CONSOLIDATION OF BANK EXAMINING AND SUPERVISORY FUNCTIONS MONDAY, APRIL 12, 1965 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON BANK SUPERVISION AND INSURANCE Washington, D.C. The subcommittee met, pursuant to call, at 10 a.m., in room 2128, Rayburn House Office Building, Hon. Abraham J. Multer (chairman of the subcommittee) presiding. Present Representatives Multer, Moorhead, McGrath, Hansen, Brock, Talcott, Clawson, and Johnson. Also present: Representatives Gonzalez, Minish, and Todd of the full committee. Mr. MULTER. Good morning. The committee will please be in order. Before proceeding with my opening statement, I place in the record at this time a copy of the two bills under consideration, H.R. 107 and H.R. 6885, together with a staff analysis and comparison of the two bills, and a report dated April 14, 1965, from Mr. Martin, Chairman, Board of Governors of the Federal Reserve System, addressed to the chairman of the full committee, the Honorable Wright Patman. (H.R. 107, H.R. 6885, the staff analysis, and the letter referred to follow :) [H.R. 107, 89th Cong., 1st sess.] A BILL To establish a Federal Banking Commission to administer all Federal laws relating to the examination and supervision of banks Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Federal Banking Commission Act". SEC. 2. It is hereby declared to be the policy of the Congress (1) To provide for a more uniform, equitable, and efficient administration of Federal banking laws, by eliminating the present overlapping of regulatory jurisdiction, fragmentation of responsibility, and resulting conflicts of policy; (2) To permit the Board of Governors of the Federal Reserve System to concentrate upon its primary responsibilities in the field of monetary policy by relieving it of the additional burdens of functioning as an administrative tribunal and supervisory agency; and (3) To preserve and strengthen the principle of the dual banking system by charging a single impartial agency with the administration of Federal banking laws in consonance with that principle, and by apportioning the burden of Federal assessments in such a manner as to make equitable allowance for assessments on State banks for State supervision. 3 SEC. 3. The remainder of this Act is divided into titles, chapters, and sections as follows: TITLE I-FEDERAL BANKING COMMISSION CHAPTER 1 Sec. 4. Establishment of the Commission; Quorum. Sec. 8. Certain Executive Functions Vested in the Chairman. Sec. 9. Delegation of Functions; Review by the Commission. Sec. 10. Federal Deposit Insurance Corporation to Bear Expenses of the Commission. Sec. 11. Refunds to State Banks. Sec. 12. Reports to Congress. TITLE II-TRANSITIONAL PROVISIONS CHAPTER 2 Sec. 21. Effective Dates. CHAPTER 3 Secs. 31-34. Continuance in Force of Certain Rules and Regulations. CHAPTER 4 Secs. 41-44. Transfers of Certain Records, Property, and Personnel. CHAPTER 5 Secs. 51-55. Procedure for Employment by the Commission of Certain Federal Reserve Personnel. CHAPTER 6 Secs. 61-66. Interim Operation of the Commission and Interim Audits by the General Accounting Office; Initial Report. TITLE III-CONFORMING AMENDMENTS CHAPTER 7 Secs. 101-195. Amendments to Certain Provisions of Law Codified in Title 12 of the United States Code With Certain Related Amendments to the Internal Revenue Code of 1954. Secs. 201-217. Amendments to the Act of 1956 with CHAPTER 8 Federal Reserve Act and the Bank Holding Company CHAPTER 9 Secs. 301-317. Amendments to the Federal Deposit Insurance Act. CHAPTER 10 Secs. 401-422. Amendments to Miscellaneous Provisions of Law. TITLE I-FEDERAL BANKING COMMISSION CHAPTER 1 ESTABLISHMENT OF THE COMMISSION; QUORUM SEC. 4. There is hereby established the Federal Banking Commission, hereafter in this Act referred to as the "Commission", which shall consist of a chairman and four other members, appointed by the President by and with the advice and consent of the Senate. Three members of the Commission shall constitute a quorum. QUALIFICATIONS OF MEMBERS; TERMS OF OFFICE SEC. 5. (a) The members of the Commission shall be appointed without reference to political affiliations and solely on the ground of fitness to perform the duties of their office. In this Act, unless otherwise indicated, the term "member" includes the Chairman. (b) The Chairman and other members shall be initially appointed for terms expiring on June 30 of the second, fourth, sixth, eighth, and tenth calendar years beginning after the date of enactment of this Act, as designated by the President at the time of nomination. Any member or Chairman appointed after the initial appointments have been made shall be appointed for a term expiring ten years after the expiration of the term for which his predecessor was appointed, except that the term of a member appointed to fill a vacancy (other than a vacancy in the chairmanship) shall expire at the end of the term for which his predecessor was appointed. A vacancy in the chairmanship may be filled either as other vacancies or by appointing a member of the Commission to serve as Chairman for the remainder of the term for which he was appointed as a member, and by appointing a new member for the unexpired portion of the term of the former Chairman. Any member or Chairman of the Commission may continue to serve as such after the expiration of his term unless and until his successor has been appointed and has qualified. CERTAIN INTERESTS AND EMPLOYMENTS PROHIBITED SEC. 6. (a) No member of the Commission may hold stock in or be an officer, director, or employee of any bank, trust company, bank holding company, or other financial institution subject to the jurisdiction of the Commission. Each member, before entering upon his duties as such, shall certify in writing under oath that he is in compliance with this requirement and such certification shall be filed with the Commission. (b) The prohibition contained in subsection (a) shall also apply to any former member for two years after the termination of his membership if he did not serve the full term to which he was appointed. FUNCTIONS TRANSFERRED TO THE COMMISSION SEC. 7. (a) All bank examining and other banking supervisory functions (except with reference to Federal Reserve banks) of the Board of Governors of the Federal Reserve System and the several Federal Reserve banks are transferred to the Commission. (b) All currency issue and redemption functions of the Comptroller of the Currency are transferred to the Secretary of the Treasury, and all other functions of the Comptroller are transferred to the Commission. (c) All functions of the Board of Directors of the Federal Deposit Insurance Corporation are transferred to the Commission. CERTAIN EXECUTIVE FUNCTIONS VESTED IN THE CHAIRMAN SEC. 8. (a) Subject to the provisions of subsection (b) of this section, the Chairman of the Commission is vested with, and may delegate the performance of, the internal administration of the Commission, including the appointment and supervision of employees and the distribution of business among members, employees, and administrative units. (b) (1) In the exercise of his functions under subsection (a), the Chairman shall be governed by the general policies of the Commission and by such regulatory decisions, findings, determinations, rules, and regulations as the Commission may by law be authorized to make. (2) The appointment by the Chairman of the heads of major administrative units shall be subject to the approval of the Commission. (3) The assignment of personnel to regular and full-time employment in the office of any member of the Commission shall, subject to the general personnel policies of the Commission, be made by that member. (c) The Chairman of the Commission may designate one member as Vice Chairman. The Vice Chairman shall have power to act in the temporary absence or disability of the Chairman, or in the event of the death, resignation, or permanent incapacity of the Chairman, to act as Chairman pending appointment of his successor. DELEGATION OF FUNCTIONS; REVIEW BY THE COMMISSION SEC. 9. (a) Subject to the Administrative Procedure Act and to the remaining subsections of this section, the Commission may, in its discretion, by published order or rule, delegate any function not vested in the Chairman to one or more hearing examiners or members or employees of the Commission. (b) The Commission shall review any action at a delegated level (1) upon the application of any institution whose status as a national bank, as a member of the Federal Reserve System, or as an institution whose deposits are insured by the Federal Deposit Insurance Corporation is terminated by such action; (2) upon the application of any holding company affiliate whose voting permit under section 5144 of the Revised Statutes of the United States is revoked by such action; (3) upon the application of any person removed from office as a director or officer of any bank by such action; (4) upon the affirmative vote of any member of the Commission upon an application for review by any person adversely affected by such action; or (5) upon the affirmative vote of two members of the Commission that the Commission review such action of its own motion. The Commission shall by regulation prescribe reasonable time limits and procedural rules respecting such review. (c) The Commission may not delegate the function of making rules and regulations of general applicability and future effect, but may delegate the function of making statements of particular applicability or interpretations or implementations of policies expressed in statute law or in the rules or regulations of the Commission. (d) Action at a delegated level shall be deemed the action of the Commission for all purposes, including appeal or review, if the Commission declines to review such action, or if no review by the Commission is sought pursuant to the Commission's rules for seeking such review. FEDERAL DEPOSIT INSURANCE CORPORATION TO BEAR EXPENSES OF THE COMMISSION SEC. 10. (a) All of the costs and expenses of the Commission, including the salaries of its members and employees, shall be paid by the Federal Deposit Insurance Corporation as operating costs and expenses of the Corporation. (b) All of the assessments, penalties or other charges which the Commission is authorized to make shall be paid to the Federal Deposit Insurance Corporation and may be used to defray the operating costs and expenses of the Corporation. REFUNDS TO STATE BANKS SEC. 11. (a) The Commission shall direct the Federal Deposit Insurance Corporation, as soon as practicable after the close of each calendar year, to refund to each insured bank (other than a national bank) an amount equal to the lesser of (1) the bank's proportionate share of the Corporation's noninsurance expenses for that year as determined in accordance with subsection (b), and (2) the net amount actually paid by the bank with respect to such year as fees, assessments, or similar charges to defray the cost of State bank examination and supervision. (b) For the purposes of subsection (a) of this section, a bank's proportionate share of the Corporation's noninsurance expenses for any given year shall be computed as follows: (1) The total operating costs and expenses of the Corporation for that year shall be reduced by any expenses for which the Commission is specifically reimbursed through assessments or other means other than insurance assessments, and the difference thus obtained shall be multiplied by a factor of two-thirds. (2) The total of all of the average assessment bases (as defined in section 7(b)(3) of the Federal Deposit Insurance Act) for all insured banks for the first semiannual period in such year shall be added to the total of all such bases for the second semiannual period in such year, and the sum thus obtained shall be divided by two. (3) The amount determined in accordance with paragraph (1) shall be divided by the amount determined in accordance with paragraph (2). (4) The average assessment base of the bank for the first semiannual period in such year shall be added to the average assessment base of the bank for the second semiannual period in such year, and the sum thus obtained shall be divided by two. (5) The amount determined in accordance with paragraph (4) shall be multiplied by the ratio determined in accordance with paragraph (3), and the amount so determined shall be the bank's proportionate share of the Corporation's noninsurance expenses for the year in question. (c) The Corporation shall maintain a reserve for its unliquidated and unpaid liabilities to make refunds pursuant to this section. In each calendar year the Corporation shall add to the reserve and charge as an operating expense an amount equal to the aggregate of the refunds which it estimates will be payable to State banks in the following year. The amount of refunds paid shall be deducted from the reserve when paid. The Corporation may make adjustments to the reserve from time to time in such manner as may be in accordance with accepted principles of accounting. REPORTS TO CONGRESS SEC. 12. The Commission shall make a report to the Congress of its activities and recommendations as soon as practicable after the close of each calendar year. TITLE II-TRANSITIONAL PROVISIONS CHAPTER 2 EFFECTIVE DATES SEC. 21. (a) Sections 1 through 6, 8, 9, 12, 21, 31 through 34, 41, 51 through 55, 61 through 66, 404, 416, and 421 of this Act shall take effect on the date of enactment. (b) Sections 7, 10, 11(b), 11 (c), 42 through 44, 101 through 195, 201 through 217, 301 through 317, 401 through 403, 405 through 415, 417 through 420, and 422 shall take effect on the first day of the first calendar year which begins after the date of enactment. (c) Section 11(a) shall take effect on the first day of the second calendar year which begins after the date of enactment. CHAPTER 3 CONTINUANCE IN FORCE OF CERTAIN RULES AND REGULATIONS SEC. 31. (a) The Board of Governors of the Federal Reserve System, by published order or rule, shall designate all its rules and regulations the authority for the making of which the Board will retain after the effective date of section 7 of this Act. (b) Any rules and regulations of the Board of Governors of the Federal Reserve System which are not designated by the Board pursuant to subsection (a) and which are in effect immediately prior to the effective date of section 7 of this Act shall thereafter remain in effect until withdrawn by the Federal Banking Commission or superseded by such rules and regulations as it may prescribe. SEC. 32. All rules and regulations of the Comptroller of the Currency which are in effect immediately prior to the effective date of section 7 of this Act shall thereafter remain in effect until withdrawn by the Federal Banking Commission or superseded by such rules and regulations as it may prescribe. SEC. 33. All rules and regulations of the Federal Deposit Insurance Corporation or the Board of Directors thereof which are in effect immediately prior to the effective date of section 7 of this Act shall thereafter remain in effect until withdrawn by the Federal Banking Commission or superseded by such rules and regulations as it may prescribe. SEC. 34. Any reference to the Board of Governors of the Federal Reserve System, the Board of Directors of the Federal Deposit Insurance Corporation, or the Comptroller of the Currency in any rule or regulation remaining in effect pursuant to section 31 (b), 32, or 33 after the effective date of section 7 of this Act shall where appropriate be deemed, after such date, to be a reference to the Secretary of the Treasury or the Federal Banking Commission. CHAPTER 4 TRANSFER OF CERTAIN RECORDS, PROPERTY, AND PERSONNEL SEC. 41. The Comptroller of the Currency shall transmit to the Board of Governors of the Federal Reserve System the original organization certificates of the Federal Reserve banks. SEC. 42. (a) The Board of Governors of the Federal Reserve System and the several Federal Reserve banks shall transfer to the Federal Banking Commission all records kept by them in connection with functions transferred to the Commission by this Act, except that the Board or the banks may transfer copies of any such records for which they anticipate a continuing need in connection with other functions. (b) The Board of Governors of the Federal Reserve System and the several Federal Reserve banks shall transfer, without consideration or for nominal consideration, to the Federal Deposit Insurance Corporation, any tangible personal property used by them in connection with the performance of functions |