available. Between 1929 and 1933 the money supply contracted so sharply that monetary stability in general was dangerously shaken. In the light of this situation the Congress provided deposit insurance as a device for maintaining the confidence of people in the security of their bank deposits, and thus minimizing any threat of wholesale withdrawals of funds. The program was thus set up not only with no actual experience in insuring depositors and very little other data and information on which to develop the bases of the new program, but also in a psychology of panic conditions.

Today our Nation is in a strong financial position. Our ability to maintain a stable economy has met a major test in the reconversion from war to peace. We have accomplished that job with practically none of the weaknesses which undermined our economy after World War I, when we went through a period of riotous speculation comparable in many ways to the stock market speculation of 10 years later. We have learned lessons in avoiding the pitfalls which led to the severe break that followed that speculation. We have learned to protect ourselves against the destruction of public confidence in the credit of the United States-a factor which made that break so severe. So long as we have the wisdom and courage to avoid excesses of speculation and credit expansion, and so long as public confidence in the strong financial position of the United States Government remains unimpaired, our banking system will never have to meet a crisis comparable to that which motivated the Congress in creating the Federal Deposit Insurance Corporation.

The economic lessons we have learned since 1933, and the experience gained in 16 years of operation of the Federal Deposit Insurance Corporation, provide a point of departure for reexamining the deposit insurance program which was not available when the program was originally set up. With no experience to draw upon it was necessary for the Congress at that time to make arbitrary judgments on such matters as the limitation on insurance coverage, the assessment rates to be charged the banks, the bases on which to compute assessments. It is highly proper, therefore, for the Congress to review those judgments in the light of experience and present outlook.

The bill before the committee proposes changes based upon that experience and outlook. On the one hand the bill would double the protection afforded to an individual depositor, and on the other it would reduce costs to the banks by providing relief in the form of dividends. It is my belief that these proposals are based upon a sound analysis of the probabilities. In the fiscal years 1948 and 1949 the Corporation repaid to the Treasury the $289,000,000 originally provided to it for capital. In the 16 years since its creation it has in addition accumulated a surplus of 1.2 billion dollars. With such a steadily increasing surplus, some relief to bankers in their insurance costs seems clearly to be in order. The method proposed in the bill has had the study of the Board of Directors of the Corporation and appears to provide an acceptable method. The increase in insurance coverage appears to conform to general changes in the economy that have taken place since the figure was originally fixed, and does not appear to present a threat to the ability of the Corporation to deal with any crisis which it must meet.

The development of the best method of computing the assessment base is a matter especially dependent upon experience. The process

provided for in the existing law was necessarily based in large part on guesswork as to feasibility. Experience has indicated the desirability of simplification, which the bill undertakes to provide.

I consider these the major matters which the bill proposes for revision. In addition, the bill would make numerous other changes of a minor character in existing law, in most part changes not of particular interest to the Treasury Department.

In closing, however, I should like to mention two aspects of the bill which I would recommend to the committee for amendment. The first aspect deals with the coordination through the Secretary of the Treasury of the fiscal operations of the Corporation. Up until the time the Corporation repaid its capital furnished by the Treasury, operations such as those involving the purchase and sale of Government obligations for the account of the Corporation under the Government Corporation Control Act were subject to the approval of the Secretary of the Treasury. Since the Corporation has repaid the Treasury for its capital, the Government Corporation Control Act is not applicable, and there is no provision in S. 2822 which would permit the Secretary of the Treasury to coordinate such an operation with the general fiscal policy of the Treasury.

Senator MAYBANK. Do you mind being interrupted?

Mr. SNYDER. No.

Senator MAYBANK. There was quite some controversy about that the first day of the hearing: That the FDIC did pay back the money they got from the Treasury, but did not pay any interest. Senator Douglas discussed that at quite some length. I only mention it so the record can show what he had on his mind on the opening day when Mr. Harl testified.

Mr. SNYDER. There is no controversy in what I am presenting now, because we have since talked to the FDIC, and it is acceptable to be presented to you.

Senator MAYBANK. I wanted you to see what Senator Douglas thought.

Mr. SNYDER. Did you intend to

Senator MAYBANK. No, but Senator Douglas did.

Mr. SNYDER. The point is that there is no controversy here since we have worked it out with the FDIC, and they are perfectly willing to reinstate that authority of the Treasury Department.

Senator MAYBANK. He could not get here this morning. He must have asked questions for 15 minutes on this the other morning. Mr. SNYDER. Is there any question?

Senator MAYBANK. No; I wanted you to know what his attitude

was.

Mr. SNYDER. Fortunately this matter, since we have prepared this, has been worked out between the FDIC staff and

Senator MAYBANK. I am not questioning it. The only thought I had was this: Senator Douglas discussed this; with about 15 minutes of questions with Mr. Harl. There is still some $40,000,000

Mr. SNYDER. It is a little more than that if you are talking about the interest. It is somewhere between 45 and 50 million on the $150,000,000 furnished by the Treasury.

We have simply followed the congressional procedure of the past. If they want it back, all they have got to do is say so.

Senator MAYBANK. I thoroughly agree with you. He raised the question, that is all.

Mr. SNYDER. I have no feeling on that at all. If Congress wants to order it paid, it is perfectly all right, but we have just been following the regular congressional procedure.

I believe that a statutory provision to correct this situation is desirable. I also recommend that the Corporation be required to carry its banking and checking accounts with the Treasurer of the United States as was formerly required under the Government Corporation Control Act.

Senator MAYBANK. You say "statutory provision." You would put that in this bill?

Mr. SNYDER. With agreement of the FDIC.
Senator MAYBANK. In this bill?

Mr. SNYDER. In this bill.

Senator ROBERTSON. Later repay the 45 or 50 million

Mr. SNYDER. That is no part of it. That they would have the Secretary of the Treasury coordinate their buying and selling of Government obligations, and that they would deposit their funds with the Treasury of the United States.

Senator ROBERTSON. What is your attitude toward repaying the interest?

Mr. SNYDER. I just got through saying that, Senator. We have just been following the regular congressional procedure there in reference to that matter. If Congress wants it repaid, we are perfectly

Senator ROBERTSON. But my question was, do you think it ought to be repaid?

Mr. SNYDER. I do not think it makes a great deal of difference one way or the other.

Senator ROBERTSON. You mean you have got plenty of money down there?

Mr. SNYDER. No. But the Treasury has a continuing obligation there to supply money to the FDIC if they ever need it, so if it is in the reserve account or the Treasury account, it is all right with us. If Congress wants it repaid

Senator ROBERTSON. The $3,000,000,000 is to be borrowed, is it not? Mr. SNYDER. In the event it is necessary.

Senator ROBERTSON. When they borrow $3,000,000,000, they would not get $3,000,000,000 without any interest, would they?

Mr. SNYDER. The law provides for the payment of interest. Senator ROBERTSON. I thought you might have some personal opinion.

Mr. SNYDER. I am always happy to get all of the money I can get. Senator ROBERTSON. You are one of the experts on money business. We thought you could give us some guidance.

Mr. SNYDER. It is purely a matter, I think, for congressional decision. If that is the move you want to make in altering your past policy, I am in perfect accord with it.

Senator ROBERTSON. That will be more than enough to build the Bug's Island Dam.

Mr. SNYDER. The bill would also carry forward and reenact a provision included in the original law authorizing the issuance by the Corporation of tax-free obligations. Such a provision would be contrary

to the general policy which has intervened, as announced by the Congress in the Public Debt Act of 1941. I would recommend that S. 2822 be made consistent with the general policy in this respect.

These recommendations have been brought to the attention of the Federal Deposit Insurance Corporation, and I am assured there will be no difficulty in working out the details.

With the amendments which I have suggested, I believe the bill will provide a desirable revision in the light of experience and prospects. Senator ROBERTSON. Mr. Secretary, some days ago, in arranging for these hearings today, I announced that our committee would stay in session all day, if necessary, to hear the witnesses we invited to appear before us today, but I failed to get the consent of the Senate for us to be in session while the Senate was in session. So we either must get that consent when we meet at noon or else members of this subcommittee will have to go back to the Senate floor to answer quorum calls and matters of that kind.

I have some questions about this bill that I want to ask you, and to save time, I hope the other witnesses who will follow you will take note of the questions that I ask you and comment on those questions so that I will not have to go through the detail of asking each witness the same questions that I am going to ask you. They are questions that I think are pertinent to this investigation and on which the subcommittee and the full committee should have the benefit of expert advice.

Is it true that for the past 6 years there has been no receivership of an insured bank nor financial loss to any depositor?

Mr. SNYDER. That, I think, is correct, sir. I do not think we have had-we have had mergers and consolidations and things of that sort. but I do not think there have been any receiverships nor any loss to any depositors.

Senator ROBERTSON. Do you think that splendid record is one that could be safely used in establishing a future policy with respect to the amount to be insured and the assessment to cover anticipated liabilities?

Mr. SNYDER. I think it is an important matter to consider the reasons why that was true. I think you could not take a matter such as this bill up without giving due weight to that historical background.

Senator ROBERTSON. Do you think the time has come to increase the insured amount from $5,000, and, if so, to what amount would you recommend the increase?

Mr. SNYDER. Well, we go along with the recommendations in the bill here, increasing it to $10,000. We feel that the added expense would not be beyond the ability of the Corporation to meet.

Senator ROBERTSON. But you do not qualify in any way your recommendation concerning that provision of the bill that would fix the limit at $10,000?

Mr. SNYDER. I do not.

Senator ROBERTSON. The Federal Reserve Board is now the depository of reserve funds of member banks, makes examinations, discounts their papers, and so forth. Have you given any thought to the question as to the benefits that might be obtained by having the FRB also exercise the functions of guaranteeing deposits?

Mr. SNYDER. Well, I would have to give some study to that, sir. It never occurred to me that we were going to set up two insurance companies.

Senator ROBERTSON. Now, under section 7 (a) of the bill certain figures are now required to measure deposits in three ways: For report of condition, for establishing reserve requirements, and for the basis of assessment by the FDIC.

Do you think that the Federal Reserve, Comptroller, and the FDIC could, with very little trouble, work out a simple formula to be used for all purposes?

Mr. SNYDER. I think they are working on something like that now. Is that right?

Mr. ROBINSON. I do not think there is any formula, other than that one, under consideration at this time for fixing the assessment base. Mr. SNYDER. Is there any simpler way in your mind of doing it? Do you mind my referring to Mr. Robinson on that?

Senator ROBERTSON. Not at all. Would the same be true as to rate of assessments and distributions of net assessment income, and also as to authority of various agencies to examine the banks?

Mr. SNYDER. Mr. Chairman, that is a technical question I would have to inquire into. Is somebody prepared on that from the FDIC? Would you repeat the question, please, Mr. Chairman?.

Senator ROBERTSON. Would the same be true as to the rate of assessment or distribution of net assessment income, and also as to authority of various agencies to examine the banks? In other words, could that be mutually worked out without spelling it out in the law?

Mr. BAKKE. We are working out the examination formula-does the question relate to the right to examine banks, or does it relate to the procedure in conducting examination? I do not get the question.

Senator ROBERTSON. Well, let us take the examination of banks. Without writing into the law any change, could it be worked out so that the necessary examinations could be done by mutual agreement of the three agencies that now have the authority to make the examination?

Mr. SNYDER. Are they not doing that? That has already been done. Senator ROBERTSON. But the law proposes to change that. The law proposes to give the FDIC the privilege of examining any bank at will.

Mr. SNYDER. When it seems necessary, as an insuring agency. Senator ROBERTSON. Regardless of any other examinations that anybody else might make.

Mr. SNYDER. Upon request.

Mr. OPPEGARD. The Federal Reserve now has the right to examine national banks. They delegate that power and authority to the Comptroller of Currency. We are permitted now to examine State nonmember banks without asking any commissioner. We are permitted to examine national banks with the consent of the Comptroller of Currency, and the State member banks with consent of the Board of Governors of the Federal Reserve System.

We are asking for permission to examine, when we think it is necessary, State member banks without asking for such consent, because we feel we should have the right to look at our risks any time we want to do so, any time we feel it necessary to do so. We do not ask for the