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One, the direct purchase authority permits the Treasury to maintain lower cash balances since any temporary or seasonal shortage could be accommodated through direct borrowing from the Federal Reserve System. By maintaining a lower level of cash balances, the interest expenses on the national debt are correspondingly reduced.

Two, the direct purchase authority permits the Treasury an alternative source of borrowing when conditions in the money markets are temporarily unfavorable. The Treasury is able to postpone for a short time market borrowing when such borrowing could be extremely disruptive.

Third, the direct purchase authority is a big element in our financial planning for a national defense emergency. In these circumstances, the Government could need an immediate and ready source of cash at a time when our financial markets were seriously disrupted. It is for this reason that an authority as large as $5 billion is required although such a large amount has never been used.

HISTORY OF LEGISLATION

The legislation was introduced in the House of Representatives by Mr. Patman on February 15,1968, as H.R. 15344. The bill was reported by the House Committee on Banking and Currency on March 14, 1968, and was passed by the House of Representatives on March 28, 1968. The bill was referred to the Senate Banking and Currency Committee on March 29.

A companion bill (S. 2923) was introduced in the Senate on February 5, 1968. Hearings were held on S. 2923 on April 3 before the Subcommittee on Financial Institutions.

On April 22, H.R. 15344 was reported favorably without amendments by the full Senate Committee on Banking and Currency. The legislation passed the Senate on April 24 and was signed into law on May 4, 1968.

DIGEST OF STATUTE

The statute amends section 14(b)(1) of the Federal Reserve Act (12 U.S.C. 355) by extending until July 1, 1970, the authority of Federal Reserve banks to purchase U.S. obligations directly from the Treasury. Under existing Law, this authority would have expired as of July 1, 1968.

BANK PROTECTION ACT

[H.R. 15345]

[Public Law 90–389, approved July 7, 1968] To provide security measures for banks and other financial institutions and to

provide for the appointment of the Federal Savings and Loan Insurance Corporation as receiver

PURPOSE OF LEGISLATION

Public Law 90–389 directs the appropriate bank supervisory agencies to issue regulations establishing minimum standards for the installation and operation of security measures on the part of federally insured banks and savings and loan associations. The legislation is aimed at reducing the rising number of robberies which have plagued banks and savings and loan associations. The maintenance of adequate security standards will act as a deterrent to potential criminals and will aid law enforcement officials in the apprehension and conviction of those responsible for bank robberies.

The legislation also authorizes the Federal Home Loan Bank Board to appoint the Federal Savings and Loan Insurance Corporation (FSLIC) as a receiver in the case of State-chartered savings and loan associations placed in receivership or closed by State authorities. The aim of the legislation is to enable the FSLIC to effect an orderly disposition of the assets of insured associations whose depositors have been reimbursed by FSLIC insurance payments. Since the FSLIC would normally have a claim to at least 95 percent of the assets of a State-insured association undergoing liquidation, the FSLIC has a vital interest in seeing that the liquidation of the association proceeds in an orderly manner. Similar authority already exists for federally chartered associations.

HISTORY OF LEGISLATION

H.R. 15345 was introduced by Mr. Patman as a bank protection bill on February 15, 1968. Hearings were held by the House Banking and Currency Committee on April 23 and the bill was reported by the House committee on April 30 and passed by the House of Representatives on May 6. It was referred to the Senate Banking and Currency Committee on May 8. A companion bank protection bill was introduced in the Senate on February 20 (S. 3001) by Senator John Sparkman and referred to the Senate Banking and Currency Committee. Hearings were held on April 1 and 2, before the Subcommittee on Financial Institutions under the chairmanship of Senator William Proxmire. The bill, S. 3001, was reported from subcommittee to full committee on May 7.

A separate bill to provide for the appointment of the Federal Savings and Loan Insurance Corporation as a receiver was introduced in the Senate on May 3. Hearings on the measure, S. 3436, were held before the full Senate Committee on Banking and Currency on May 20.

On June 11, the Senate committee met in executive session and amended H.R. 15345, the Bank Protection Act, to include an amended version of S. 3436 dealing with savings and loan receiverships. The Senate committee then ordered reported H.R. 15345, as amended. The bill, as amended, was considered and passed by the Senate on June 19 and on June 24 the House of Representatives concurred in the Senate amendments. The legislation was signed into law on July 7, 1968.

DIGEST OF STATUTE Public Law 90-389 provides that the banking regulatory agencies shall issue rules establishing minimum standards at reasonable cost with respect to the installation, maintenance, and operation of security devices and procedures for banks and savings and loan associations. The regulations would be issued by the Comptroller of the Currency for national banks and district banks, the Federal Reserve Board for Federal Reserve banks and member State banks, the Federal Deposit Insurance Corporation for nonmember insured banks, and the Federal

98-841—68—11

Home Loan Bank Board for federally chartered or insured savings and loan associations. The legislation directs that the regulations shall be promulgated by the Federal supervisory agencies within 6 months from the date of enactment of the act.

Section 6 of the legislation deals with savings and loan receiverships and amends section 406(c) of the National Housing Act by adding two additional paragraphs. The first new paragraph, 406(c)(2), empowers the Federal Home Loan Bank Board to appoint the FSLIC as receiver for State savings and loan associations provided that all of the following three conditions are met:

(1) A conservator, receiver, or other custodian has been appointed for at least 15 days under State law or the association has been closed under State law; and

(2) The Board determines that the same grounds required for the appointment of a receiver for a Federal association exist for the State association. These grounds are specified in section 5(d) (6)(A) of the Home Owners' Loan Act which permits the appointment of a receiver if any one of the following five conditions exists: (i) Insolvency, (ii) substantial dissipation of assets, (iii) unsafe or unsound practices, (iv) willful violation of a cease-anddesist order, or (v) concealment of books and records; and

(3) Savings account holders are unable to withdraw their funds. The second new paragraph, 406(c)(3)(A), applies to State associations in FSLIC receivership, the provisions of section 5(d) of the Home Owners' Loan Act of 1933 which deals with Federal associations in receivership. Among the applicable provisions of section 5(d) are those which authorize the Board to adopt regulations for associations in receivership; for the conduct of receiverships; and for the exercise of functions by members, directors, or officers of an association during a receivership. The Board is also authorized to enforce the section including rules and regulations issued thereunder. In addition, the Board is permitted to act in its own name and through its own attorneys. The FSLIC as receiver is empowered to buy at its own sale subject to the approval of the Board.

In addition, section 5(d) also provides for prompt judicial review of the Board's appointment of the FSLIC as receiver. These provisions would also be extended to the appointment of the FSLIC as receiver for State associations. Under section 5(d) (6)(A) insured associations are authorized to bring an action to remove the FSLIC as receiver within 30 days after its appointment. Such an action could only be brought in the U.S. district court for the judicial district in which the home office of the insured institution is located or in the U.S. District Court for the District of Columbia. The court could either dismiss the action on the merits or direct the Board to remove the receiver. The statute requires that such proceedings be given precedence over other cases pending in the courts and that they be in every way expedited.

The appointment of the FSLIC as receiver by the Board would not otherwise be subject to judicial attack. Section 5(d)(6)(C) provides that no court may take any other action toward the removal of a receiver, or, except at the instance of the Board, restrain or affect the excercise of powers or functions of a receiver.

Section 406(c)(3)(B) authorizes the FSLIC to liquidate the institution in an orderly manner or make such other disposition of the matter as the FSLIC might deem to be in the best interests of the institutions, its savers, and the FSLIC.

MICHIGAN NATIONAL BANK BRANCH OFFICES

[S. 356] To permit the establishment and operation of certain branch offices by the

Michigan National Bank, Lansing, Michigan

PURPOSE OF BILL

The bill would permit the Comptroller of the Currency to reverse an earlier legal finding which denied the operation of four branches to the Michigan National Bank, Lansing, Mich., pursuant to a general consolidation of six national banks.

HISTORY OF LEGISLATION

S. 356 was introduced by Senator Hart on January 16, 1967. Hearings were held before the Subcommittee on Financial Institutions on March 25, 1968. The bill was reported by the Banking and Currency Committee on July 9, 1968, and passed the Senate on July 11, 1968. It was referred to the House Banking and Currency Committee on July 12.

DIGEST OF BILL

The bill provides that notwithstanding any other provision of law. the Michigan National Bank, Lansing, Mich., may, with the approval of the Comptroller of the Currency, reestablish and operate as branches at such locations as shall be approved by the Comptroller of the Currency, the office in Saginaw, Mich., and the three offices in Grand Rapids, Mich., or any of them, which were in lawful operation as branches of the Saginaw National Bank, Saginaw, Mich., and the First National Bank, Grand Rapids, Mich., prior to their consolidation with the Lansing National Bank under the name Michigan National Bank, Lansing, Mich.

CONSUMER CREDIT AND THE POOR

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Hearings were held by the Subcommittee on Financial Institutions on April 7, 1968 on consumer credit and the poor. The specific focus of the subcommittee's inquiry was a report released by the Federal Trade Commission in March of 1968 on Installment Credit and Retail Sales Practices of District of Columbia Retailers.

The FTC survey covered those District of Columbia retailers of furniture and appliances having estimated sales of at least $100,000 for the year 1966. The 96 retailers providing data had combined sales of $226 million, which represented about 85 percent of the sales of furniture, appliance, and department store retailers in the District of Columbia.

These retailers were classified into two groups: those appealing primarily to low-income consumers and those appealing to a more general market. The principal conclusion of the study is that prices in the low-income stores were substantially higher for identical or inferior merchandise. On the average, prices for furniture and appliances in stores catering to low-income persons were 60 percent higher than the prices in stores catering to a more general market.

Testimony on the FTC report was provided by Paul Rand Dixon, Chairman of the FTC and Betty Furness, Special Assistant to the President for Consumer Affairs. In addition, Mr. William O'Brien, Assistant Director of the Bureau of Federal Credit Unions testified on Project Moneywise, a special program developed by the Bureau to stimulate the establishment of credit unions in low-income neighborhoods.

As a result of the testimony, legislation was introduced and signed into law to authorize the continuation of Project Moneywise on an expanded basis. (See Public Law 90–375.)

FINANCIAL INSTITUTIONS, AND THE URBAN CRISIS

Hearings were held by the Subcommittee on Financial Institutions from September 30 through October 4 on financial institutions and the urban crisis. The purpose of the hearings was to determine what actions have been and can be taken in the private sector to channel more credit into the inner city. The hearings focused on deficiencies in mortgage credit, business credit, and consumer credit. Some of the questions explored by the hearings include the following:

(1) What are financial institutions doing now to help alleviate the problems of our cities?

(2) What is the proper role of government and private financial institutions in meeting urban problems? Are new types of governmental or quasi-governmental agencies needed, or can private institutions do the job?

(3) What are the existing constraints which impede the flow of credit into the ghetto?

(4) To what extent do existing regulations, examination procedures and laws restrict the flow of credit into ghetto areas? Can these restrictions be eliminated or modified?

(5) To what extent would broader investment powers of financial institutions result in additional flows of credit into the ghetto?

(6) Have Federal chartering policies made it difficult to establish Negro owned financial institutions in ghetto areas?

(7) Have examination practices been overly critical of investments in ghetto areas?

(8) What kinds of governmental inducements would stimulate financial institutions to channel more capital into the gehtto?

(9) To what extent are governmental subsidies needed and to what extent are self-liquidating, guarantee type approaches adequate?

(10) What would be the effect of legislation requiring financial institutions to allocate a certain percentage of their resources to inner city areas or to investments which benefit residents of ghetto areas?

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