you have handled this fund, the great strength you have given to the banking of this Nation, and to now take it away from you and give it to the Treasury Department or to another agency, the Federal Banking Commission, I am just wondering whether it is going to be a good thing for the country and for the banking people and for the Nation at large.

So I say I take a dim view of it, and I am just wondering if one of the main purposes of this legislation isn't to take this fund away from the FDIC and give it to either the Treasury Department or another agency which is locked right into the Treasury Department.

Mr. RANDALL. Mr. Johnson, I would be remiss if I didn't also echo with you the important role that FDIC has played in the establishment of confidence and in bolstering the money supply of this country since its establishment in 1933. I think it has a distinguished and a great history and I am extremely proud to be a part of it. It has a fine staff and it is conducting itself in, I hope, a manner consistent with the high policies of this Nation, and I acknowledge these factors that I state and this is very important. I just acquired this job and I wouldn't mind staying with it for a little while either. Mr. JOHNSON. Thank you very much.

Mr. MULTER. And you wouldn't object if the Multer bill was enacted and a new banking commission were established and you were appointed to that commission to serve as its chairman.

[Laughter.]

Mr. RANDALL. Mr. Chairman, I hope you know by now that I will do the job that I am asked to do in the best manner that I can. I don't believe it is, or should be, the policy of an agency affected in this to try and legislate. We will try to contribute to your discussions in an informed manner if we are allowed to.

Mr. MULTER. Let me make the record amply clear, that as the sponsor of the Multer bill, if it should be enacted, I will have no choice in the personnel and I am sure the President will make the appointment without consulting with me as to who the chairman of the commission should be or who the members of the commission should be.

At the same time, let me again reiterate what should not be necessary to state again on this record. That is, that no one has found fault with the operation of FDIC. We all agree it has been an excellent operation. Nothing in either of these bills is aimed at any personality in FDIC. This is not an attempt to give the President some new appointments and it is not an attempt to take away some jobs from some people whom we don't like.

If the banking commission principle is followed by the committee and Congress, FDIC will, even though it will then be a part of that bill, will be continued as an independent agency.

The entire commission will be an independent agency and there will be no attempt to impair the fund or throw the fund into the General Treasury or to use it for any purpose except that which is required of it under existing statute.

At the same time, I think we might consider the possibility of a banking commission, independent of FDIC, continuing FDIC as a separate agency and doing just the insuring job. My own feeling is if we do that, then all of these examinations on the national level ought to be done by one board of examiners for all of the Federal agencies

that may have occasions to need examinations of banks in connection with any of their functions and powers.

In that connection we might consider the feasibility of joining the Federal Savings and Loan Insurance Corporation with the Federal Deposit Insurance Corporation-joining the two in one independent agency. Give us your thinking on that.

Here again you may be torn between the feeling that you ought not to comment on another agency and say what should be done with that agency. Just as you might not like them to say you ought to be put out of business and made part of their agency. But give us the best thinking of the FDIC Board on this subject.

I think

I, for one, can't see any need for two insuring agencies. it is just as important that FSLIC be an independent insuring agency as it is that FDIC be an independent insuring agency, but I can't see why it must be two insurance agencies. I can see why it might be necessary to have two different funds. The assessments are slightly different and maybe there is good reason to keep the funds separate. There might be more soundness attained by joining the two funds together. Whether it should be done by just joining the two agencies together and continuing two separate funds or one fund is something we would like to have your thinging on.

Now, I admire your optimism, Mr. Randall, as you expressed it about the possibility of resolving a lot of these differences by discussions. I think you will find, before you are too long in the job that you will have plenty of discussions but you are going to resolve none of these differences between the agencies as a result thereof, I am sorry to say. I think you should not hesitate after you have had that experience to come before us and say we can't resolve this, you will have to resolve it for us by legislation.

I think you will find willing ears here to help resolve those situations. Mr. RANDALL. We have a suggestion in this regard, Mr. Chairman, that presently is being reviewed by the Bureau of the Budget, We may be back before you shortly.

(The information requested follows:)

In the light of the performance of both agencies through the years, I do not consider it necessary or appropriate.

Mr. MULTER. We will be glad to hear you.

There is one other point and that is this. You talk about no duplication or overlapping among the primary functions of the three Federal banking agencies. Here there may be a difference of opinion as to what is primary and what is not primary. I would like to have you supplement the record with a statement of where you find duplication and overlapping, regardless of whether it is a primary function or an unimportant function, and give us the benefit of your thinking on that.

Mr. RANDALL. Yes.

(The information requested follows:)

There is very little, if anything, in the way of duplication of functions among the three bank regulatory agencies. Although all three agencies perform bank examinations, there is no duplication of the banks so examined. Approximately the same number of man-hours would likely be required to examine these banks if the agencies were to be consolidated. The statistical work is coordinated to avoid duplication.

As a matter of fact the three Federal agencies operate in well-defined separate spheres. Any apparent overlapping is generally resolved by the bank agencies through working agreements.

Mr. MULTER. Finally, may I most respectfully indicate my personal disagreement with the view that it is necessary to live with some of these things that have occurred or may occur in the future. I think it is not necessary to live with anything that goes wrong in any of these agencies or in the industry. I think it is our duty, joint duty, that of the agencies and of the Congress, to try and do something about those situations rather than just live with them, and I think you will agree with us, and come up with some suggestions along that line.

Are there any other questions?

Yes, Mr. Moorhead.

Mr. MOORHEAD. Thank you, Mr. Chairman.

Mr. Randall, I would like to go back to my hypothetical proposal and ask you to answer for the record, assuming that this committee should adopt that proposal: Should we add to it as a matter of equality an equal power of the FDIC to reject or refuse insurance to the national banks as it now has to State-chartered banks?

Mr. RANDALL. Mr. Moorhead, I think this is a very difficult thing to answer. It involves a concept of national policy that may be larger than that involved in just bank regulation, and that is the aspect of one Federal agency passing upon the activities of another Federal agency.

This does create some problems and I believe that only the Congress could answer this. I believe it is just an impossibility from someone within an agency to come to a statement of national policy in this regard.

Mr. MOORHEAD. I thank you. I will accept that as your answer.

Mr. MULTER. That suggests something that has always bothered me. As a matter of actual practice, when the Comptroller of the Currency gets an application for a new bank, a new bank charter, he will have his people go out into the field and make inquiries and interview people and look over the area. Since the statute requires that every national bank must be a member of the Federal Reserve System, the Federal Reserve Board sends out its man to make the same inquiries of the same people and to look over the same area. FDIC must insure the national bank if the charter is granted, therefore, FDIC sends someone, one or more persons out to do exactly the same thing, look over the area, interview the people, examine the documents.

Sometimes they do it together and sometimes they do it separately. Is this necessary duplication?

Mr. RANDALL. I believe, Mr. Chairman, that it would be wellMr. MULTER. Can't that be done once by the same people for the three agencies?

Mr. RANDALL. I think it would be well for us to submit a statement on this in regard to our historic practice and what currently is being done in this regard. I do believe that it has been a conscious effort. on the part of the three agencies to conserve their manpower and their time and to conserve the time and inconvenience of the banks and other people involved. We would like to submit this but I am certain that we are concerned about being positive elements in this regard and to do the job with as little inconvenience and as little duplication as possible.

Mr. CLAWSON. Would the chairman yield?

Mr. MULTER. Certainly.

Mr. CLAWSON. It seems to me that three independent appraisals might be very healthy in deciding whether a charter should be issued. I think there is some real strength in having this kind of approach to issuing a charter.

Mr. MULTER. That is why I asked Mr. Randall to comment on it. You can argue the question both ways. Where the three men go out together, interview the same people, and then arrive at a concensus of opinion and file a report-that is one thing. But to have three different people call upon the same individuals, interview the same individuals on three different occasions, and make the same kind of inspections, I don't know that this is really accomplishing anything. Mr. CLAWSON. If I am going to purchase a piece of property, I like three independent appraisers to go in and give me separate, independent opinions. Sometimes there is considerable variation in such appraisals. I think there is a salutary strength derived from this approach.

Mr. MULTER. You may be right on that but I would like to have the thinking of agency on that.

Mr. CLAWSON. Thank you.

Mr. MULTER. Anything else for Mr. Randall?

Mr. RANDALL. Mr. Multer, you submitted to us a letter with three specific questions. We are working on these. We hope to have a detailed study for you within the next 2 or 3 days.

Mr. MULTER. Fine.

And after you get your transcript, you take your time and review it and also answer the other questions that have been put to you today.

Mr. RANDALL. Yes, sir.

Mr. MULTER. It has been a pleasure to have you before us and we hope to have you with us on many other occasions and that they will be just as pleasant.

Mr. RANDALL. Thank you, Mr. Chairman.

Mr. MULTER. The committee will stand in recess subject to the call of the Chair.

I am sorry. Mr. Beller calls my attention to the fact that we are to meet tomorrow morning to hear the Comptroller of the Currency. The committee will stand in recess until tomorrow at 10 o'clock when Mr. Saxon will be our witness.

(Whereupon, at 11:25 a.m., the subcommittee was adjourned, to reconvene at 10 a.m., Friday, April 30, 1965.)

CONSOLIDATION OF BANK EXAMINING AND

SUPERVISORY FUNCTIONS

FRIDAY, APRIL 30, 1965

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON BANK SUPERVISION AND INSURANCE OF THE COMMITTEE ON BANKING AND CURRENCY, Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 2128, Rayburn House Office Building, Hon. Abraham J. Multer (chairman of the subcommittee) presiding.

Present: Representatives Multer, McGrath, Hansen, Talcott, Clawson, and Johnson.

Also present: Representative Gettys of the full committee.
Mr. MULTER. Good morning.

We will resume our hearings this morning on H.R. 107 and H.R. 6885. We are very pleased to have with us as our witness today the Honorable James J. Saxon, Comptroller of the Currency, a longtime friend and very able public servant. We are very pleased to have you with us this morning, Mr. Saxon. You may proceed in your own inimitable manner, either to read your prepared statement or file and summarize it.

STATEMENT OF HON. JAMES J. SAXON, COMPTROLLER OF THE CURRENCY

Mr. SAXON. Thank you, Mr. Chairman, I have a brief statement. if I may read that.

I appraised the Secretary of the Treasury of the committee's request that I testify, and the Secretary has authorized me to present my personal views to the committee.

The best test of the effectiveness of bank regulation is the performance of the banking industry itself. This performance is now at record levels throughout the country. Deposits, loans, and investments, and profits have reached new heights; and they continue to grow. Added banking facilities are being brought to areas which long had suffered deficiencies. The services offered to bank customers are being progressively broadened. The banking system is alive and teeming with energy. The consuming public is the ultimate beneficiary of all this. activity.

The record performance of the banking industry reflects a greater awareness by the regulatory authorities of the obligation to allow sufficient scope for innovation and initiative in banking to meet growing and changing consumer requirements. Consumer needs for banking services are constantly undergoing change as our population grows,

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