 1
64,338.0
57,904.0
8,608.o
172.2
72,602.0
65,342.0
653.0
1963
8,866.o
177.3
81,113.0
73,002.0
730.0
1964
9,132.0
182.6
89,88o.o
80,892.0
809.0
177-3
182.6
1961
$ 8,357.0
1962
$
172.2
1965
9,406.o
188.1
98,910.0
89,019.0
890.0
188.1
1966
9,688.0
193.8
108,210.0
97,389.0
974.o
193.8
1967
9,979.0
199.6
117,790.0
106,011.0
1,o6o.o
199.6
1968
10,278.0
205.6
127,657.0
114,891.0
1,149.0
205.6
1969
10,587.0
211.7
137,820.0
124,038.0
1,240.0
82.0
129. 7
1970
10,904.0
218.1
148,288.0
133,459.0
1,335.0
95.0
123. 1
(A) SEE SCHEDULE
5•
(a) ~ or
NET SAVI NQS INFLOW.
(c) i,, or
NET HOME MORTGAGES HELD.
*2;°
MINIMUM REQUIREMENT
(D) YEAR END REQUIREMENT LESS~ MINIMUM REQUIREMENT
(E) PAYMENT DUE (FSLIC) MAY 1 NEXT.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
12/31/61.
12/31/61.
57
FEDERAL HOME LOAN BANK ACT AMENDMENTS
lJ
PART
ASSIMES ANNUAL GROWTH IN SAVINGS (NEW l«lNEY) Of'
PLUS DIVIDENDS AT ANNUAL RATE Of'
$
7.0 BILLION
~
EXHIBIT J
ESTIMATED AGGREGATE (PRIMARY & SECONDARY) RESERVE POSITION
AHUMts ANNUAL GROWTH IN SAYINGS (NEW MoNEY)
or. 7.0
BILLION PLUS DIVIDENDS AT ~
DOLLARS IN MILLIONS
PRIMARY RESERVE
AGGREGATE Of' PRIMARY
SECONDARY RESERVE
&.
SECONDARY RESERVE
DEC.
31
RESERVE
RATIO
RESERVE
RATIO
(A)
(•l
(a)
(a)
1960
3&>.9
0.622
1961
441 .6
o,628
1962
511.2
o.642
RESERVE
•
•
180.8
0.227
3&>.9
IIATIO
0.622
441 .6
o.628
692.0
0.869
1.078
1963
590.1
0.661
372.5
o.417
962.6
1964
678.9
0.685
575-5
0.581
1,254.4
1.266
1965
778.0
o. 712
790.3
o. 723
1,568.3
1.435
1966
888.1
0.7'11
1,017.6
o.849
1,905.7
1.590
1967
1,009.6
0.773
1,257.7
0.963
2,267.3
1.736
1968
1,143.1
0.807
1,511.4
1.o67
2,654.5
1.87'1
1969
1,289.3
o.842
1,757.8
1.148
3,047.1
1,990
1970
1,448.8
0.879
1,940.7
1.177
3,389.5
2.056
(A) SEE EXHIBIT Ko
(11) HE EXHIBIT Lo
(NOT£)
IT
rs
ESTIMATED THAT AGGREGATE RESERVES WOULD BE RE:DUCED TO
1~
IN
19?4
AT WHICH TIME
ASSESSMENT WOULD BE RESUMED, AND THAT THE PRIMARY RESERVE ALONE WOULD REACH ~ IN_199'io
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Federal Reserve Bank of St. Louis
58
FEDERAL HOME LOAN BANK A:CT AMENDMENTS
EXHIBIT I<
ESTIMATED PRIMARY RESERVE POSITION
s . . vlNGS (NEW MoNtY) OF. 7.0 BILLION
AssuME.S ANNUAL GROWTH IN
PLUS DIVIDENDS AT~
DOLLARS IN MILLIONS
p
DEC.
BEOINNING
OF YEAR
31
1960
I
R
,-PEMI UM
R
y
'
R
s
I NYESTMENT
LESS
INCOME
EXPENSES
INCOME
-
$
'
M
•
-
$
'
R
V
TOTAL SVGSo
'
CAP1 TAL AND
END
NCT ADDITION
DURING YE:AR
or
YEAR
-
38o.9
CRE.DITDR
OBLIGATIONS
RESERVE
RATIO
61, 262,0
0.622
1961
38o.9
50.5
12, 1
1.9
6o. 7
441 .6
70,327.0
0.628
1962
441 .6
57.6
14. 1
2, 1
69.6
511.2
79,658.0
o.642
19"3
511.2
65.0 ,
16.3
2.4
78.9
590. 1
89,263.0
0,661
19(11
590.1
7c:.6
18.9
2, 7
88.8
678.9
99,150.0
0.685
1965
678.9
8o.4
21. 7
3.0
99.1
778.0
109,328.0
0.712
o.-,41
1966
r,S.o
88.5
24.9
3.3
110.1
888.1
119,8o5.o
1967
888.1
96.7
28.4
3.6
121.5
1,009.6
130,590.0
o. m
1968
1,009.6
105.2
32.2
3.9
133.5
1,143.1
141,693.0
o.8o7
1969
1,143.1
113.9
36.5
4.2
146.2
1,289.3
153,123.0
o.842
1970
1,289.3
123.0
41.1
4.6
159.5
1,448.8
164,890.0
0.879
EXHIBIT L
ESTIMATED SECONDARY RESERVE POSITION
ASSUMES ANNUAL GROWTH
7.0
IN SAVINGS (NEW MoNEY) Of'$
BILLION PLUS DIVIDENDS AT
J"
DOLLARS IN Ml LLI ONS
•'
DEC,
31
1961
BEGINNING
OF' YEAR
C
0
N
•
y
PREPAYMENTS
INCOME
•-
♦
A
INVESTMENT
!•l
1962
0
NET PREM! UM
♦
-
•' •'
R
V
NET ADDITION
DUAi NGI YEAR
♦
'
TOTAL SVGS •
CAPITAL AND
END OP"
YEAR
-
Cl'IEDI TOR
OBLIGA.TIONS
RESERVE.
RATIO
70,327.0
3.5
18o.8
18o.8
79,658.0
0.227
9.1
191. 7
372.5
89,263.0
o.417
18o.8
177.3
182.6
1964
372.5
188.1
14.9
203.0
575.5
99,150.0
0.581
1965
575.0
193. 7
21, 1
214.8
790.3
109,328.0
0.723
1963
1966
790.3
199.6
27. 7
227.3
1,017.6
119,8o5.o
o.849
1967
1,017.6
205.5
34.6
240.1
1,257.7
130,590.0
0.963
1968
1,257.7
211, 7
42.0
253. 7
1,511.4
141,693.0
1.o67
1969
1,511.4
197. 1
49. ~
246.4
1,757.8
153,123.0
1.t48
1970
1,757.8
127.6
55.3
182.9
1,940.7
164,890.0
1,177
(A) SEE SCHEDULE
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
8.
59
FEDERAL HOME LOAN BANK ACT AMENDMENTS
SCHEDULE
7
l NSURANCE PREMIUM DASPJ - RCOJLN~ ANU PREPAYMENTS
A:;:,1,1~1t:s A-lNUAL GROWTh
•~i
SAVINGS
(New
Mr,NEY) Of$
"(.O
BILLION PLUS DIVIDENC'5 AT
3%
IN MILLIONS Oi DOLLARS
,
A
N
I
'
s
G
DEC.
eCGINNtNG
3i
OF 'l'CAR
'
I
N E 1
t,;
A
p
'
A
T
'
TOTAL S¥G5o
F L O W
CAP L TAL
£NO OF
N(W MONEY
DIVIO(NDS
TOTAL
1960
'!'EAR
CREDI TOR
OBLIGATIONS
AND
CRE.DI TOP
OBLJ'lATIONS
$ 58,662.0
$ 2,600.0
1961
58,662.0
7,000.0
1,865.0
8,865.0
67,527.0
2,Boo.o
$ 61,262.0
70,327.0
1962
67,527.0
7,000.0
2,131.0
9,131.0
76,658.0
3,000.0
79,658.0
89,263.0
i963
76,656.0
7,000.0
2,405.0
9,405.0
86,063.0
3,200.0
1964
86,06;.o
7,000.0
2,687.0
9,687.0
95,750.0
3,400.0
99,150.0
1965
95,750.0
7,000.0
2,970.o
9,978.0
105,728.0
3,6oo.o
109,328.0
119,8o5.o
1966
105,728.0
7,000.0
3,277.0
10,277.0
116,005.0
3,Boo.o
1967
116,00:,.0
7,000.0
~,S&J.O
10,585.0
126,590.0
4,ooo.u
130,590.0
1968
126,590.0
7,000.0
3,903.0
10,903.0
137,493-0
4,200.0
141,693.0
1969
137,493.0
7,000.0
4,230.0
11,230.0
148,723.0
4,400.0
153,123.0
1970
148,723.0
7,000.0
4,567.0
11,567.0
160,290.0
4,6oo.o
164,89o.o
SCHEDULE
DER I VAT I DN OF PREM I UM PREPAYMENTS
7,0 BILLION
ASSUME$ ANNUAL GROVTH IN SAVINGS (NEW MoNEY) OF$
PLUS DIVIDENDS AT
8
~
IN MILLIONS OF DOLLARS
YEAR
LNDING
DEC,
NET SAVINGS
INFLOW
GROSS PREMIUM
PREPAYMENTS
(A)
31
MORTGAGE
LOANS HELD
NET HOME
MORTGAGES HELD
(o)
BANK STOCK
REQUIREMENTS
(c)
BANK STOCK
PURCHASES
GROSS PREMIUM
PREPAYMENTS
LESS BANK STOCK
PURCHASES
(<)
(o)
•
-
♦
1961
$ 8,865.0
$ 177-3
64,826.0
58,343.0
1962
9,131 .o
182.6
73,592.0
66,233.0
662.0
1963
9,405.0
188.1
82,620.0
74,358.0
744.o
1964
9,687.0
193. 7
91,920.0
82,728.0
827.0
193. 7
1965
9,978.0
199.6
101,499.0
91,349.0
913.0
199.6
205.5
$ 1,167.00
1966
10,277.0
205.5
111,365.0
100,229.0
1,002.0
1967
10,585.0
211.7
121,526.0
109,373.0
1,094.0
1968
10,903.0
218.1
131,993.0
118,794.0
1,188.0
1969
11,230.0
224.6
142, 774.o
128,497.0
1970
11,567.0
231 .3
153,878.0
138,490.0
(A) SEE SCHEDULE
7•
(e) ~ Of' NET SAVINGS I Nf'Low.
(c}
1%
Of' NET HOME MORTGAGES HELDo
*~
MINIMUM REQUIREMENT
(o) YEAR [ND REQUIREMENT LESS~ MINIMUM REQUIREMENT
{t)
PAYMENT DUE (rSLI c) MAY
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1
NEXT.
12/31/61.
12/31/610
177.3
182.6
188.1
211, 7
21.0
197.1
1,285.0
97,0
127.6
1,385.0
100,0
131 .3
60
FEDERAL HOME LOAN BANK ACT AMENDMENTS
Mr. SPENCE. Mr. Holifield desires to present his statement to the
committee and I recognize him for that purpose.
STATEMENT OF HON. CHET HOLIFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE 19TH CONGRESSIONAL DISTRICT OF THE
STATE OF CALIFORNIA, AT THE COMMENCEMENT OF THE
HEARING
Mr. HOLIFIELD. Mr. Chairman, I will not take the time of the committee this morning. I know you have u regularly scheduled list of
witnesses. However, in view of the importance of any legislation
which has to do with the election of directors in the different regions,
I wish to call to the attention of the chairman and members of the
committee the fact that the 11th and 12th regions remain welded
together.
I believe that it should be separated, as it was once some 12 or 13
years ago, sepaJ-ated for the most expeditious and efficient handling
of the affairs of the region.
I, therefore, would like to have permission to file with you a statement and submit some copies of the statement, and ask permission
that it be printed at anr, place that :you choose in the hearmgs. Mr. SPENCE. That will be done without objection. We are glad to
have your views.
HOUSE OF REPRESENTATIVES,
Washington, D.C., Jwly 12, 1961.
Hon. BRENT SPENCE,
Chairman, Committee on Bo,nking and Currency,
New House Office Builming, Washington, D.C.
DEAR MR. CHAIRMAN: I note that you have pending before the committee,
among other legislation, H.R. 7109, a bill which you introduced relating to the
election and appointment of directors of Federal home loan banks. It is my
understanding that hearings on this bill will be held by your committee the latter
part of this week.
I have not had the time to analyze H.R. 7109, but the mere fact of its pendency
suggests that there are problems associated with representation of member associations in the directorates of Federal home loan banks.
To a large extent, it would appear the problems of representation have beeQ.
created or aggravated by the disproportionately large size of the 11th bank district, which comprises 11 States including California, Alaska, and Hawaii, and
also the island of Guam. The geographical area probably exceeds one-quarter
of the whole .United States, touches the borders of Mexico and Canada, and
includes our noncontiguous States of the Union.
According to the terms of the Federal Home Loan Bank Act as originally enacted, each district bank was entitled to 12 directors, 8 of whom were elected
by member associations and four appointed by the Board. Following a 1935
amendment, six of the eight elective directors were elected by member associa.tions grouped according to size categories and two were elected at large by
the members.
While the legislation provided for representation of member associations by
size groups, the Board in its regulations also tried to include the principle of
geographical representation by States.
In the cast of the outsized 11th district which had nine States and the territories of Alaska and Hawaii before the latter two were admitted to the Union,
it was impossible to provide even one director for each State, since there were
only eight elective directors permitted by law. The Board dealt with this problem administratively by alternating directorships between two of the States.
In 1955 the Board recommended, and your committee and the Congress ac,cepted, legislation which, among other things, authorized the Board by regulation to increase the number of elective directors of any bank whose district comr1rised five or more States. The number of elective directors was limited to
twice the number of States in the bank district, except that each State was to
have at least 1 director, and no State more than 3, with the total number in
any district not to exceed 11.
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Federal Reserve Bank of St. Louis
FEDERAL HOME LOAN BANK ACT AMENDMENTS
61
Under this arrangement California was enabled to have three elective directors, and the other States of the 11th district one each. However, the admission of Alaska and Hawaii into the Union again raised the problem of State
representation, and accordingly further amendatory legislation was adopted in
1959. The Board was authorized to increase the number of elective directors
up to 13 in districts with 5 or more States. At the same time the Board was
authorized to increase the number of appointive directors in such districts up
to one-half the number of elective directors in order to preserve the previous
statutory ratio of 2 to 1 between elective and appointive directors.
As matters now stand in the 11th district, the San Francisco bank bas 19
directors, while each of the other 10 district banks has 12 directors. Thus, the
practical effect of the legislation has been confined to the 11th district.
The bill before your committee, H.R. 7109, would change the formula for representation without affecting the total number of directors now permitted by
law. While there may be merit in the proposed change, I believe that before
any new legislation is enacted regarding district bank representation, consideration spould be given by the committee to the special problem created by the
11th district.
As you know, the Federal Home Loan Bank Act originally authorized the
Board to divide the United States into not less than 8 nor more than 12 districts.
These districts were to be created on the basis of the convenience and customary
course of business of the institutions eligible to and likely to subscribe for the
stock of the Federal home loan bank. In each district a city was to be designated as the bank center.
.
In accordance with this legislation the Board created 12 bank districts, the
same number as were created under the Federal Reserve System. One of these
districts, the 12th, comprised the States of California, .Arizona, and Nevada, and
the then Terrritory of Hawaii, and this region was served by the Federal home
loan bank of Los Angeles. The then 11th district, with a bank centered in
Portland, Oreg., comprised the States of Idaho, Montana, Wyoming, Oregon,
Washington, and the then Territory of Alaska.
For some 13 or 14 years since the inception of the Federal Home Loan Bank
System in 1932, these bank districts served their members well and created no
problem suggesting that the district arrangements should be modified.
Then suddenly on March 29, 1946, the 11th and 12th districts were declared
merged, the Los .Angeles bank was dissolved, and the Portland bank was brought
to San Francisco to serve the reconstituted and greatly enlarged 11th district.
This action was taken without notice to the member associations or the district
banks concerned, without hearings, and solely on the decree of Commissioner
John H. Fahey, who was at that time the single head of the Home Loan Bank
System.
Mr. Fahey's action was arbitrary and vindictive, ·and the circumstances are
documented in the report of investigation conducted in 1946 by a select committee of the House chaired by Representative Howard W. Smith of Virginia.
In large part, Mr. Fahey's action was in the nature of ·a reprisal against member associations of the 12th district who elected a president of the Los Angeles
bank not favored by Mr. Fahey, who had bis own preferred candidate. The dissolution of the Los .Angeles bank was followed by the seizure of the Long
Beach Federal Savings & Loan .Association, whose president, Thomas A. Gregory,
was a leading member of the association representatives who bad incurred Mr.
Fahey's enmity.
The grievance events set in motion by Mr. Fahey's arbitrary action have continually disturbed the industry, plagued the Board, •and resulted in complex
litigation not fully resolved to this day, 15 years later. This whole matter has
been the subject of investigation by at least three committees of the House of
Representatives and was a key factor in the enactment of legislation by your
committee in 1954, when provision was made by law for orderly administrative
procedures. The legislative history of that enactment clearly shows that the
Congress intended to provide means for effective supervision by the Board of
associations without the need for drastic seizure action such as occurred in the
Long Beach case.
Notwithstanding the declared congressional intent and the amendments sponMred by your committee, these have remained virtually a dead letter as far as
the Board is concerned, and it was persuaded in 1960 to seize the Long Beach
association a second time. A special subcommittee of the Committee on Government Operations under the chairmanship of Representative John E. Moss bas
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FEDERAL HOME LOAN BANK A'CT AMENDMENTS
inquired into this matter and has issued House Report 2083, 86th Congress, 2d
session, which found the Board action completely unwarranted and in defiance
of the congressional mandate. Other aspects of the Board operations also are
under subcommittee scrutiny.
There was a time, after Mr. Fahey left office and his administration was reconstituted as a three-man Board, when the Long Beach association was returned to Mr. Gregory's management following the initial seizure. By this
action in 1948, the Board impliedly acknowledged that Mr. Fahey's action was
unjustified. In fact one of the Board members, J. Alston Adams, now the
president of the San Francisco bank, termed Mr. Fahey's action "arbitrary
and capricious and vindictive." This characterization was made in sworn testimony before a subcommittee than under my chairmanship.
In returning the association to Mr. Gregory's management, the Board did not
act to reestablish the Los Angeles bank. The desirability of restoring the 11th
and 12th districts was publicly acknowledged by the then Board Chairman,
William K. Divers, and other Board members. However, the Board was persuaded by certain of its personnel and by others in the Department of Justice
that restoration of the Los Angeles bank and the two districts would prejudice
the Government's position in litigation which involved both the Los Angeles
bank and the Long Beach association.
Information on these matters were conveyed to you by Raymond M. Foley,
then Administrator of the Housing and Home Finance Agency, of which the
Board was until 1955 a constituent unit. You had asked Mr. Foley to comment
on a bill (H.R. 1232 of the 81st Cong.) which proposed to recreate the original
11th and 12th Federal home loan bank districts and to reestablish the Los
Angeles and Portland banks in original form. Mr. Foley's letter to you of
July 14, 1949, the text of which is printed in hearings held by m-y subcommittee
in 1950, reads as follows :
"HOUSING AND HOME FINANCE AGENCY,
"OFFICE OF THE ADMINISTRATOR,
"Washington, D.O., July 14, 1949.
"Re H.R. 1232, 81st Congress.
"HON. BRENT SPENCE,
"Ohairman, House Banking and Ourrency Oommittee,
"House of Representatives, Washington, D.O.
"DEAR CONGRESSMAN SPENCE: This is in further reply to your letter of May 3
requesting the views of this Agency with respect to H.R. 1232. This bill would
amend section 3 of the Federal Home Loan Bank Act, as amended, to provide
that the original 11th and 12th Federal home loan bank districts and Federal
home loan banks be reestablished in their original form.
"The original Federal home loan banks of Portland and Los Angeles were
consolidated in 1946 into the Federal home loan bank of San Francisco. The
question of dissolving the Federal home loan bank of San Francisco and the
reestablishment of the Federal home loan banks of Los Angeles and Portland
has been under consideration by the Home Loan Bank Board for some time.
The Board has given public recognition to the desirability of such reestablishment, but has not so far found itself able to take the necessary action because
the question of reestablishing the banks has been closely related to pending
litigation involving not only the two banks, but a Federal savings and loan
assocition in Long Beach, Calif.
"The Home Loan Bank Board is desirous of reestablishing the banks but is
unwilling to take any action which in the opinion of the Department of Justice
would be prejudicial to the litigation now pending, which is under the jurisdiction of the Department of Justice. The legislative proposal embodied in H.R.
1232 is not necessary since the Home Loan Bank Board has under existing law
adequate authority to accomplish the objectives of that bill. Therefore, I believe that action on the bill should be deferred until appropriate administrative action can be taken which will not prejudice the pending litigation.
"I have been advised by the Bureau of the Budget that there would be no
objection to the submission of this report as the enactment of the proposed
legislation would not be in accord with the program of the President.
"Sincerely yours,
"RAYMOND M. FOLEY, Administrator."
More than a decade has passed since that letter was written, but the case
for the recreation of the 11th and 12th home loan bank districts is still valid.
In fact, with the rapidly expanding population and business. of the West and
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FEDERAL HOME LOAN BANK ACT AMENDMENTS
the admission of the new States to the Union, it would seem more appropriate
than ever to divide up the outsized 11th district into two districts.
The 11th district San Francisco bank, in terms of lending operations and total
assets of member associations, is the largest in the System. It advances (loans)
to members during calender year 1960 totaled $845,324,243. This was more
than 3½ times the advances of $232,666,200 of the seventh district Chicago bank,
which ranked second. In fact the total advances by the San Francisco bank
for 1960 were more than the total of the next six highest district banks, which
ranked as follows :
Advances
District
: ____________________________________________ $845,324,243
San banks
Francisco
Chicago___________________________________________________
Greensboro ________________________________________________
New York________________________________________________
CincinnatL________________________________________________
Pittsburgh_________________________________________________
Little Rock_______________________________________________
Total ___________________________________________________
232,666,200
184,650,000
122,972,188
108, 687, 700
93, 783, 700
84,180,000
826,939,788
In total assets of members (insured Federal and State associations) the San
Francisco bank district represented $13,651,413,000. This was $3.6 billion more
than the association assets in the next highest bank district, which is Greensboro.
I may note in this regard that of the 11 States in the 11th district, the California associations have $10,728,183,000 of assets, or 80 percent of the total within
the district. The assets of the insured associations in California are greater than
the assets of the insured associations not only in any other State but in any
other bank district. California alone even tops the fourth district, which comprises eight States including the District of Columbia. This concentration of
assets in California suggests by itself that, whatever the permissible number of
directors for the whole district, California always will be underrepresented in
the bank directorate. Nevertheless, its representation will be improved if the
unwieldly ilth district is divided into two districts.
Furthermore, the reestablishment of the Los Angeles bank will properly reflect
the concentration of population and business in southern California. The State's
population is now 15.7 million, and 6 million of these persons reside in Los
Angeles County alone. The next largest California county, San Diego, has 1
million persons. Thus, these two southern counties contain about 45 percent
of California's total population.
After years of costly litigation, painful efforts, and many setbacks to settlement, the Long Beach association controversy is on the threshold of resolution.
The Bank Board in negotiations with Mr. Gregory has drawn up a settlement
document which now awaits ratification by the Department of Justice. This
settlement will wind up all outstanding litigation involving the Board, the Insurance Corporation, the Long Beach association, and the San Francisco bank.
Whatever excuse the Board had in the past, because of the litigation, to withhold the reestablishment of the 11th and 12th districts will be gone. As a simple act of justice and of good business judgment as well, the Board now should
take action, previously promised and long delayed, to restore the district bank
arrangements upon which the Federal Home Loan Bank System was nurtured.
I recognize, of course, that many associations and others have become adjusted
to the existing setup. However, I have outlined the reasons why restoration of
the Los Angeles bank is fully justified. I have discussed the matter with the
new Board Chairman, Joseph P. McMurray. He has indicated that he is willing
to consider the merits of this request.
Since the Board is empowered by law to take the necessary action, I would
ask that you urge the Board to do so before further legislative action is taken on
H.R. 7109 or any other bill to rearrange the district bank representation. Restoration of the Los Angeles bank and a 12-district system will provide a more
rational basis for establishing a representation formula. If the Board fails to
act, I intend to introduce legislation to restore the Los Angeles bank and the
12-district system.
Sincerely yours,
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Federal Reserve Bank of St. Louis
CHET HOLIFIELD,
Member of Congress.
64
FEDERAL HOME LOAN BANK ~CT AMENDMENTS
Mr. SPENCE. Thank you. We will adjourn to meet at the call of
the Chair.
(The following letter from the United States Savings & Loan
League, dated July 17, 1961, has been received and is inserted at this
point in the record:)
UNITED STATES SAVINGS & LOAN LEAGUE,
WASHINGTON OFFIOE,
Washington, D.C., July 17, 1961.
Hon. BRENT SPENCE,
Chairman, House ·Banking and Currency Committee,
House Office Building, Washington, D.C.
DEAR MR. CHAIRMAN : When Henry Bubb testified before your Subcommittee
No. 1 with respect to R.R. 7108 on July 13 he raised a question regarding the
method of payment of earnings on prepaid premiums. He indicated that the
United States League might submit an amendment to clarify that section of
the law.
We have reviewed this question and have discussed it with the staff of the
Federal Home Loan Bank Board and we are satisfied that the present language
is adequate to achieve our objective. Therefore, it is not necessary for us to
submit an amendment.
We appreciated the opportunity to testify and we are hopeful that the committee will support both R.R. 7108 and R.R. 7109.
Sincerely yours,
STEPHEN SLIPHER, Legislative Director.
(Whereupon, at 12 o'clock noon the subcommittee adjourned, subject to the call of the Chair.)
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