Today it is generally recognized that shareholders in savings and loan associations, although their investments are of a long-term nature, desire and are entitled to a reasonable availability of cash funds in case of need. From the point of view of the association, the payment of withdrawals in a manner satisfactory to the investor is necessary for the maintenance of confidence and public support. From the point of view of home-mortgage finance, institutions specializing in long-term home financing will not obtain sufficient funds to serve the needs of home builders or purchasers unless some degree of liquidity is assured. The Federal charter for savings and loan associations provides for a liberal withdrawal schedule, 10 and the Federal Savings and Loan Insurance Corporation expects insured associations in general to meet reasonable withdrawal requests promptly.

Liquidity of home-financing institutions, however, presents peculiar problems. The overwhelming portion of the resources of savings and loan associations is invested in long-term home mortgages which naturally do not constitute liquid assets. In this respect, the liquidity of such institutions is necessarily limited. It is in regard to liquidity that the Federal Home Loan Bank System performs one of its important services. The Bank System enables member institutions to obtain, without delay, cash on mortgage collateral and thus to meet withdrawals required by investors who are temporarily in need of money. The availability of funds in a central reserve bank reduces the necessity and costs of maintaining large liquid funds within each member institution. By supplementing their own liquidity with a large liquidity reserve, the Bank System places its member institutions in a position to meet any current or future needs with a greater degree of success than in the past.

Federal Aid

The above review reveals the considerable influence which the agencies under the direction of the Federal Home Loan Bank Board have exerted on the improvements in practices and operations of home

10 Charter K contains the following provisions for repurchases of shares: "Holders of share accounts shall have the right to file with the association their written applications to repurchase their share accounts, in part or in full. at any time. Upon the filing of such written applications to repurchase, the association shall number and file the same in the order received and shall either pay the holder the repurchase value of the share account, in part or in full as requested, or, after 30 days from the receipt of such application to repurchase, apply at least one-third of the receipts of the association from holders of share accounts and borrowers, to the repurchase of such share accounts in numerical order; provided, that if any holder of a share account applies for the repurchase of more than $1,000 of his share account or accounts, he shall be paid $1,000 in order when reached, and his application shall be charged with such amount as paid and shall be renumbered and placed at the end of the list of applications to repurchase, and thereafter, upon again being reached, shall be paid a like amount, but not exceeding the value of his account and until paid in full shall continue to be so paid, renumbered, and replaced at the end of the list."

financing institutions. However, the establishment of these agencies in itself was perhaps an even greater factor in the restoration of such institutions. Through the Federal Home Loan Bank System, savings and loan associations have been provided with a central source of financing, the absence of which proved so disastrous during the first few years of the depression. Through the establishment of a national system of savings and loan associations operating under a uniform Federal charter, the Federal savings and loan associations, a more complete geographic distribution of home-financing institutions over the country was achieved. Insurance of accounts through the Federal Savings and Loan Insurance Corporation has helped to revive and maintain confidence in the security and safety of thriftand home-financing institutions.

Along with the establishment of Federal agencies in the field of home finance, direct Federal assistance, in the form of investments, has largely contributed to the rehabilitation of thrift- and homefinancing institutions. Primarily designed to supply immediate funds for home finance at a time when private money sources had dried up, they have helped to develop a better system of home-financing institutions, to encourage the flow of private money into such institutions, and to stabilize the home-mortgage structure of the country. The following table presents a summary of Federal investments in thrift- and home-financing institutions and in permanent agencies. under the Federal Home Loan Bank Board designed to assist such institutions:

Government investment in home-financing institutions and related Federal agencies, June 30, 1939

1

Federal Home Loan Bank System 1.

Federal Savings and Loan Insurance Corporation 2.

Federal savings and loan associations 3,

Insured State-chartered savings and loan associations 1_

State-chartered noninsured member associations of the Federal

$124, 741, 000

100, 000, 000

217, 025, 500

42, 917, 010

508, 000

Total...

585, 191, 510

1 Investment of United States Treasury in the capital stock of the 12 Federal Home Loan Banks. Investment of the Home Owners' Loan Corporation in the capital stock of the Federal Savings and Loan Insurance Corporation.

Investment of the United States Treasury and the Home Owners' Loan Corporation in shares of Federal Savings and loan associations.

+ Investment of the Home Owners' Loan Corporation in shares of such institutions.

183130-39--7

IV

Federal Savings and Loan Associations

INCREASE IN NUMBER AND ASSETS OF FEDERAL ASSOCIATIONS

D

URING the year ending June 30, 1939, the number of savings and loan associations operating under Federal charter increased from 1,346 to 1,386. This net addition of 40 institutions to the Federal system of savings and loan associations was due, in the main, to conversions of State-chartered associations to Federal charter. As by and large the purpose of the Act providing for the establishment of new Federal savings and loan associations in areas not adequately served has been accomplished, the chartering of newly organized associations has naturally diminished in importance.

From July 1, 1938, to June 30, 1939, there were 78 charters issued, of which 4 were for new associations, and 74 for associations converting from State to Federal charter. During the same period, there were 38 charters canceled because of merger and liquidation. At the end of the fiscal year 1939 there were 100 applications for the issuance of Federal charters on file.

Owing to the continued growth in the resources of existing Federal savings and loan associations, the percentage increase in aggregate assets during the year by far exceeded the percentage increase in the number of associations operating under Federal charter. On June 30, 1939, the total estimated assets of Federal savings and loan associations stood at $1,442,069,000, as compared to $1,213,874,000 at the end of the preceding fiscal year-an increase of 18.8 percent. Exhibit 34 presents the number and estimated assets of Federal savings and loan associations, classified by new and converted associations, for each of the fiscal-year periods from June 30, 1934, to June 30, 1939.

1 The difference between the 1,386 Federal savings and loan associations reported as chartered and the 1,380 Federal savings and loan associations listed as members of the Federal Home Loan Bank System is due to the lapse of time between the issuance or withdrawal of Federal charters and the issuance or withdrawal of membership certificates. The difference results from such time lapses mainly in the cases of conversions from State to Federal charter and terminations.

NUMBER

CHART XXIX

NUMBER AND ASSETS OF FEDERAL SAVINGS AND LOAN ASSOCIATIONS FIGURES AS OF JUNE 30

The following table indicates significant changes in the size distribution of Federal savings and loan associations during the fiscal year 1939; there was a general shift from the lower to the higher asset brackets, with the result that the number of associations in the asset brackets up to $250,000 decreased from 539 to 454, while the number of associations in each of the higher asset brackets increased.

Distribution of Federal savings and loan associations, by size groups

At the end of the reporting period, 47 percent of all Federal savings and loan associations had assets in excess of $500,000, and 28 percent had assets in excess of $1,000,000.

Exhibit 35 shows the number, estimated assets, and mortgage loans outstanding of Federal savings and loan associations as of June 30,