Full text of Financial Institutions Supervisory Act of 1966

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1028

78"*statr 23^?^'

64 Stat. 1267.
c<!^gres*s!°

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

and installations appropriate for the educational functions of
such facilities;
(5) include such other conditions as the Secretary, after consultation with the National Advisory Committee on Education of
the Deaf, deems necessary to carry out the purposes of this Act;
and
(6) provide that any laborer or mechanic employed by any contractor or subcontractor in the performance of work on any construction aided by Federal funds appropriated for the benefit of
the model secondary school will be paid wages at rates not less
than those prevailing on similar construction in the locality as
determined by the Secretary of Labor in accordance with the
Davls-Bacon Act, as amended (40 U.S.C. 276a—276a-5); and the
Secretary of Labor shall have, with respect to the labor standards
specified in this paragraph, the authority and functions set forth
in Keorganization Plan Numbered 14 of 1950 (15 F.R. 3176; 5
U.S.C. 133z-15) aud section 2 of the Act of J u n e 13, 1934, as
amended (40 U.S.C. 276c).
(c). Th® Secretary shall submit the annual report of the college
(required by clause (3) of subsection (b)) to the Congress with such
comments and recommendations as he may deem appropriate.
Approved October 15, 1966.

Public Law 89-695
October 16, 1966
[s. 3158]

A^N A C T
To Strengthen t h e regulatory and supervisory a u t h o r i t y of F e d e r a l agencies
•
over insured banks a n d insured savings a n d loan associations, a n d for other
purposes.

Be it enacted hy the Senate and House of Representatives of the
Financial insti- JJnited States of America in Congress assembled^ That this Act may
v"is'or"^AcTor
be cited as the "Financial Institutions Supervisory Act of 1966".
1966.

T I T L E I — P R O V I S I O N S R E L A T I N G TO T H E F E D E R A L
H O M E LOAN B A N K B O A R D A N D T H E F E D E R A L SAVI N G S A N D LOAN I N S U R A N C E C O R P O R A T I O N
68 Stat. 634.

SEC. 101. (a) Subsection (d) of section 5 of the Home Owners'
Loan Act of 1933 (12 U.S.C. 1464(d)) is hereby amended to read as
follows:
" ( d ) (1) The Board shall have power to enforce this section and
rules and regulations made hereunder. I n the enforcement of any.
provision of this section or rules and regulations made hereunder, or
any other law or regulation, or in any other action, suit, or proceeding
to which it is a party or in which it is interested, and in the administration of conservatorships and receiverships, the Board is author-

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

1029

ized to act in its own name and through its own attorneys. Except
as otherwise provided herein, the Board shall be subject to suit (other
than suits on claims for money damages) by any Federal savings and
loan association or director or officer thereof with respect to any
matter under this section or any other applicable law, or rules or
regulations thereunder, in the United States district court for the
judicial district in which the home ojSice of the association is located,
or in the United States District Court for the District of Columbia,
and the Board may be served with process in the manner prescribed
by the Federal Kules of Civil Procedure.
28 use app.
"(2) (A) If, in the opinion of the Board, an association is violating si^t^Jr^o^ceedl'^^'
or has violated, or the Board has reasonable cause to believe that the ings.
association is about to violate, a law, rule, regulation, or charter or
other condition imposed in writing by the Board in connection with
the granting of any application or other request by the association, or
written agreement entered into with the Board, or is engaging or has
engaged, or the Board has reasonable cause to believe that the association is about to engage, in an unsafe or unsound practice, the Board
may issue and serve upon the association a notice of charges in respect
thereof. The notice shall contain a statement of the facts constituting
the alleged violation or violations or the unsafe or unsound practice or
practices, and shall fix a time and place at which a hearing will be held
to determine whether an order to cease and desist therefrom should
issue against the association. Such hearing shall be fixed for a date
not earlier than thirty days nor later than sixty days after service of
such notice unless an earlier or a later date is set by the Board at the
request of the association. Unless the association shall appear at the
hearing by a duly authorized representative, it shall be deemed to have
consented to the issuance of the cease-and-desist order. In the event of
such consent, or if upon the record made at any such hearing the Board
shall find that any violation or unsafe or unsound practice specified
in the notice of charges has been established, the Board may issue and
serve upon the association an order to cease and desist from any such
violation or practice. Such order may, by provisions which may be
mandatory or otherwise, require the association and its directors, officers, employees, and agents to cease and desist from the same, and, further, to take affirmative action to correct the conditions resulting from
any such violation or practice,
" ( B ) A cease-and-desist order shall become effective at the expiration of thirty days after service of such order upon the association concerned (except in the case of a cease-and-desist order issued upon consent, which shall become effective at the time specified therein), and
shall remain effective and enforceable, except to such extent as it is
stayed, modified, terminated, or set aside by action of the Board or a
reviewing court.

1030

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

Temporary
" (3) (A) Whenever the Board shall determine that the violation
orde^sT""^"^^^'^' ^^ threatened violation or the unsafe or unsound practice or practices,
specified in the notice of charges served upon tlie association pursuant
to paragraph (2) (A) of this subsection, or the continuation thereof,
is likely to cause insolvency (as defined in paragraph (6) (A) (i) of
this subsection) or substantial dissipation of assets or earnings of the
association, or is likely to otherwise seriously prejudice the interests of
its savings account holders, the Board may issue a temporary order
requiring the association to cease and desist from any such violation or
practice. Such order shall become effective upon service upon the association and, unless set aside, limited, or suspended by a court in proceedings authorized by subparagraph (B) of this paragraph, shall
remain effective and enforceable pending the completion of the administrative proceedings pursuant to such notice and until such time as the
Board shall dismiss the charges specified in such notice or, if a ceaseand-desist order is issued against the association, until the effective date
of any such order.
" ( B ) Within ten days after the association concerned has been
served with a temporary cease-and-desist order, the association may
apply to the United States district court for the judicial district in
which the home office of the association is located, or the United States
District Court for the District of Columbia, for an injunction setting
aside, limiting, or suspending the enforcement, operation, or effectiveness of such order pending the completion of the administrative proceedings pursuant to the notice of charges served upon the association
under paragraph (2) (A) of this subsection, and such court shall have
jurisdiction to issue such injunction.
" ( C ) I n the case of violation or threatened violation of, or failure
to obey, a temporary cease-and-desist order, the Board may apply to
the United States district court, or the United States court of any territory, within the jurisdiction of which the home office of the association is located, for an injunction to enforce such order, and, if the
court shall determine that there has been such violation or threatened
violation or failure to obey, it shall be the duty of the court to issue
such injunction.
di^cToT^r °^
"(4) (A) Whenever, in the opinion of the Board, any director or
officer.
officer of an association has committed any violation of law, rule, or
regulation, or of a cease-and-desist order which has become final, or
has engaged or participated in any unsafe or unsound practice in connection with the association, or has committed or engaged in any act,
omission, or practice which constitutes a breach of his fiduciary duty
as such director or officer, and the Board determines that tlie association has suffered or will probably suffer substantial financial loss or
other damage or that the interests of its savings account holders could
be seriously prejudiced by reason of such violation or practice or
breach of fiduciary duty, and that such violation or practice or breacli
of fiduciary duty is one involving personal dishonesty on the part of
such director or officer, the Board may serve upon such director or officer a written notice of its intention to remove him from office.

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

" ( B ) Whenever, in the opinion of the Board, any director or officer
of an association, by conduct or practice with respect to another savings and loan association or other business institution which resulted
in substantial financial loss or other damage, has evidenced his personal
dishonesty and unfitness to continue as a director or officer, and, whenever, in the opinion of the Board, any other person participating in
the conduct of the affairs of an association, Dy conduct or practice
w^ith respect to such association or other savings and loan association
or other Dusiness institution which resulted in substantial financial loss
or other damage, has evidenced his personal dishonesty and unfitness
to participate in the conduct of the affairs of such association, the
Board may serve upon such director, officer, or other person a written
notice of its intention to remove him from office and/or to prohibit his
further participation in any manner in the conduct of the affairs of
such association.
" ( C ) I n respect to any director or officer of an association or any
other person referred to in subparagraph (A) or (B) of this paragraph, the Board may, if it deems it necessary for the protection of
the association or the interests of its savings account holders, by written
notice to such effect served upon such director, officer, or other person,
suspend him from office and/or prohibit him from further participation in any manner in the conduct of the affairs of the association.
Such suspension and/or prohibition shall become effective upon service
of such notice and, unless stayed by a, court in proceedings authorized
by subparagraph (E) of this paragraph, shall remain in effect pending
the completion of the administrative proceedings pursuant to the
notice served under subparagraph (A) or (B) of this paragraph and
until such time as the Board shall dismiss the charges specified in such
notice, or, if an order of removal and/or prohibition is issued against
the director or officer or other person, until the effective date of any
such order. Copies of any such notice shall also be served upon the
association of which he is a director or officer or in the conduct of w^hose
affairs he has participated.
" ( D ) A notice of intention to remove a director, officer, or other
person from office and/or to prohibit his participation in the conduct
of the affairs of an association, shall contain a statement of the facts
constituting grounds therefor, and shall fix a time and place at which
a hearing will be held thereon. Such hearing shall be fixed for a
date not earlier than thirty days nor later than sixty days after the
date of service of such notice, unless an earlier or a later date is set
by the Board at the request of (i) such director, officer, or other
person, and for good cause shown, or (ii) the Attorney General of
the United States. Unless such director, officer, or other person shall
appear at the hearing in person or by a duly authorized representative, he shall be deemed to have consented to the issuance of an order
of such removal and/or prohibition. I n the event of such consent, or
if upon the record made at any such hearing the Board shall find that
any of the grounds specified m such notice has been established, the
Board may issue such orders of suspension or removal from office,
and/or prohibition from participation in the conduct of the affairs
of the association, as it may deem appropriate. Any such order shall
become effective at the expiration of thirty days after service upon
such association and the director, officer, or other person concerned
(except in the case of an order issued upon consent, which shall become effective at the time specified therein). Such order shall remain
effective and enforceable except to such extent as it is stayed, modified, terminated, or set aside by action of the Board or a reviewing
court.

1031

1032

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

" ( E ) Within ten days after any director, officer, or other person
has been suspended from office and/or prohibited from participation
in the conduct of the affairs of an association under subparagraph (C)
of this paragraph, such director, officer, or other person may apply to
the United States district court for the judicial district in which the
home office of the association is located, or the United States District
Court for the District of Columbia, for a stay of such suspension and/or
prohibition pending the completion of the administrative proceedings
pursuant to the notice served upon such director, officer, or other person under subparagraph (A) or (B) of this paragraph, and such court
shall have jurisdiction to stay such suspension and/or prohibition.
Felony con"(5) (A) Whenever any director or officer of an association, or
f^rre°movaiT^
other pcrsou participating in the conduct of the affairs of such association, is charged in any information, indictment, or complaint authorized by a United States Attorney, with the commission of or participation in a felony involving dishonesty or breach of trust, the
Board may, by written notice served upon such director, officer, or
other person, suspend him from office and/or prohibit him from further participation in any manner in the conduct of the affairs of the
association. A copy of such notice shall also be served upon the association. Such suspension and/or prohibition shall remain in effect
until such information, indictment, or complaint is finally disposed of
or until terminated by the Board. I n the event that a judgment of
conviction with respect to such offense is entered against such director,
officer, or other person, and at such time as such judgment is not subject to further appellate review, the Board may issue and serve upon
such director, officer, or other person an order removing him from
office and/or prohibiting him from further participation in any manner in the conduct of the affairs of the association except with the
consent of the Board. A copy of such order shall be served upon such
association, whereupon such director or officer shall cease to be a
director or officer of such association. A finding of not guiltv or
other disposition of the charge shall not preclude the Board from
thereafter instituting proceedings to remove such director, officer, or
other person from office and/or to prohibit further participation in
association affairs, pursuant to subparagraph (A) or (B) of paragraph (4) of this subsection.
" ( B ) if at any time, because of the suspension of one or more
directors pursuant to this subsection ( d ) , there shall be on the board
of directors of an association less than a quorum of directors not so
suspended, all powers and functions vested in or exercisable by such
board shall vest in and be exercisable by the director or directors on
the board and not so suspended, until such time as there shall be a
quorum of the board of directors. I n the event all of the directors of
an association are suspended pursuant to this subsection ( d ) , tlie
Board shall appoint persons to serve temporarily as directors in their
place and stead pending the termination of such suspensions, or until such time as those who have been suspended cease to be directors
of the association and their respective successors take office.
conservator^or °^
" ( ^ ) ( ^ ) ^^^ grouuds for the appoiutmeut of a conservator or rereceiver.
celver for an association shall be one or more of the following: (i)
insolvency in that the assets of the association are less than its obligations to its creditors and others, including its members; (ii) substantial
dissipation of assets or earnings due to any violation or violations of
law, rules, or regulations, or to any unsafe or unsound practice or
practices; (iii) an unsafe or unsound condition to transact business;
(iv) willful violation of a cease-and-desist order which has become
final; (v) concealment of books, papers, records, or assets of the association or refusal to submit books, papers, records, or affairs of the

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

1033

association for inspection to any examiner or to any lawful agent of
the Board. The Board shall have exclusive power and jurisdiction
to appoint a conservator or receiver. If, in the opinion of the Board,
a ground for the appointment of a conservator or receiver as herein
provided exists, the Board is authorized to appoint ex parte and without notice a conservator or receiver for the association. I n the event
of such- appointment, the association may, within thirty days thereafter, bring an action in the United States district court for the judicial district in which the home office of such association is located, or
in the United States District Court for the District of Columbia, for
an order requiring the Board to remove such conservator or receiver,
and the court shall upon the merits dismiss such action or direct the
Board to remove such conservator or receiver. Such proceedings shall
be given precedence over other cases pending in such courts, and shall
be in every way expedited. Upon the commencement of such an action,
the court having jurisdiction of any other action or proceeding authorized under this subsection to which the association is a party shall stay
such action or proceeding during the pendency of the action for removal of the conservator or receiver.
" ( B ) I n addition to the foregoing provisions, the Board may, without any requirement of notice, hearing, or other action, appoint a
conservator or receiver for an association in the event that (i) the
association, by resolution of its board of directors or of its members,
consents to such appointment, or (ii) the association is removed from
membership in any Federal home loan bank, or its status as an institution the accounts of which are insured by the Federal Savings and
Loan Insurance Corporation is terminated.
" ( C ) Except as otherwise provided in this subsection, no court may
take any action for or toward the removal of any conservator or
receiver, or, except at the instance of the Board, restrain or affect the
exercise of powers or functions of a conservator or receiver.
" ( D ) A conservator shall have all the powers of the members, the
directors, and the officers of the association and shall be authorized
to operate the association in its own name or to conserve its assets in
the manner and to the extent autliorized by the Board. The Board
shall appoint only the Federal Savings and Loan Insurance Corporation as receiver for an association, and said Corporation shall have
power to buy at its own sale as receiver, subject to approval by the
Board. The Board may, without any requirement of notice, hearing,
or other action, replace a conservator with another conservator or with
a receiver, but any such replacement shall not affect any right which
the association may have to obtain judicial review of the original
appointment, except that any removal under this paragraph (6) shall
be removal of the conservator or receiver in office at the time of such
removal.
"(7) (A) Any hearing provided for in this subsection (d) shall . Hearings and
be held in the Federal judicial district or in the territory in which the ^" ^''^^
home office of the association is located unless the party afforded the
hearing consents to another place, and shall be conducted in accordance
with the provisions of chapter 5 of title 5 of the United States Code. ^"'^' ?• ^8°Such hearing shall be private, unless the Board, in its discretion, after
fully considering the views of the party afforded the hearing, determines that a public hearing is necessary to protect the public interest.
After such hearing, and within ninety days after the Board has notified the parties that the case has been submitted to it for final decision, the Board shall render its decision (which shall include findings
of fact upon which its decision is predicated) and shall issue and cause
to be served upon each party to the proceeding an order or orders consistent with the provisions of this subsection. Judicial review of any

1034

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

such order shall be exclusively as provided in this paragraph (7). Unless a petition for review is timely filed in a court of appeals of the
United States, as hereinafter provided in subparagraph (B) of this
paragraph, and thereafter until the record in the proceeding has been
filed as so provided, the Board may at any time, upon such notice and
in such manner as it shall deem proper, modify, terminate, or set aside
any such order. Upon such filing of the record, the Board may
modify, terminate, or set aside any such order with permission of
the court.
" ( B ) Any party to the proceeding, or any person required by an
order issued under this subsection to cease and desist from any of the
violations or practices stated therein, may obtain a review of any
order served pursuant to subparagraph (A) of this paragraph (other
than an order issued with the consent of the association or the director
or officer or other person concerned, or an order issued under paragraph (5) (A) of this subsection), by filing in the court of appeals
of the United States for the circuit in which the home office of the association is located, or in the United States Court of Appeals for the
District of Columbia Circuit, within thirty days after the date of
service of such order, a written petition praying that the order of the
Board be modified, terminated, or set aside. A copy of such petition
shall be forthwith transmitted by the clerk of the court to the Board,
and thereupon the Board shall file in the court the record in the proceeding, as provided in section 2112 of title 28 of the United States
72 Stat. 941.
Code. Upou the filing of such petition, such court shall have jurisdiction, which upon the filing of the record shall except as provided in the
last sentence of said subparagraph (A) be exclusive, to affirm, modify,
terminate, or set aside, in whole or in part, the order of the Board.
Review of such proceedings shall be had as provided in chapter 7 of
Ante, p. 392,
^j^jg 5 ^-f ^j^g United States Code. The judgment and decree of the
court shall be final, except that the same shall be subject to review by
the Supreme Court upon certiorari as provided in section 1254 of title
62 Stat. 928.
28 of the United States Code.
" ( C ) The commencement of proceedings for judicial review under
subparagraph (B) of this paragraph shall not, unless specifically
ordered by the court, operate as a stay of any order issued by the
Board.
orde'/sT""^"' °'
. " ( ? ) The Board may in its discretion apply to the United States
district court, or the United States court oi any territory, within the
jurisdiction of which the home office of the association is located, for
the enforcement of any effective and outstanding notice or order issued
by the Board under this subsection ( d ) , and such courts shall have
jurisdiction and power to order and require compliance therewith;
but except as otherwise provided in this subsection no court shall
have jurisdiction to affect by injunction or otherwise the issuance or
enforcement of any notice or order under this subsection, or to review,
modify, suspend, terminate, or set aside any such notice or order.
Any court having jurisdiction of any proceeding instituted under
this subsection by an association or a director or officer thereof, may
allow to any such party such reasonable expenses and attorneys' fees
as it deems just and proper; and such expenses and fees shall be paid
by the association or from its assets.
subpena power,
u^g^ j ^ ^^iQ course of or iu connection with any proceeding under
etc
this subsection, the Board or vmy member thereof or a designated representative of the Board, including any person designated to conduct
any hearing under this subsection, shall have power to administer
oaths and affirmations, to take or cause to be taken depositions, and to
issue, revoke, quash, or modify subpenas and subpenas duces tecum;
and the Board is empowered to make rules and regulations with respect

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

to any such proceedings. The attendance of witnesses and the production of documents provided for in this paragraph may be required
from any place in any State or in any territory at any designated place
where such proceeding is being conducted. Any party to proceedings
under this subsection may apply to the United States District Court
for the District of Columbia, or the United States district court for
the judicial district or the United States court in any territory in
which such proceeding is being conducted or where the witness resides
or carries on business, for enforcement of any subpena or subpena duces
tecum issued pursuant to this paragraph, and such courts shall have
jurisdiction and power to order and require compliance therewith.
Witnesses subpenaed under this paragraph shall be paid the same fees
and mileage that are paid witnesses in the district courts of the LTnited
States. All expenses of the Board or of the Federal Savings and Loan
Insurance Corporation in connection with this subsection shall be considered as nonadministrative expenses.
"(10) Any service required or authorized to be made by the Board Notice of
under this subsection may be made by registered mail, or in such other ^^'•''"'^•
manner reasonably calculated to give actual notice as the Board may
by regulation or otherwise provide.
" (11) The Board shall have power to make rules and regulations for aufho^r'it^*"'^^
the reorganization, consolidation, liquidation, and dissolution of associations, for the merger of associations with other institutions the
accounts of which are insured by the Federal Savings and Loan Insurance Corporation, for associations in conservatorship and receivership, and for the conduct of conservatorships and receiverships; and
the Board may, by regulation or otherwise, provide for the exercise
of functions by members, directors, or officers of an association during
conservatorship and receivership.
" (12) (A) Any director or officer, or former director or officer, of an Penalties.
association, or any other person, against whom there is outstanding
and effective any notice or order (which is an order which has become final) served upon such director, officer, or other person under
paragraph ( 4 ) ( C ) , ( 4 ) ( D ) , or (5) (A) of this subsection, and who
(i) participates in any manner in the conduct of the affairs of such
association, or directly or indirectly solicits or procures, or transfers
or attempts to transfer, or votes or attempts to vote any proxies, consents, or authorizations in respect of any voting rights in such association, or (ii) without the prior written approval of the Board, votes
for a director or serves or acts as a director, officer, or employee of any
institution the accounts of which are insured by the Federal Savings
and Loan Insurance Corporation, shall upon conviction be fined not
more than $5,000 or imprisoned for not more than one year, or both.
" ( B ) Except with the prior written consent of the Board, no person
shall serve as a director, officer, or employee of an association w'ho has
been convicted, or who is hereafter convicted, of a criminal offense involving dishonesty or a breach of trust. For each willful violation of
this prohibition, the association involved shall be subject to a penalty
of not more than $100 for each day this prohibition is violated, which
the Board may recover by suit or otherwise for its own use.
" ( C ) Whenever a conservator or receiver appointed by the Board
demands possession of the property, business, and assets of any association, or of any part thereof, the refusal by any director, officer, employee, or agent of such association to comply with the demand shall
be punishable by a fine of not more than $5,000 or imprisonment for
not more than one year, or both.
"(IS) (A) As used in this subsection—
Definitions.
"(1) The terms 'cease-and-desist order which has become final' and
'order which has become final' mean a cease-and-desist order, or an

1035

1036

62 Stat. 907.

48*statr\*246^.'
u use 1421.

1701

Effective date.

68^stat^*63^3^^'

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

order, issued by the Board with the consent of the association or the
director or officer or other person concerned, or with respect to which
no petition for review of the action of the Board has been filed and perfected in a court of appeals as specified in paragraph (7) (B) of this
subsection, or with respect to which the action of the court in which
said petition is so filed is not subject to further review by the Supreme
Court of the United States in proceedings provided for in said paragraph, or an order issued under paragrapli (5) (A) of this subsection.
"(2) The term 'State' includes the CommonweaUh of Puerto Rico.
"(3) The term 'territory' includes any possession of the United
States and any place subject to the jurisdiction of the United States.
" (4) The terms 'district', 'district court', 'district court of the United
States', and 'judicial district' shall have the meanings defined in section
45^ ^f ^-^j^ gg ^f ^^^ United States Code.
" ( B ) As used in paragraph (4) of this subsection, the term 'violation' includes without limitation any action (alone or with another or
others) for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation.
" (14) As used in this subsection, the terms 'Federal savings and loan
association' and 'association' shall include any institution with respec!:
to which the Federal Home Loan Bank Board now or hereafter has
any statutory power of examination or supervision under any Act or
joint resolution of Congress other than this Act, the Federal Home
Loau Bank Act, and the National Housing Act. For the purposes of
this paragraph (14), references in this subsection to directors, officers,
employees, and agents, or to former directors or officers, of associations
shall be deemed to be references respectively to directors, officers, employees, and agents, or to former directors or officers, of such institutions, references therein to savings account holders and to members of
associations shall be deemed to be references to holders of withdrawable accounts in such institutions, and references therein to boards of
directors of associations shall be deemed to be references to boards of
directors or other governing boards of such institutions. Said Board
shall have power by regulation to define, for the purposes of this paragraph (14), terms used or referred to in the sentence next preceding
and other terms used in this subsection."
(b) The amendment made by subsection (a) of this section shall be
effective only with respect to proceedings commenced on or after the
date of enactment of this Act. Section 5(d) of the Home Owners'
Loan Act of 1933 as in effect immediately prior to the date of enactment of this Act shall continue in effect with respect to any proceedings commenced prior to such date.
SEC. 102. (a) Section 407 of the National Housing Act (12 U.S.C.
1730) is hereby amended to read as follows:
"SEC. 407. TERMINATION or INSURANCE AND ENFORCEMENT PROVISIONS.—
" ( a ) VOLUNTARY TERMINATION or INSURANCE.—Any insured insti-

tution other than a Federal savings and loan association may terminate its status as an insured institution by written notice to the Corporation specifying a date for such termination.
"(b)

INVOLUNTARY TERMINATION OF INSURANCE; NOTICE AND HEAR-

ING.— (1) Whenever, in the opinion of the Corporation, any insured
institution has violated its duty as such or is engaging or has engaged
in an unsafe or unsound practice in conducting the business of such
institution, or is in an unsafe or unsound condition to continue operations as an insured institution, or is violating or has violated an applicable law, rule, regulation, or order, or any condition imposed in
writing by the Corporation in connection with the granting of any
application or other request by the institution, or any written agreement entered into with the Corporation, including any agreement en-

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

tered into under section 403 of this title, the Corporation shall serve
upon the institution a statement with respect to such violations or
practices or conditions for the purpose of securing the correction
thereof, and shall send a copy of such statement to the appropriate
State supervisory authority.
"(2) Unless such correction shall be made within one hundred and
twenty days after service of such statement, or such shorter period of
not less than twenty days after such service as (A) the Corporation
shall require in any case where the Corporation determines that its
insurance risk with respect to such institution could be unduly jeopardized by further delay in the correction of such violations or practices or conditions, or (B) the appropriate State supervisory authority
shall require, or unless within such time the Corporation shall have
received acceptable assurances that such correction will be made within a time and in a manner satisfactory to the Corporation, or in the
event such assurances are submitted to and accepted by the Corporation but are not carried out in accordance with their terms, the Corporation may, if it shall determine to proceed further, issue and serve
upon the institution written notice of intention to terminate the status
of the institution as an insured institution.
"(3) Such notice shall contain a statement of the facts constituting
the alleged violation or violations or the unsafe or unsound practice
or practices or condition, and shall fix a time and place for a hearing
thereon. Such hearing shall be fixed for a date not earlier than thirty
days after service of such notice. Unless the institution shall appear
at the hearing by a duly authorized representative, it shall be deemed
to have consented to the termination of its status as an insured institution. I n the event of such consent, or if upon the record made at any
such hearing the Corporation shall find that any violation or unsafe
or unsound practice or condition specified in such notice has been
established and has not been corrected within the time above prescribed
in which to make correction, the Corporation may issue and serve
upon the institution an order terminating the status of the institution
as an insured institution; but any such order shall not become effective until it is an order which has become final (except in the case of
an order of termination issued upon consent, which shall become effective at the time specified therein).
"(c) DATE OF TERMINATION or INSURED STATUS.—The effective date
of the termination of an institution's status as an insured institution
under the foregoing provisions of this section shall be the date specified
for such termination in the notice by the institution to the Corporation as provided in subsection (a) of this section, or the date upon
which an order of termination issued under subsection (b) (3) of this
section becomes effective. The Corporation may from time to time
postpone the effective date of the termination of an institution's status
as an insured institution at any time before such termination has become effective, but in the case of termination by notice given by the
institution such effective date shall be postponed only with the written
consent of the institution.
"(d)

CONTINUATION OF INSURANCE; EXAMINATION; NOTICE TO MEM-

BERS ; AND PAYMENT OF PREMIUMS.—In the eveut of the termination of
an institution's status as an insured institution, insurance of its
accounts to the extent that they were insured on the effective date of
such termination as hereinabove provided in subsection (c), less any
amounts thereafter withdrawn, repurchased, or redeemed, shall continue for a period of two years, but no investments or deposits made
after such date shall be insured. The Corporation shall have the right
to examine such institution from time to time durins: the two-year
period aforesaid. Such insured institution shall be obligated to pay,
within thirty days after the effective date of such termination, as a final
65-300 0-67—68

1037
48 Stat. 1257.
12 u s e 1726.

1038

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

insurance premium, a sum equivalent to twice the last annual insurance
premium payable by it. In the event of the termination of insurance
of accounts as herein provided the institution which was the insured
institution shall give prompt and reasonable notice to all of its insured
members that it has ceased to be an insured institution and it may
include in such notice the fact that insured accounts, to the extent not
withdrawn, repurchased, or redeemed, remain insured for two years
from the date of such termination, but it shall not further represent
itself in any manner as an insured institution. In the event of failure
to give the notice to insured members as herein provided the Corporation is authorized to give reasonable notice.
"(e)

48 Stat. 1257.
12 u s e 1726.

CEASE-AND-DESIST PROCEEDINGS.—(1)

If,

in

the

opinion

of

the Corporation, any insured institution or any institution any of the
accounts of which are insured is engaging or has engaged, or the
Corporation has reasonable cause to believe that the institution is about
to engage, in an unsafe or unsound practice in conducting the business
of such institution, or is violating or has violated, or the Corporation
has reasonable cause to believe that the institution is about to violate,
a law, rule, or regulation, or any condition imposed in writing by the
Corporation in connection w^ith the granting of any application or
other request by the institution, or written agreement entered into with
the Corporation, including any agreement entered into under section
403 of this title, the Corporation may issue and serve upon the institution a notice of charges in respect thereof. The notice shall contain a
statement of the facts constituting the alleged violation or violations
or the unsafe or unsound practice or practices, and shall fix a time
and place at which a hearing will be held to determine whether an order
to cease and desist therefrom should issue against the institution. Such
hearing shall be fixed for a date not earlier than thirty days nor later
than sixty days after service of such notice unless an earlier or a
later date is set by the Corporation at the request of the institution.
Unless the institution shall appear at the hearing by a duly authorized
representative, it shall be deemed to have consented to the issuance
of the cease-and-desist order. In the event of such consent, or if
upon the record made at any such hearing the Corporation shall find
that any violation or unsafe or unsound practice specified in the notice
of charges has been established, the Corporation may issue and serve
upon the institution an order to cease and desist from any such violation or practice. Such order may, by provisions which may be mandatory or otherwise, require the institution and its directors, officers,
employees, and agents to cease and desist from the same, and, further
to take affirmative action to correct the conditions resulting from any
such violation or practice.
" (2) A cease-and-desist order shall become effective at the expiration
of thirty days after service of such order upon the institution concerned (except in the case of a cease-and-desist order issued upon
consent, which shall become effective at the time specified therein), and
shall remain effective and enforceable except to such extent as it is
stayed, modified, terminated, or set aside by action of the Corporation
or a reviewing court.
" ( f ) TEMPORARY CEASE-AND-DESIST ORDERS.— (1)Whenever the Corporation shall determine that the violation or threatened violation or
the unsafe or unsound practice or practices, specified in the notice
of charges served upon the institution pursuant to subsection (e) (1) of
this section, or the continuation thereof, is likely to cause insolvency or
substantial dissipation of assets or earnings of the institution, or is
likely to otherwise seriously prejudice the interest of its insured members or of the Corporation, the Corporation may issue a temporary
order requiring the institution to cease and desist from any such violation or practice. Such order shall become effective upon service upon

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

the institution and, unless set aside, limited, or suspended by a court in
proceedings authorized by paragraph (2) of this subsection, shall
remain effective and enforceable pending the completion of the administrative proceedings pursuant to such notice and until such time as
the Corporation shall dismiss the charges specified in such notice or.
if a cease-and-desist order is issued against the institution, until the
effective date of any such order.
"(2) Within ten days after the institution concerned has been
served with a temporary cease-and-desist order, the institution may
apply to the United States district court for the judicial district in
v/hich the principal office of the institution is located, or the United
States District Court for the District of Columbia, for an injunction
setting aside, limiting, or suspending the enforcement, operation,
or effectiveness of such order pending the completion of the administrative proceedings pursuant to the notice of charges served upon the
institution under subsection (e)(1) of this section, and such court
shall have jurisdiction to issue such injunction.
"(3) I n the case of violation or threatened violation of, or failure
to obey, a temporary cease-and-desist order, the Corporation may
apply to the United States district court, or the United States court
of any territory, within the jurisdiction of which the principal office
of the institution is located, for an injunction to enforce such order,
and, if the court shall determine that there has been such violation or
threatened violation or failure to obey, it shall be the duty of the court
to issue such injunction.
" ( g ) SUSPENSION OR REMOVAL OF DIRECTOR OR OFFICER.— (1) Whenever, in the opinion of the Corporation, any director or officer of an
insured institution has committed any violation of law, rule, or regulation, or of a cease-and-desist order which has become final, or has
engaged or participated in any unsafe or unsound practice in connection with the institution, or has committed or engaged in any act,
omission, or practice which constitutes a breach of his fiduciary duty
as such director or officer, and the Corporation determines that the
institution has suffered or will probably suffer substantial financial
loss or other damage or that the interests of its insured members could
be seriously prejudiced by reason of such violation or practice or
breach of fiduciary duty, and that such violation or practice or breach
of fiduciary duty is one involving personal dishonesty on the part of
such director or officer, the Corporation may serve upon such director or officer a written notice of its intention to remove him from
office.
"(2) Whenever, in the opinion of the Corporation, any director or
officer of an insured institution, by conduct or practice with respect to
another insured institution or other business institution which resulted in substantial financial loss or other damage, has evidenced his
personal dishonesty and unfitness to continue as a director or officer,
and, whenever, in the opinion of the Corporation, any other person participating in the conduct of the aff'airs of an insured institution, by
conduct or practice with respect to such institution or other insured institution or other business institution which resulted in substantial
financial loss or other damage, has evidenced his personal dishonesty
and unfitness to participate in the conduct of the affairs of such
insured institution, the Corporation may serve upon such director,
officer, or other person a written notice of its intention to remove him
from office and/or to prohibit his further participation in any manner
in the conduct of the affairs of such institution.
"(3) I n respect to any director or officer of an insured institution
or any other person referred to in paragraph (1) or (2) of this subsection, the Corporation may, if it deems it necessary for the protection

1039

1040

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

of the institution or the interests of its insured members or of the
Corporation, by written notice to such effect served upon such director,
officer, or other person, suspend him from office and/or prohibit him
from further participation in any manner in the conduct of the affairs
of the institution. Such suspension and/or prohibition shall becorne
effective upon service of such notice and, unless stayed by a court in
proceedings authorized by paragraph (5) of this subsection, shall remain in effect pending the completion of the administrative proceedings pursuant to the notice served under paragraph (1) or (2) of this
subsection and until such time as the Corporation shall dismiss the
charges specified in such notice, or, if an order of removal and/or prohibition is issued against the director or officer or other person, until
the effective date of any such order. Copies of any such notice shall
also be served upon the institution of which he is a director or officer
or in the conduct of whose affairs he has participated.
"(4) A notice of intention to remove a director, officer, or other
person from office and/or to prohibit his participation in the conduct
of the affairs of an insured institution, shall contain a statement of
the facts constituting grounds therefor, and shall fix a time and place
at which a hearing will be held thereon. Such hearing shall be fixed
for a date not earlier than thirty days nor later than sixty days after
the date of service of such notice, unless an earlier or a later date is
set by the Corporation at the request of (A) such director, officer, or
other person and for good cause shown, or (B) the Attorney General
of the United States. Unless such director, officer, or other person
shall appear at the hearing in person or by a duly authorized representative, he shall be deemed to have consented to the issuance of
an order of such removal and/or prohibition. In the event of such
consent, or if upon the record made at any such hearing the Corporation shall find that any of the grounds specified in such notice has been
established, the Corporation may issue such orders of suspension or
removal from office, and/or prohibition from participation in the conduct of the affairs of the institution, as it may deem appropriate. Any
such order shall become effective at the expiration of thirty days after
service upon such institution and the director, officer, or other person
concerned (except in the case of an order issued upon consent, which
shall become effective at the time specified therein). Such order shall
remain effective and enforceable except to such extent as it is stayed,
modified, terminated, or set aside by action of the Corporation or a
reviewing court.
"(5) Within ten days after any director, officer, or other person has
been suspended from office and/or prohibited from participation in the
conduct of the affairs of an insured institution under paragraph (3)
of this subsection, such director, officer, or other person may apply to
the United States district court for the judicial district in which the
principal office of the institution is located, or the United States District Court for the District of Columbia, for a stay of such suspension
and/or prohibition pending the completion of the administrative proceedings pursuant to the notice served upon such director, officer, or
other person under paragraph (1) or (2) of this subsection, and such
court shall have jurisdiction to stay such suspension and/or
prohibition.
"(h)

SUSPENSION OF DIRECTOR OR OFFICER CHARGED WITH FELONY.—

Whenever any director or officer of an insured institution, or other
person participating in the conduct of the affairs of such institution,
is charged in any information, indictment, or complaint authorized by
a United States Attorney, with the commission of or participation in
a felony involving dishonesty or breach of trust, the Corporation may,
by written notice served upon such director, officer, or other person.

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

1041

suspend him from office and/or prohibit him from further participation in any manner in the conduct of the affairs of the institution.
A copy of such notice shall also be served uj)on the institution. Such
suspension and/or prohibition shall remain in effect until such information, indictment, or complaint is finally disposed of or until terminated by the Corporation. I n the event that a judgment of conviction
with respect to such offense is entered against such director, officer, or
other person, and at such time as such judgment is not subject to
further appellate review, the Corporation may issue and serve upon
such director, officer, or other person an order removing him from
office and/or prohibiting him from further participation in any manner in the conduct of the affairs of the institution except with the consent of the Corporation. A copy of such order shall also be served
upon such institution, whereupon such director or officer shall cease to
be a director or officer of such institution. A finding of not guilty or
other disposition of the charge shall not preclude the Corporation
from thereafter instituting proceedings to remove such director, officer,
or other person from office and/or to prohibit further participation in
institution affairs, pursuant to paragraph (1) or (2) of subsection (g)
of this section.
" ( i ) TERMINATION or

FEDERAL HOME LOAN BANK MEMBERSHIP.—

Termination under this section or otherwise of the status of an institution as an insured institution shall automatically constitute a removal
Stat, 729;
under subsection (i) of section 6 of the Federal Home Loan Bank Act 69
_ 47^Stat.
^^
640.
of the institution from Federal home loan bank membership, if at the 12 use 14*26.
time of such termination such institution is a member of a Federal home
loan bank; and removal of an institution from Federal home loan bank
membership under subsection (i) of section 6 of the Federal Home
Loan Bank Act or otherwise shall automatically constitute an order
of termination under this section of the status of such institution as
an insured institution, if such institution is at the time of such removal
an insured institution.
"(j) HEARINGS AND JUDICIAL REVIEW.—(1) Any hearing provided
for in this section shall be held in the Federal judicial district or in the
territory in which the principal office of the institution is located unless
the party afforded the hearing consents to another place, and shall be
conducted in accordance with the provisions of chapter 5 of title 5 of
the United States Code. Such hearing shall be private, unless the Cor- ^"^^' P- -'SO.
poration, in its discretion, after fully considering the view^s of the party
afforded the hearing, determines that a public hearing is necessary to
protect the public interest. After such hearing, and within ninety days
after the Corporation has notified the parties that the case has been submitted to it for final decision, the Corporation shall render its decision
(which shall include findings of fact upon which its decision is predicated) and shall issue and cause to be served upon each party to the
proceeding an order or orders consistent with the provisions of this section. Judicial review of any such order shall be exclusively as provided in this subsection. Unless a petition for review is timely filed in
a court of appeals of the United States, as hereinafter provided in
paragraph (2) of this subsection, and thereafter until the record in the
proceeding has been filed as so provided, the Corporation may at any
time, upon such notice and in such manner as it shall deem proper,
modify, terminate, or set aside any such order. Upon such filing of
the record, the Corporation may modify, terminate, or set aside any
such order with permission of the court.
"(2) Any party to the proceeding, or any person required by an
order issued under this section to cease and desist from any of the
violations or practices stated therein, may obtain a review of any
order served pursuant to paragraph (1) of this subsection (other

1042

72 Stat. 941.

Ante, p. 392.
62 Stat. 928.

PUBLIC LAW 89-695-OCT. 16, 1966

than an order issued with the consent of the institution or the director or officer or other person concerned, or an order issued under subsection (h) of this section), by filing in the court of appeals of the United States for the circuit in which the principal office
of the institution is located, or in the United States Court of Appeals for the District of Columbia Circuit, within thirty days after
the date of service of such order, a written petition praying that
the order of the Corporation be modified, terminated, or set aside.
A copy of such petition shall be forthwith transmitted by the clerk
of the court to the Corporation, and thereupon the Corporation shall
file in the court the record in the proceeding, as provided in section
2112 of title 28 of the United States Code. Upon the filing of such
petition, such court shall have jurisdiction, which upon the filing of
the record shall, except as provided in the last sentence of said paragraph (1), be exclusive, to affirm, modify, terminate, or set aside, in
whole or in part, the order of the Corporation. Review of such
proceedings shall be had as provided in chapter 7 of title 5 of the
XJuited States Code. The judgment and decree of the court shall be
final, except that the same shall be subject to review by the Supreme
Court upon certiorari as provided in section 1254 of title 28 of the
United States Code.
"(3) The commencement of proceedings for judicial review under
paragraph (2) of this subsection shall not, unless specifically ordered by the court, operate as a stay of any order issued by the
Corporation.
"(k)

62 Stat. 907.

[80 STAT.

JURISDICTION AND ENFORCEMENT.—(1)

Notwithstanding any

other provision of law, (A) the Corporation shall be deemed to be an
agency of the LTnited States within the meaning of section 451 of title
28 of the United States Code; (B) any civil action, suit, or proceeding
to which the Corporation shall be a party shall be deemed to arise
under the laws of the United States, and the United States district
courts shall have original jurisdiction therof, without regard to the
amount in controversy; and (C) the Corporation may, without bond
or security, remove any such action, suit, or proceeding from a State
court to the United States district court for the district and division
embracing the place where the same is pending by following any
procedure for removal now or hereafter in effect: Provided, That any
action, suit, or proceeding to which the Corporation is a party in its
capacity as conservator, receiver, or other legal custodian of an insured State-chartered institution and which involves only the rights
or obligations of investors, creditors, stockholders, and such institution under State law shall not be deemed to arise under the laws of
the United States. No attachment or execution shall be issued
against the Corporation or its property before final judgment in any
action, suit, or proceeding in any court of any State or of the United
States or any territory, or any other court.
"(2) The Corporation may, in its discretion, apply to the United
States district court, or the United States court of any territory, within the jurisdiction of which the principal office of the institution is
located, for the enforcement of any effective and outstanding notice
or order issued by the Corporation under this section, and such courts
shall have jurisdiction and power to order and require compliance
therewith; but except as otherwise provided in this section no court
shall have jurisdiction to affect by injunction or otherwise the issuance
or enforcement of any notice or order under this section, or to review,
modify, suspend, terminate, or set aside any such notice or order.
"(1) REPORTING REQUIREMENTS.—(1) Whenever a change occurs in
the outstanding voting stock of any insured institution which will
result in control or a change in the control of such institution, the

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

president or other chief executive officer of such institution shall
promptly report such facts to the Corporation upon obtaining knowledge of such change. As used in this subsection, the term 'control' "control.»»
means the power to directly or indirectly direct or cause the direction
of the management or policies of the insured institution. If there is
any doubt as to whether a change in ownership or other change in the
outstanding voting stock of any insured institution is sufficient to
result in control or a change in the control thereof, such doubt shall
be resolved in favor of reporting the facts to the Corporation.
"(2) Whenever an insured institution or an insured bank of the
Federal Deposit Insurance Corporation makes a loan or loans secured
(or to be secured) by 25 per centum or more of the voting stock of an
insured institution, the president or other chief executive officer of
the lending insured institution or insured bank shall promptly report
such fact to the Corporation upon obtaining knowledge of such loan
or loans, except that no report need be made in those cases where the
borrower has been the owner of record of the stock for a period of one
year or more, or the stock is of a newly organized insured institution
prior to its opening.
"(3) The reports required by paragraphs (1) and (2) of this subsection shall contain the following information to the extent that it is
known by the person making the report: (A) the number of shares
involved, (B) the names of the sellers (or transferors), (C) the names
of the purchasers (or transferees), (D) the names of the beneficial
owners if the shares are of record in another name or other names, ( E )
the purchase price, (F) the total number of shares owned by the sellers
(or transferors), the purchasers (or transferees) and the beneficial
owners both immediately before and after the transaction, and in tlie
case of a loan, (G) the name of the borrower, (H) the amount of the
loan, and (I) the name of the institution issuing the stock securing the
loan and the number of shares securing the loan. In addition to the
foregoing, such reports shall contain such other information as may
be available to inform the Corporation of the effect of the transaction
upon control of the institution whose stock is involved. The reports
required by this subsection shall be in addition to any report.s that may
be required pursuant to other provisions of law.
"(4) Whenever such a change as is described in paragraph (1) of
this subsection occurs, the insured institution involved shall report
promptly to the Corporation any change or changes, or replacement
or replacements, of its chief executive officer or of any director occurring in the next twelve-month period, including in its report a statement of the past and current business and professional affiliations of
the new chief executive officer or director.
"(5) Without limitation by or on the foregoing provisions of this
subsection, the Corporation may require insured institutions and individuals or other persons who have or have had any connection with the
management of any insured institution, as defined by the Corporation,
to provide, in such manner and under such civil penalties (which shall
be cumulative to any other remedies) as the Corporation may prescribe,
such periodic or other reports and disclosures as the Corporation may
determine to be necessary or appropriate for the protection of investors
or the Corporation.
"(6) As used in this subsection, the term 'stock' means such stock "stock."
or other equity securities or equity interests in an insured institution,
or rights, interests, or powers with respect thereto, regardless of
whether such institution is a stock company, a mutual institution, or
otherwise, as the Corporation may by regulation define for the purposes of this subsection.

1043

1044

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

" ( m ) ANCILLARY PROvisioisrs.— (1) I n making examinations of insured institutions, examiners appointed by the Federal Home Loan
Bank Board shall have power, on behalf of the Corporation, to make
such examinations of the affairs of all affiliates of such institutions
as shall be necessary to disclose fully the relations between such institutions and their affiliates and the effect of such relations upon such
institutions. The cost of examinations of such affiliates shall be as"Affihate."
sessed against and paid by the institution. For purposes of this subsection, the term 'affiliate' shall have the same meaning as where used
AnLfT.'242!''
in section 2(b) of the Banking Act of 1933 (12 U.S.C. 221a(b)),
"Member bank." except that the term 'member bank' in said section 2(b) shall be
deemed to refer to an insured institution.
subpena
power,
u^2) I n conncctiou with examinations of insured institutions and
etc
affiliates thereof, the Corporation, or its designated representatives,
shall have power to administer oaths and affirmations and to examine
and to take and preserve testimony under oath as to any matter in
respect of the affairs or ownership of any such institution or affiliate
thereof, and to issue subpenas and subpenas duces tecum, and, for the
enforcement thereof, to apply to the United States district court for
the judicial district or the United States court in any territory in
which the principal office of the institution or affiliate thereof is located, or in which the witness resides or carries on business. Such
courts shall have jurisdiction and power to order and require compliance with any such subpena.
"(3) I n the course of or in connection with any proceeding under
this section, the Corporation or its designated representatives, including any person designated to conduct any hearing under this section,
shall have power to administer oaths and affirmations, to take or cause
to be taken depositions, and to issue, revoke, quash, or modify subpenas
and subpenas duces tecum; and the Corporation is empowered to make
rules and regulations with respect to any such proceedings. The attendance of witnesses and the production of documents provided for
in this subsection may be required from any place in any State or in
any territory at any designated place where such proceeding is being
conducted. Any party to proceedings under this section may apply to
the United States District Court for the District of Columbia, or the
United States district court for the judicial district or the United
States court in any territory in which such proceeding is being conducted, or where the witness resides or carries on business, for enforcement of any subpena o r subpena duces tecum issued pursuant to this
subsection, and such courts shall have jurisdiction and power to order
and require compliance therewith. Witnesses subpenaed under this
section shall be paid the same fees and mileage that are paid witnesses
in the district courts of the United States. All expenses of the Board
or of the Federal Savings and Loan Insurance Corporation in connection with this section shall be considered as nonadministrative expenses. Any court having jurisdiction of any proceeding instituted
under this section by an insured institution, or a director or officer
thereof, may allow to any such party such reasonable expenses and
attorneys' fees as it deems just and proper; and such expenses and
fees shall be paid by the institution or from its assets.
" ( n ) SERVICE.—Any service required or authorized to be made by
the Corporation under this section may be made by registered mail,
or in such other manner reasonably calculated to give actual notice as
the Corporation may by regulation or otherwise provide. Copies of
any notice or order served by the Corporation upon any Statechartered institution or any director or officer thereof or other person
participating in the conduct of its affairs, pursuant to the provisions of
this section, shall also be sent to the appropriate State supervisory
authority.

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

"(o) NOTICE TO STATE AUTHORITIES.—In connection with any proceeding under subsection (e), (f) (1), or (g) of this section involving
an insured State-chartered institution or any director or officer or
other person participating in the conduct of its affairs, the Corporation
shall provide the appropriate State supervisory authority with notice
of the Corporation's intent to institute such a proceeding and the
grounds therefor. Unless within such time as the Corporation deems
appropriate in the light of the circumstances of the case (which time
must be specified in the notice prescribed in the preceding sentence)
satisfactory corrective action is effectuated by action of the State supervisory authority, the Corporation may proceed as provided in this
section. No institution or other party who is the subject of any
notice or order issued by the Corporation under this section shall have
standing to raise the requirements of this subsection as ground for
attacking the validity of any such notice or order.
" ( p ) PENALTIES.—(1) Any director or officer, or former director or
officer, of an insured institution or an institution any of the accounts
of which are insured, or any other person, against whom there is outstanding and effective any notice or order (which is an order which has
become final) served upon such director, officer, or other person under
subsection (g) (3), (g) (4), or (h) of this section, and who (A) participates in any manner in the conduct of the affairs of such institution,
or directly or indirectly solicits or procures, or transfers or attempts to
transfer, or votes or attempts to vote any proxies, consents, or authorizations in respect to any voting rights in such institution, or (B) without the prior written approval of the Corporation, votes for a director
or serves or acts as a director, officer, or employee of any insured institution, shall upon conviction be fined not more than $5,000 or imprisoned for not more than one year, or both.
"(2) Except with the prior written consent of the Corporation, no
person shall serve as a director, officer, or employee of an insured institution who has been convicted, or who is hereafter convicted, of a criminal offense involving dishonesty or a breach of trust. For each willful
violation of this prohibition, the institution involved shall be subject
to a penalty of not more than $100 for each day this prohibition is violated, which the Corporation may recover by suit or otherwise for its
own use.
" (q) DEFINITIONS.—(1) As used in this section—
" ( A ) The terms 'cease-and-desist order which has become final' and
'order which has become final' mean a cease-and-desist order, or an
order, issued by the Corporation with the consent of the institution
or the director or officer or other person concerned, or with respect to
which no petition for review of the action of the Corporation has been
filed and perfected in a court of appeals as specified in subsection (j)
(2) of this section, or with respect to which the action of the court in
which said petition is so filed is not subject to further review by the
Supreme Court of the United States in proceedings provided for in
said subsection, or an order issued under subsection (h) of this section.
" ( B ) The term 'State' includes the Commonwealth of Puerto Eico.
" ( C ) The term 'territory' includes any possession of the United
States and any place subject to the jurisdiction of the United States.
" ( D ) The terms 'district', 'district court', 'district court of the
United States', and 'judicial district' shall have the meanings defined
in section 451 of title 28 of the United States Code.
62 stat. 907.
"(2) As used in subsection (f) of this section, the term 'insolvency'
means that the assets of an institution are less than its obligations to
its creditors and others, including its members.
"(3) As used in subsection (g) of this section, the term 'violation'
includes without limitation any action (alone or with another or
others) for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation."

1045

1046
Effective d a t e .

12 use 1730.

73 Stat. 691.

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

(b) The amendment made by subsection (a) of this section shall be
effective only with respect to proceedings commenced on or after the
daJte of enactment of this Act. Section 407 of the National Housing
Act as in effect inunediately prior to the date of enactment of this Act
shall continue in effect with respect to any proceedings commenced
prior to such date.
SEC. 103. Subsection (c) of section 408 of the National Housing Act
(12U.S.C. 1730a (c)) is amended to read:
"(c) I t shall be unlawful for any company on or after September
23,1959—
" (1) to acquire the control of more than one insured institution,
or
"(2) to acquire the control of an insured institution when it
holds the control of any other insured institution,
except in a transaction which has been approved by the Federal Home
Loan Bank Board upon a determination by it that such transaction
is advisable to assist in preventing the commencement or continuance
of involuntary liquidation of the insured institution whose control,
whether by acquisition of stock or assets or otherwise, as being acquired
by such company or an insured institution which it controls."
T I T L E II—PROVISION RELATING TO T H E F E D E R A L
D E P O S I T INSURANCE CORPORATION, T H E BOARD OF
G O V E R N O R S O F T H E F E D E R A L R E S E R V E SYSTEM,
AND T H E COMPTROLLER OF T H E CURRENCY

SEC. 201. Paragraph (6) of subsection (j) of section 7 of the Federal Deposit Insurance Act (12 U.S.C. 18l7(j) (6)) is repealed and
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813) is
amended by adding the following new subsection (q) :
Fedtrai^b^'iiking
" (^) The term 'appropriate Federal banking agency' shall mean
agency."
(1) the Comptroller of the Currency in the case of a national banking
association or a District bank, (2) the Board of Governors of the
Federal Reserve System in the case of a State member insured bank
(except a District bank), and (3) the Federal Deposit Insurance
Corporation in the case of a State nonmember insured bank (except a
District bank)."
SEC. 202. Section 8 of the Federal Deposit Insurance Act (12 U.S.C.
1818), is amended by redesignating subsections (b), (c), and (d)
thereof as (o), ( p ) , and (q) and by adding after subsection (a)
thereof the following new subsections (b) through ( n ) , inclusive:
sist^proceedings.
" ( b ) ( 1 ) If, iH thc opiuiou of the appropriate Federal banking
agency, any insured bank or bank which has insured deposits is engaging or has engaged, or the agency has reasonable cause to believe
that the bank is about to engage, in an unsafe or unsound practice in
conducting the business of such bank, or is violating or has violated,
or the agency has reasonable cause to believe that the bank is about to
violate, a law, rule, or regulation, or any condition imposed in writing
by the agency in connection with the granting of any application or
other request by the bank, or any written agreement entered into with
the agency, the agency may issue and serve upon the bank a notice of
charges in respect thereof. The notice shall contain a statement of the
facts constituting the alleged violation or violations or the unsafe or
unsound practice or practices, and shall fix a time and place at which
a hearing will be held to determine whether an order to cease and
desist therefrom should issue against the bank. Such hearing shall be
fixed for a date not earlier than thirty days nor later than sixty days
after service of svich notice unless an earlier or a later date is set by
the agency at the request of the bank. Unless the bank shall appear
78 Stat. 9 4 1 .
64 Stat. 873.

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

1047

at the hearing by a duly authorized representative, it shall be deemed
to have consented to the issuance of the cease-and-desist order. I n
the event of such consent, or if upon the record made at any such hearing, the agency shall find that any violation or unsafe or unsound practice specified in the notice of charges has been established, the agency
may issue and serve upon the bank an order to cease and desist from
any such violation or practice. Such order may, by provisions which
may be mandatory or otherwise, require the bank and its directors,
officers, employees, and agents to cease and desist from the same, and,
further, to take affirmative action to correct the conditions resulting
from any such violation or practice.
"(2) A cease-and-desist order shall become effective at the expiration of thirty days after the service of such order upon the bank concerned (except in the case of a cease-and-desist order issued upon consent, which shall become effective at the time specified therein), and
shall remain effective and enforceable as provided therein, except to
such extent as it is stayed, modified, terminated, or set aside by action
of the agency or a reviewing court.
" ( c ) ( 1 ) Whenever the appropriate Federal banking agency shall ^'^f?^°•''^^l^^^^^^''
determine that the violation or threatened violation or the unsafe or ders. ^^^^
unsound practice or practices, specified in the notice of charges served
upon the bank pursuant to paragraph (1) of subsection (b) of this
section, or the continuation thereof, is likely to cause insolvency or
substantial dissipation of assets or earnings of the bank, or is likely
to otherwise seriously prejudice the interests of its depositors, the
agency may issue a temporary order requiring the bank to cease and
desist from any such violation or practice. Such order shall become
effective upon service upon the bank and, unless set aside, limited, or
suspended by a court in proceedings authorized by paragraph (2) of
this subsection, shall remain effective and enforceable pending the
completion of the administrative proceedings pursuant to such notice
and until such time as the agency shall dismiss the charges specified in
such notice, or if a cease-and-desist order is issued against the bank,
until the effective date of any such order.
" (2) Within ten days after the bank concerned has been served with
a temporary cease-and-desist order, the bank may apply to the United
States district court for the judicial district in which the home office
of the bank is located, or the United States District Court for the District of Columbia, for an injunction setting aside, limiting, or suspending the enforcement, operation, or effectiveness of such order
pending the completion of the administrative proceedings pursuant
to the notice of charges served upon the bank under paragraph (1) of
subsection (b) of this section, and such court shall have jurisdiction to
issue such injunction.
" ( d ) I n the case of violation or threatened violation of, or failure
to obey, a temporary cease-and-desist order issued pursuant to paragraph (1) of subsection (c) of this section, the appropriate Federal
banking agency may apply to the United States district court, or the
United States court of any territory, within the jurisdiction of which
the home office of the bank is located, for an injunction to enforce such
order, and, if the court shall determine that there has been such violation or threatened violation or failure to obey, it shall be the duty of
the court to issue such injunction.
"(e) (1) Whenever, in the opinion of the appropriate Federal bank- ,„^,^„™°^^if°^^fi'
ing agency, any director or officer of an insured State bank (other rector or officer.
than a District bank) has committed any violation of law, rule, or
regulation, or of a cease-and-desist order which has become final, or
has engaged or participated in any unsafe or unsound practice in connection with the bank, or has committed or engaged in any act, omis-

1048

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

sion, or practice which constitutes a breach of his fiduciary duty as
such director or officer, and the agency determines that the bank has
suffered or will probably suffer substantial financial loss or other
damage or that the interests of its depositors could be seriously prejudiced by reason of such violation or practice or breach of fiduciary
duty, and that such violation or practice or breach of fiduciary duty
is one involving personal dishonesty on the part of such director or
officer, the agency may serve upon such director or officer a written
notice of its intention to remove him from office.
"(2) Whenever, in the opinion of the Comptroller of the Currency,
any director or officer of a national banking association or a District
bank has committed any violation of law, rule, or regulation, or of a
cease-and-desist order which has become final, or has engaged or participated in any unsafe or unsound practice in connection with the
bank, or has committed or engaged in any act, omission, or practice
which constitutes a breach of his fiduciary duty as such director or
officer, and the Comptroller determines that the bank has suffered or
will probably suffer substantial financial loss or other damage or that
the interests of its depositors could be seriously prejudiced by reason
of such violation or practice or breach of fiduciary duty, and that such
violation or practice or breach of fiduciary duty is one involving personal dishonesty on the part of such director or officer, the Comptroller of the Currency may certify the facts to the Board of Governors of the Federal Reserve System.
"(3) Whenever, in the opinion of the appropriate Federal banking
agency, any director or officer of an insured State bank (other than a
District bank), by conduct or practice with respect to another insured
bank or other business institution which resulted in substantial financial loss or other damage, has evidenced his personal dishonesty and
unfitness to continue as a director or officer and, whenever, in the
opinion of the appropriate Federal banking agency, any other person
participating in the conduct of the affairs of an insured State bank
(other than a District bank), by conduct or practice with respect to
such bank or other insured bank or other business institution which
resulted in substantial financial loss or other damage, has evidenced his
personal dishonesty and unfitness to participate in the conduct of the
affairs of such insured bank, the agency may serve upon such director,
officer, or other person a written notice of its intention to remove him
from office and/or to prohibit his further participation in any manner
in the conduct of the affairs of the bank.
"(4) Whenever, in the opinion of the Comptroller of the Currency,
any director or officer of a national banking association or a District
bank, by conduct or practice with respect to another insured bank or
other business institution which resulted in substantial financial loss
or other damage, has evidenced his personal dishonesty and unfitness
to continue as a director or officer and, whenever, in the opinion of the
Comptroller, any other person participating in the conduct of the
affairs of a national banking association or a District bank, by conduct
or practice with respect to such bank or other insured bank or other
business institution which resulted in substantial financial loss or other
damage, has evidenced his personal dishonesty and unfitness to participate in the conduct of the affairs of such bank, the Comptroller of
the Currency may certify the facts to the Board of Governors of the
Federal Reserve System.
"(5) In respect to any director or officer of an insured State bank
(other than a District bank) or any other person referred to in paragraph (1) or (3) of this subsection, the appropriate Federal banking
agency may, if it deems it necessary for the protection of the bank or
the interests of its depositors, by written notice to such effect served

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

upon such director, officer, or other person, suspend him from office
and/or prohibit him from further participation in any manner in the
conduct of the affairs of the bank. Such suspension and/or prohibition
shall become effective upon service of such notice and, unless
stayed by a court in proceedings authorized by subsection (f) of
this section, shall remain in effect pending the completion of
the administrative proceedings pursuant to the notice served under
paragraph (1) or (3) of this subsection and until such time as the
agency shall dismiss the charges specified in such notice, or, if an
order of removal and/or prohibition is issued against the director or
officer or other person, until the effective date of any such order.
Copies of any such notice shall also be served upon the bank of which
he is a director or officer or in the conduct of whose affairs he has
participated.
"(6) I n respect to any director or officer of a national banking
association or a District bank, or any other person referred to in paragraph (2) or (4) of this subsection, the Comptroller of the Currency
may, if he deems it necessary for the protection of the bank or the interests of its depositors that such director or officer be suspended from
office or prohibited from further participation in any manner in the
conduct of the affairs of the bank, certify the facts to the Board of
Governors of the Federal Reserve System.
"(7) In the case of a certification to the Board of Governors of the
Federal Reserve System under paragraph (2) or (4) of this subsection, the Board may serve upon the director, officer, or other person
involved, a written notice of its intention to remove him from office
and/or to prohibit him from further participation in any manner in
the conduct of the affairs of the bank. In the case of a certification to
the Board of Governors of the Federal Reserve System under paragraph (6) of this subsection, the Board may by written notice to such
effect served upon such director, officer, or other person, suspend him
from office and/or prohibit him from further participation in any
manner in the conduct of the affairs of the bank. Such suspension
and/or prohibition shall become effective upon service of such notice
and, unless stayed by a court in proceedings authorized by subsection
(f) of this section, shall remain in effect pending the completion of
the administrative proceedings pursuant to the notice served under
the first sentence of this paragraph and until such time as the Board
shall dismiss the charges specified in such notice, or, if an order of removal and/or prohibition is issued against the director or officer or
other person, until the effective date of any such order. Copies of any
such notice shall also be served upon the bank of which he is a director or officer or in the conduct of whose affairs he has participated.
F o r the purposes of this paragraph and paragraph (8) of this subsection, the Comptroller of the Currency shall be entitled in any case
involving a national bank or a District bank to sit as a member of
the Board of Governors of the Federal Reserve System and to participate in its deliberations on any such case and to vote thereon in all
respects as a member of such Board.
"(8) A notice of intention to remove a director, officer, or other
person from office and/or to prohibit his participation in the conduct
of the affairs of an insured bank, shall contain a statement of the facts
constituting grounds therefor, and shall fix a time and place at which
a hearing will be held thereon. Such hearing shall be fixed for a date
not earlier than thirty days nor later than sixty days after the date of
service of such notice, unless an earlier or a later date is set by the
agency at the request of (A) such director or officer or other person,
and for good cause shown, or (B) the Attorney General of the tjnited
States. Unless such director, officer, or other person shall appear

1049

1050

causiTor re^^^'
movai.

PUBLIC LAW 89-695-OCT. 16, 1966

[80 STAT.

at the hearing in person or by a duly authorized representative, he shall
be deemed to have consented to the issuance of an order of such
removal and/or prohibition. In the event of such consent, or if upon
the record made at any such hearing the agency shall find that any
of the grounds specified in such notice has been established, the agency
may issue such orders of suspension or removal from office, and/or
prohibition from participation in the conduct of the affairs of the bank,
as it may deem appropriate. Any such order shall become effective
at the expiration of thirty days after service upon such bank and the
director, officer, or other person concerned (except in the case of an
order issued upon consent, which shall become effective at the time
specified therein). Such order shall remain effective and enforceable
except to such extent as it is stayed, modified, terminated, or set aside
by action of the agency or a reviewing court.
" ( f ) Within ten days after any director, officer, or other person has
been suspended from office and/or prohibited from participation in
the conduct of the affairs of an insured bank under subsection (e) (5)
or (e) (7) of this section, such director, officer, or other person may
apply to the United States district court for the judicial district in
which the home office of the bank is located, or the United States
District Court for the District of Columbia, for a stay of such suspension and/or prohibition pending the completion of the administrative proceedings pursuant to the notice served upon such director,
officer, or other person under subsection (e) (1), (e) (3), or (e) (7) of
this section, and such court shall have jurisdiction to stay such suspension and/or prohibition.
" ( g ) ( 1 ) Whcuevcr auy director or officer of an insured bank, or
other person participating in the conduct of the affairs of such bank,
is charged in any information, indictment, or complaint authorized by
a United States attorney, with the commission of or participation in a
felony involving dishonesty or breach of trust, the appropriate Federal banking agency may, by written notice served upon such director,
officer, or other person suspend him from office and/or prohibit him
from further participation in any manner in the conduct of the affairs
of the bank. A copy of such notice shall also be served upon the bank.
Such suspension and/or prohibition shall remain in effect until such
information, indictment, or complaint is finally disposed of or until
terminated by the agency. In the event that a judgment of conviction with respect to such offense is entered against such director, officer,
or other person, and at such time as such judgment is not subject to
further appellate review, the agency may issue and serve upon such
director, officer, or other person an order removing him from office
and/or prohibiting him from further participation in any manner in
the conduct of the affairs of the bank except with the consent of the
appropriate agency. A copy of such order shall also be served upon
such bank, whereupon such director or officer shall cease to be a director or officer of such bank. A finding of not guilty or other disposition of the charge shall not preclude the agency from thereafter instituting proceedings to remove such director, officer, or other person
from office and/or to prohibit further participation in bank affairs,
pursuant to paragraph (1), (2), (3), (4), or (7) of subsection (e) of
this section.
"(2) If at any time, because of the suspension of one or more directors pursuant to this section, there shall be on the board of directors
of a national bank less than a quorum of directors not so suspended, all
powers and functions vested in or exercisable by such board shall vest
in and be exercisable by the director or directors on the board not so
suspended, until such time as there shall be a quorum of the board of
directors. I n the event all of the directors of a national bank are

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

1051

suspended pursuant to this section, the Comptroller of the Currency
shall appoint persons to serve temporarily as directors in their place
and stead pending the termination of such suspensions, or until such
time as those who have been suspended, cease to be directors of the
bank and their respective successors take office.
" ( h ) (1) Any hearing provided for in this section shall be held in ju"cla\"fevi'e'lv.
the Federal judicial district or in the territory in which the home office
of the bank is located unless the party afforded the hearing consents
to another place, and shall be conducted in accordance with the provisions of chapter 5 of title 5 of the United States Code. Such hearing ^"'^' P- ^^°shall be private, unless the appropriate Federal banking agency, in its
discretion, after fully considering the views of the party afforded the
hearing, determines that a public hearing is necessary to protect the
public interest. After such hearing, and within ninety days after the
appropriate Federal banking agency or Board of Governors of the Federal Reserve System has notified the parties that the case has been submitted to it for final decision, it shall render its decision (which shall
include findings of fact upon which its decision is predicated) and shall
issue and serve upon each party to the proceeding an order or orders
consistent with the provisions of this section. Judicial review of any
such order shall be exclusively as provided in this subseotion (li).
Unless a petition for review is timely filed in a court of appeals of the
United States, as hereinafter provided in paragraph (2) of this subsection, and thereafter until the record in the proceeding has been filed
as so provided, the issuing agency may at any time, upon such notice
and in such manner as it shall deem proper, modify, terminate, or set
aside any such order. Upon such filing of the record, the agency may
modify, terminate, or set aside any such order w4th permission of the
court.
"(2) Any party to the proceeding, or any person required by an
order issued under this section to cease and desist from any of the
violations or practices stated therein, may obtain a review of any
order served pursuant to paragraph (1) of this subsection (other than
an order issued with the consent of the bank or the director or officer
or other person concerned, or an order issued under paragraph (1) of
subsection (g) of this section) by the filing in the court of appeals of
the United States for the circuit in which the home office of the bank
is located, or in the United States Court of Appeals for the District
of Columbia Circuit, within thirty days after the date of service of
such order, a written petition praying that the order of the agency
be modified, terminated, or set aside. A copy of such petition shall be
forthwith transmitted by the clerk of the court to the agency, and
thereupon the agency shall file in the court the record in the proceeding, as provided in section 2112 of title 28 of the United States Code. ''^ ^'^*- ^'*^Upon the filing of such petition, such court shall have jurisdiction,
Avhich upon the filing of the record shall except as provided in the last
sentence of said paragraph (1) be exclusive, to affirm, modify, terminate, or set aside, in whole or in part, the order of the agency, Review
of such proceedings shall be had as provided in chapter 7 of title 5 of
the United States Code. The judgment and decree of the court shall ^"'^' P- ^92.
be final, except that the same shall be subject to review by the Supreme
Court upon certiorari, as provided in section 1254 of title 28 of the
United States Code.
. . .
" ^'"'' ^^^'
"(3) The commencement of proceedings for judicial review under
paragraph (2) of this subsection shall not, unless specifically ordered
by the court, operate as a stay of any order issued by the agency.
" ( i ) The appropriate Federal banking agency may in its discretion ord^"^"'^'^^"^"' °^
apply to the United States district court, or the United States court of
any territory, within the jurisdiction of which the home office of the

1052

Penalties.

Definitions.

Notice of

Notice to State
authorities.

Subpena power,
etc.

PUBLIC LAW 89-695-OCT. 16, 1966

[80

STAT.

bank is located, for the enforcement of any effective and outstanding
notice or order issued under this section, and such courts shall have
iurisdiction and power to order and require compliance herewith;
but except as otherwise provided in this section no court shall have
jurisdiction to affect by injunction or otherwise the issuance or enforcement of any notice or order under this section, or to review, modify,
suspend, terminate, or set aside any such notice or order.
"(j) Any director or officer, or former director or officer of an
insured bank, or any other person, against whom there is outstanding
and effective any notice or order (which is an order which has become
final) served upon such director, officer, or other person under subsections (e) (5), (e) (7), (e) (8), or (g) of this section, and who (i)
participates in any manner in the conduct of the affairs of the bank
involved, or directly or indirectly solicits or procures, or transfers or
attempts to transfer, or votes or attempts to vote, any proxies, consents, or authorizations in respect of any voting rights in such bank, or
(ii) without the prior written approval of the appropriate Federal
banking agency, votes for a director, serves or acts as a director, officer,
or employee of any bank, shall upon conviction be fined not more than
$5,000 or imprisoned for not more than one year, or both.
" ( k ) As used in this section (1) the terms 'cease-and-desist order
which has become final' and 'order which has become final' mean a
cease-and-desist order, or an order, issued by the appropriate Federal
banking agency with the consent of the bank or the director or officer
or other person concerned, or with respect to which no petition for
review of the action of the agency has been filed and perfected in
a court of appeals as specified m paragraph (2) of subsection (h), or
with respect to which the action of the court in which said petition is
so filed is not subject to further review by the Supreme Court of the
United States in proceedings provided for in said paragraph, or an
order issued under paragraph (1) of subsection (^) of this section,
and (2) the term 'violation' includes without limitation any action
(alone or with another or others) for or toward causing, bringing
about, participating in, counseling, or aiding or abetting a violation.
"(1) Any service required or authorized to be made by the appropriate Federal banking agency under this section may be made by
registered mail, or in such other manner reasonably calculated to give
actual notice as the agency may by regulation or otherwise provide.
Copies of any notice or order served by the agency upon any State
bank or any director or officer thereof or other person participating
in the conduct of its affairs, pursuant to the provisions of this section,
shall also be sent to the appropriate State supervisory authority.
" ( m ) I n connection with any proceeding under subsection (b),
(c) (1), or (e) of this section involving an insured State bank or any
director or officer or other person participating in the conduct of its
affairs, the appropriate Federal banking agency shall provide the appropriate State supervisory authority with notice of the agency's
intent to institute such a proceeding and the grounds therefor. Unless within such time as the Federal banking agency deems appropriate in the light of the circumstances of the case (which time must
be specified in the notice prescribed in the preceding sentence) satisfactory corrective action is effectuated by action of the State supervisory authority, the agency may proceed as provided in this section.
No bank or other party who is the subject of any notice or order issued
by the agency under this section shall have standing to raise the requirements of this subsection as ground for attacking the validity of
any such notice or order.
" (n) I n the course of or in connection with any proceeding under
this section, the agency conducting the proceeding, or any member or

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

1053

designated representative thereof, including any person designated to
conduct any hearing under this section, shall have the power to administer oaths and affirmations, to take or cause to be taken depositions, and to issue, revoke, quash, or modify subpenas and subpenas
duces tecum; and such agency is empowered to make rules and regulations with respect to any such proceedings. The attendance of witnesses and the production of documents provided for in this subsection
may be required from any place in any State or in any territory or
other place subject to the jurisdiction of the United States at any
designated place where such proceeding is being conducted. Any
party to proceedings under this section may apply to the United
States District Court for the District of Columbia, or the United
States district court for the judicial district or the United States court
in any territory in which such proceeding is being conducted, or where
the witness resides or carries on business, for enforcement of any subpena or subpena duces tecum issued pursuant to this subsection, and
such courts shall have jurisdiction and power to order and require
compliance therewith. Witnesses subpenaed under this section shall
be paid the same fees and mileage that are paid witnesses in the
district courts of the United States. Any court having jurisdiction of
any proceeding instituted under this section by an insured bank or a
director or officer thereof, may allow to any such party such reasonable
expenses and attorneys' fees as it deems just and proper; and such
expenses and fees shall be paid by the bank or from its assets."
SEC. 203. Subsections (b) and (c) of section 10 of the Federal ^^^t^^^'^tl'^T'
Deposit Insurance Act (12 U.S.C. 1820 (b), (c)) are amended to read duties.
as follows:

" ( b ) The Board of Directors shall appoint examiners who shall
have power, on behalf of the Corporation, to examine any insured
State nonmember bank (except a District bank), any State nonmember bank making application to become an insured bank, and any
closed insured bank, whenever in the judgment of the Board of Directors an examination of the bank is necessary. I n addition to the examinations provided for in the preceding sentence, such examiners shall
have like power to make a special examination of any State member
bank and any national bank or District bank, whenever in the judgment of the Board of Directors such special examination is necessary
to determine the condition of any such bank for insurance purposes.
I n making examinations of insured banks, examiners appointed by
the Corporation shall have power on behalf of the Corporation to make
such examinations of the affairs of all affiliates of such banks as shall be
necessary to disclose fully the relations between such banks and their
affiliates and the effect of such relations upon such banks. Each examiner shall have power to make a thorough examination of all of
the affairs of the bank and its affiliates, and shall make a full and detailed report of the condition of the bank to the Corporation. The
Board of Directors in like manner shall appoint claim agents who shall
have power to investigate and examine all claims for insured deposits.
Each claim agent shall have power to administer oaths and affirmations
and to examine and to take and preserve testimony under oath as to
any matter in respect to claims for insured deposits, and to issue subpenas and subpenas duces tecum, and, for the enforcement thereof, to
apply to the United States district court for the judicial district or
the United States court in any territory in which the main office of the
bank or affiliate thereof is located, or in which the witness resides or
carries on business. Such courts shall have jurisdiction and power to
order and require compliance with any such subpena.
"(c) In connection with examinations of insured banks, and affiliates thereof, the appropriate Federal banking agency, or its designated
65-300 0-67—69

64 Stat. 882.

1054

'Affiliate."
48 Stat. 162;
Ante, p . 242.
"Member bank.
Insured bank,
termination of
status.
64 Stat. 879.

PUBLIC LAW 89-695-OCT. 16, 1966

[80

STAT.

representatives, shall have the power to administer oaths and affirmations and to examine and to take and preserve testimony under oath as
to any matter in respect of the affairs or ownership of any such bank
or affiliate thereof, and to issue subpenas and subpenas duces tecum,
and, for the enforcement thereof, to apply to the United States district
court for the judicial district or the United States court in any territory in which the main office of the bank or affiliate thereof is located,
or in which the witness resides or carries on business. Such courts
shall have jurisdiction and power to order and require compliance with
any such subpena. For purposes of this section, the term 'affiliate'
shall have the same meaning as where used in section 2(b) of the
Banking Act of 1933 (12 U.S.C. 221a(b)) except that the term 'member bank' in said section 2(b) shall be deemed to refer to an insured
bank."
SEC. 204. The first five sentences of section 8(a) of the Federal
Deposit Insurance Act (12 U.S.C. 1818(a)) are amended to read as
follows:
"SEC. 8. (a) Any insured bank (except a national member bank or
State member bank) may, upon not less than ninety days' written
notice to the Corporation, terminate its status as an insured bank.
Whenever the Board of Directors shall find that an insured bank or its
directors or trustees have engaged or are engaging in unsafe or unsound
practices in conducting the business of such bank, or is in an unsafe or
unsound condition to continue operations as an insured bank, or
violated an applicable law, rule, r e f l a t i o n or order, or any condition
imposed in writing by the Corporation in connection with the granting
of any application or other request by the bank, or any written agreement entered into with the Corporation, the Board of Directors shall
first give to the Comptroller of the Currency in the case of a national
bank or a district bank, to the authority having supervision of the bank
in the case of a State bank, and to the Board of Governors of the
Federal Reserve System in the case of a State member bank, a statement with respect to such practices or violations for the purpose of
securing the correction thereof and shall give a copy thereof to the
bank. Unless such correction shall be made within one hundred and
twenty days, or such shorter period not less than twenty days fixed by
the Corporation in any case where the Board of Directors in its discretion has determined that the insurance risk of the Corporation is
unduly jeopardized, or fixed by the Comptroller of the Currency in
the case of a national bank, or the State authority in the case of a State
bank, or Board of Governors of the Federal Reserve System in the
case of a State member bank as the case may be, the Board of Directors,
if it shall determine to proceed further, shall give to the bank not less
than thirty days' written notice of intention to terminate the status of
the bank as an insured bank, and shall fix a time and place for a hearing before the Board of Directors or before a person designated by it
to conduct such hearing, at which evidence may be produced, and
upon such evidence the Board of Directors shall make written findings
which shall be conclusive. If the Board of Directors shall find that any
unsafe or unsound practice or condition or violation specified in such
statement has been established and has not been corrected within the
time above prescribed in which to make such corrections, the Board of
Directors may order that the insured status of the bank be terminated
on a date subsequent to such finding and to the expiration of the time
specified in such notice of intention. Unless the bank shall appear at
the hearing by a duly authorized representative, it shall be deemed
to have consented to the termination of its status as an insured bank
and termination of such status thereupon may be ordered. Any
insured bank whose insured status has been terminated by order of the
Board of Directors under this subsection shall have the right of judi-

80 STAT. ]

PUBLIC LAW 89-695-OCT. 16, 1966

cial review of such order only to the same extent as provided for the
review of orders under subsection (h) of this section."
SEC. 205. Subsection "Fourth" of section 9 of the Federal Deposit
Insurance Act (12 U.S.C. 1819 "Fourth") is amended to read as
follows:
"Fourth. To sue and be sued, complain and defend, in any court
of law or equity, State or Federal. All suits of a civil nature at
common law or in equity to which the Corporation shall be a party
shall be deemed to arise under the laws of the United States, and the
United States district courts shall have original jurisdiction thereof,
without regard to the amount in controversy; and the Corporation
may, without bond or security, remove any such action, suit, or proceeding from a State court to the United States district court for the
district or division embracing the place where the same is pending
by following any procedure for removal now or hereafter in effect,
except that any such suit to which the Corporation is a party in its
capacity as receiver of a State bank and which involves only the rights
or obligations of depositors, creditors, stockholders, and such State
bank under State law shall not be deemed to arise under the laws of
the United States. No attachment or execution shall be issued against
the Corporation or its property before final judgment in any suit,
action, or proceeding in any State, county, municipal, or United States
court. The Board of Directors shall designate an agent upon whom
service of process may be made in any State, Territory, or jurisdiction
in which any insured bank is located."
SEC. 206. Nothing contained in this title shall be construed to repeal,
modify, or affect the provisions of section 19 of the Federal Deposit
Insurance Act (12 U.S.C. 1829).
SEC. 207. Section 30 of the Banking Act of 1933 (12 U.S.C. 77) is
hereby repealed.

1055

^4 stat. ssi.

f^P^^J; ^^3

TITLE III—INCREASE IN INSURANCE LIMIT
FEDERAL DEPOSIT INSURANCE CORPORATION

SEC. 301. (a) The first sentence of section 3(m) of the Federal
Deposit Insurance Act (12 U.S.C. 1813 ( m ) ) is amended by changing
"$10,000" to read "$15,000".
(b) The first sentence of section 7(i) of the Federal Deposit Insurance Act (12 U.S.C. 1817(i)) is amended by changing '^$10,000" to
read "$15,000".
(c) The last sentence of section 11(a) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)) is amended to read: "The maximum
amount of the insured deposit of any depositor shall be $15,000."
(d) The fifth sentence of section 11 (i) of the Federal Deposit Insurance Act (12 U.S.C. 1821 (i)) is amended by changing "$10,000" to
read "$15,000".
(e) The amendments made by this section shall not be applicable
to any claim arising out of the closing of a bank where such closing
is prior to the date of enactment of this Act.

64 Stat. 875.

FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION

SEC. 302. (a) Section 401(b) of title I V of the National Housing
Act (12 U.S.C. 1724(b)) is amended by changing "$10,000" to read 73^^t!t^26?^'
"$15,000" each place it appears therein.
(b) Section 405(a) of title I V of the National Housing Act (12
U.S.C. 1728(a)) is amended by changing "$10,000" to read "$15,000". e/stf^^'ssg^^^'
(c) The amendments made by this section shall not be applicable to
any claim arising out of a default, as defined in section 401 (d) of the

1056

PUBLIC LAW 89-696-OCT. 19 ,1966

12 us^c' n2^4^*

[80 STAT.

National Housing Act, where the appointment of a conservator,
receiver, or other legal custodian as set forth in that section becomes
effective prior to the date of enactment of this Act.
ADMINISTRATIVE AUTHORITY

Ante, p. 1055.
12 use 1817.

12 use 1821.

Ante,

p. 1055.

48 Stat. 1255
12 use 1724.

SEC, 303. (a) Section 3(m) of the Federal Deposit Insurance Act
^j^g U.S.C. 1813 ( m ) ) is amended by adding the following new sentence
at the end: "For the purpose of clarifying and defining the insurance
coverage under this subsection and subsection (i) of section 7, the
Corporation is authorized to define, with such classifications and exceptions as it may prescribe, terms used in those subsections, in subsection
(p) of section 3, and in subsections (a) and (i) of section 11 and the
extent of the insurance coverage resulting therefrom."
(b) Section 405(a) of title I V of the National Housing Act (12
U.S.C. 1728(a)) is amended by adding the following new sentence at
the end: " F o r the purpose of clarifying and defining the insurance
coverage under this subsection and subsection (b) of section 401, the
Corporation is authorized to define, with such classifications and exceptions as it may prescribe, terms used in those subsections and in subsection (c) of section 401 and the extent of the insurance coverage
resulting therefrom."
TITLE IV—EXPIRATION
SEC. 401. The provisions of titles I and I I of this Act and any
provisions of law enacted by said titles shall be effective only during
the period ending at the close of June 30, 1972. Effective upon the
expiration of such period, each provision of law amended by either
of such titles is further amended to read as it did immediately prior
to the enactment of this Act and each provision of law repealed by
either of such titles is reenacted.
Approved October 16, 1966.

Public Law 89-696
October 19, 1966

[s. 3834]

^^

ACT

rj^Q amend chapter 141 of title 10, United States Code, to provide for price
adjustments in contracts for the procurement of milk by the Department of
Defense.

Be it enacted by the Senate and Hoitse of Representatives of the
mim^conrra^lsr'^*" '^^^^^^^ States of America in Congress assembled, T h a t chapter 141
Milk procureof title 10, United States Code, is amended—
"ToA Stat 135
(1) by inserting at the end thereof the following new section:
10 u s e 2381
**§
2389.
Contracts far the procurement of milk; price adjustment
2388.
"Under regulations prescribed by the Secretary of Defense, any
contract for the procurement of fluid milk for beverage purposes
which was bein^ performed on or after March 1,1966, may be amended
to provide a price adjustment for losses incurred by a contractor because of increased prices paid to the producers for such milk as a
result of action by the Secretary of Agriculture on or after March 1,
1966, increasing the price of milk. A price adjustment shall not be
made unless it has been determined by the Department that—
" (1) such amount is not included in the contract price;
"(2) the contract does not otherwise contain a provision providing for an adjustment in price; and
"(3) the contractor will suffer a loss, not merely a diminution
of anticipated profit, under the contract because oi such increases