CONTENTS Arthur, Harry, president, South Carolina Bankers' Association Butler, Hugh, a United States Senator from the State of Nebraska. Crowley, Leo, former chairman, FDIC. Delano, Preston, Comptroller of the Currency. Dubois, Ben, secretary, Independent Bankers Association Harl, Maple T., Chairman, Board of Directors, Federal Deposit In- surance Corporation, accompanied by H. Earl Cook, member, Board of Directors; E. H. Cramer, Director of Research and Sta- tistics: L. L. Robertson, assistant to Chairman; and N. C. Bakke, Hughes, Syd J., on behalf of the Consumer Bankers Association.. Potts, Frederick A., president, Philadelphia National Bank Wiggins, A. Lee M., chairman of the board, the Bank of Hartsville, Woollen, Evans, Jr., accompanied by Eugene C. Zorn, Jr., secretary, research council; C. E. Bennett, chairman, Committee on FDIC Study; and D. J. Needham, general counsel, American Bankers Letters, statements, exhibits, etc., submitted for the record by- Bakke, Norris C., Associate General Counsel, FDIČ: Letter to 69 81 51 124 Consumer Bankers Association, George Clark, president, Chattanooga, Harl, Maple T., Chairman, Board of Directors, FDIC: Declining bank capital, 1875 to 1949. -facing 22 93 Assessments and coverage for deposit insurance reform.... Maybank, Burnet R., a United States Senator from the State of South Carolina: Deductions in computing net assessment income; 81 Vandenberg, Arthur H., a United States Senator from the State of Woollen, Evans, Jr., American Bankers Association: Chart. AMENDMENTS TO FEDERAL DEPOSIT INSURANCE ACT WEDNESDAY, JANUARY 11, 1950 UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, SUBCOMMITTEE ON FEDERAL RESERVE MATTERS, Washington, D. C. The subcommittee met, pursuant to call, at 10:15 a. m., in room 301, Senate Office Building, Senator A. Willis Robertson presiding. Present: Senators Robertson, Maybank, Douglas, Tobey, and Flanders. Also present: Senator Bricker: Senator MAYBANK. Gentlemen, the meeting will come to order. I just want to make a preliminary statement. We are very happy and pleased to have you gentlemen down here this morning. I am hopeful that these hearings can be completed at an early date. Unfortunately, the committee room is going to be required for housing hearings for about a week following today's meeting. Therefore, we might have to defer these meetings for another week or so. I might say that I am very appreciative of the cooperation given me by the Federal Deposit Insurance Corporation and other agencies. And now I am going to ask Senator Robertson, the chairman of the Subcommittee on Federal Reserve Matters, to take over. I have also asked Senator Frear to come to the committee because of his interest in this and other legislation. Gentlemen, I am happy to have you here; and I now will ask Senator Robertson to go on from here, and we are hopeful of completing these hearings very soon. Senator ROBERTSON. There have been referred to the Subcommittee on Federal Reserve Matters two bills relating to the Federal Deposit Insurance Act. The first of these bills is S. 2300, which was introduced by the junior Senator from Ohio, Mr. Bricker, last July, but no hearings were had on it. The other bill is S. 2822, introduced on January 10, 1950, by the senior Senator from South Carolina, the chairman of this committee, Mr. Maybank. Without objection, I will have those two bills printed in the hearings at this point in order that all may be advised as to what is being considered today. (S. 2300 and S. 2822 are as follows:) [S. 2300, 81st Cong., 1st sess.] A BILL To amend section 12B of the Federal Reserve Act, pertaining to the Federal Deposit Insurance Corporation Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) paragraph (12) of subsection (c) 1 of section 12B of the Act entitled "An Act to provide for the establishment of Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes", approved December 23, 1913, as amended, is hereby amended to read as follows: "(12) The term 'deposit' means the unpaid balance of money or its equivalent received by a bank in the usual course of business and for which it has given or is obligated to give credit to a commercial, checking, savings, time or thrift account, or which is evidenced by a certificate of deposit, an officer's check, a certified check, or travelers checks or letters of credit on which the bank is primarily liable, and trust funds held by such bank: Provided, That the obligation is payable in the States of the United States, the District of Columbia or any of the Territories or possessions of the United States." (b) Paragraph (13) of subsection (c) of such section is amended to read as follows: "(13) The term 'insured deposit' means the net amount due any depositor of an insured bank for deposits and drafts drawn on other insured banks (after deducting offsets) less any part thereof which is in excess of $10,000. In determining the amount due to any depositor there shall be added together all insured deposits in the bank maintaind in the same capacity and the same right for his benefit either in his own name or in names of others. All uninvested trust funds held by an insured bank shall be insured in an amount not to exceed $10,000 for each trust estate and such insurance shall be separate from and additional to other insurance for 'insured deposits' as defined in this section." (c) Subsection (h) of said section is amended to read as follows: "(h) (1) Whenever the surplus fund of the Corporation is less than $1,000,000,000 at the end of any calendar year the Corporation shall require each insured bank to file with it within thirty days a certified statement of the amount of its total deposits, as defined in subsection (c) (12), and as shown in the latest report of condition to the Comptroller of the Currency in the case of a national member bank or national nonmember bank, to the Federal Reserve bank of the district in which it is located in the case of a State member bank and to the Corporation in the case of a nonmember bank. The Corporation shall then proceed to restore the surplus fund to $1,000,000,000 by making an assessment on each insured bank. The assessment shall be based on the total deposits of each insured bank as shown in its certified statement. Not more than one assessment may be made annually and the assessment rate which shall be the same for all insured banks shall not exceed one-twelfth of 1 percentum of total deposits as shown on the certified statement. The Corporation shall give each insured bank written notice of the amount of the assessment due and the assessment shall be payable thirty days after the date of such notice. All assessments collected by the Corporation from insured banks in the calendar year 1949 shall be refunded within thirty days after the enactment of this section. "(2) If an insured bank shall fail to file any certified statement required to be filed by it in connection with determining the amount of any assessment payable by the bank to the Corporation or to pay any assessment due, the Board of Directors of the Corporation shall give written notice to such insured bank that the insured status of such bank will be terminated on a date not less than thirty days subsequent to the date of such notice unless such failure to file a certified statement or to pay such assessment has been corrected prior to the date specified in such written notice. If the insured status of a bank is terminated for failure to file required certified statements or to pay assessments due, notice to depositors shall be given in the manner prescribed in paragraph (1) of subsection (i) of this section." (d) Subsection (h) of such section is further amended by striking the figure "$5,000" wherever it appears in subsection (9) of subsection (h) and inserting in lieu thereof the figure "$10,000". (e) Subsection (1) of such section is amended by striking wherever it appears in subsections (2) and (9) the figure "$5,000" and inserting in lieu thereof the figure "$10,000". [S. 2822, 81st Cong., 2d sess.] A BILL To amend the Federal Deposit Insurance Act (U. S. C., title 12, sec. 264) Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 12B of the Federal Reserve Act. as amended, is hereby withdrawn as a part of that Act and is made a separate Act to be known as the "Federal Deposit Insurance Act". SEC. 2. The Federal Deposit Insurance Act is amended to read as follows: "SEC. 1. There is hereby created a Federal Deposit Insurance Corporation (hereinafter referred to as the 'Corporation') which shall insure, as hereinafter provided, the deposits of all banks which are entitled to the benefits of insurance under this Act, and which shall have the powers hereinafter granted. "SEC. 2. The management of the Corporation shall be vested in a Board of Directors consisting of three members, one of whom shall be the Comptroller of the Currency, and two of whom shall be citizens of the United States to be appointed by the President, by and with the advice and consent of the Senate. One of the appointive members shall be the Chairman, of the Board of Directors of the Corporation and not more than two of the members of such Board of Directors shall be members of the same political party. Each such appointive member shall hold office for a term of six years. In the event of a vacancy in the office of the Comptroller of the Currency, and pending the appointment of his successor, or during the absence of the Comptroller from Washington, the Acting Comptroller of the Currency shall be a member of the Board of Directors in the place and stead of the Comptroller. In the event of a vacancy in the office of the Chairman of the Board of Directors, and pending the appointment of his successor, the Comptroller of the Currency shall act as Chairman. The members of the Board of Directors shall be ineligible during the time they are in office and for two years thereafter to hold any office, position, or employment in any insured bank, except that this restriction shall not apply to any member who has served the full term for which he was appointed. No member of the Board of Directors shall be an officer or director of any insured bank, or Federal Reserve bank or hold stock in any insured bank; and before entering upon his duties as a member of the Board of Directors he shall certify under oath that he has complied with this requirement and such certification shall be filed with the secretary of the Board of Directors. "SEC. 3. As used in this Act "(a) The term 'State bank' means any bank, banking association, trust company, savings bank, or other banking institution which is engaged in the business of receiving deposits, other than trust funds as herein defined, and which is incorporated under the laws of any State, any Territory of the United States, Puerto Rico, or the Virgin Islands, or which is operating under the Code of Law for the District of Columbia (except a national bank), and includes any unincorporated bank the deposits of which were insured on August 23, 1935, under the provisions of this Act. "(b) The term 'State member bank' means any State bank which is a member of the Federal Reserve System, and the term 'State nonmember bank' means any State bank which is not a member of the Federal Reserve System. "(c) The term 'District bank' means any State bank operating under the Code of Law for the District of Columbia. "(d) The term 'national member bank' means any national bank located in any of the States of the United States, the District of Columbia, any Territory of the United States, Puerto Rico, or the Virgin Islands which is a member of the Federal Reserve System. "(e) The term 'national nonmember bank' means any national bank located in any Territory of the United States, Puerto Rico, or the Virgin Islands which is not a member of the Federal Reserve System. "(f) The term 'mutual savings bank' means a bank without capital stock transacting a savings bank business, the net earnings of which inure wholly to the benefit of its depositors after payment of obligations for any advances by its organizers. "(g) The term 'savings bank' means a bank (other than a mutual savings bank) which transacts its ordinary banking business strictly as a savings bank under State laws imposing special requirements on such banks governing the manner of investing their funds and of conducting their business: Provided, That the bank maintains, until maturity date or until withdrawn, all deposits made with it (other than funds held by it in a fiduciary capacity) as time savings deposits of the specific term type or of the type where the right is reserved to the bank to require written notice before permitting withdrawal: Provided further, That such bank to be considered a savings bank must elect to become subject to regulations of the Corporation with respect to the redeposit of maturing deposits and prohibiting withdrawal of deposits by checking except in cases where such withdrawal is permitted by law on the effective date from specifically |