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FEDERAL RE SE RV E BANK O F N E W YO RK r Circular No. 6 9 8 4~l L A u g u st 4, 1972 BANK HOLDING COMPANIES Operation of Savings and Loan Associations Not a Permissible Activity To A ll Bank Holding Companies, and Others Concerned, in the Second Federal Reserve D istrict: Following is the text of a statem ent issued A ugust 3 by the Board of Governors of the Federal Reserve System: T h e Board of G overnors of the Federal R eserve System announced today that it has decided not to include at the present tim e operation of savings and loan associations on its list of activities in w hich bank holding com panies m ay engage. T h e Board had previously indicated that operation of a savings and loan association w as not w ithin the scope of activities heretofore authorized to be conducted by a bank holding com pany under section 4 ( c ) ( 8 ) of the Bank H o ld ing Com pany A ct, and that it w as then considering w hether to expand its list of activities to include such activity. T h e Board noted that C ongress has created a statutory fram ew ork for sav ings and loan associations that is separate from the statutes governing com m ercial banks. U nd er these statutes, different rules have been established for the tw o kinds of institutions on such m atters as branching, taxation, and ceilings on rates paid to attract savings. A statute has also been enacted governing savings and loan holding com panies separate and distinct from the Bank H old in g Com pany A ct. T h is statutory pattern su ggests past intent on the part of C ongress to m aintain savings and loan associations as specialized lenders to finance housing, w ith sp e cialized rules appropriate to that role. A cquisition of savings and loan associations by bank holding com panies could tend to blur this C ongressionally established structure. Proposals for affiliation of banks and savings and loan associations in a hold ing com pany system involve broad questions of public policy w hich, in the B oard’s opinion, should not be decided until C ongress has had an opportunity to consider the matter. Suggestions for change in rules governing specialized thrift institutions have been made by the P resid en t’s C om m ission on Financial Structure and R egulation (th e “H u n t C om m ission” ) , as w ell as others. It is expected that the n ext C ongress w ill have occasion to thoroughly consider bank and savings and loan association relationships. T he action announced today does not affect previous Board decisions perm it ting affiliations of thrift institutions and com m ercial banks in R hode Island. (A p plication s of N ew port S avings & Loan A ssociation, 1972 Federal Reserve Bulletin 313 [February 17, 1972] and O ld C olony Cooperative Bank, 1972 Fed eral Reserve Bulletin 417 [M arch 9, 1 9 7 2 ]). Additional copies of this circular will be furnished upon request. A lfred H ayes, President. J