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an insured institution in violation of the act, or was engaging in or performing proscribed activities or services, the Corporation could apply to the proper U.S. district court for an appropriate order of divestiture of such control or for an order requiring compliance with the provisions of the act.

(5) All expenses of the Federal Home Loan Bank Board or of the Corporation under section 408 are considered as nonadministrative expenses.

Subsection (i)-Prohibited acts. It is unlawful for (1) any holding company or subsidiary thereof, or any director, officer, employee, or person owning, controlling, or holding more than 25 percent of the voting shares of such holding company or subsidiary, to hold, solicit, or exercise any proxies in respect of any voting rights in an insured mutual institution, or (2) any director, officer, or person owning, controlling, or holding more than 25 percent of the voting shares of a holding company, (A) except with prior approval of the Corporation, to serve at the same time as a director, officer, or employee of an insured institution or another savings and loan holding company, not a subsidiary of such holding company, or (B) to acquire control, or to retain control for more than 2 years after enactment of the bill, of any insured institution, not a subsidiary of such holding company. The above-mentioned prohibitions are consistent with other provisions of the proposed bill designed to control further holding company acquisitions of insured institutions.

(3) It is also unlawful for any individual, except with the prior approval of the Corporation, to serve or act as a director, officer, or trustee of, or become a partner in, any savings and loan holding company after having been convicted of any criminal offense involving dishonesty or breach of trust.

Subsection (1)-Penalties. For the willful violation of any provision of the proposed section 408 or any rule, regulation, or order thereunder, the offending company or individual is subject to criminal sanctions and, upon conviction, the company is subject to a fine of not more than $1,000 for each day the violation continued, and the individual would be subject to a fine of not more than $10,000 or imprisonment for not more than 1 year, or both.

Moreover, every director, officer, partner, trustee, agent, or employee of a holding company is subject to the same penalties for false entries in any book, report, or statement of such holding company as are applicable to officers, agents, and employees of insured institutions for false entries in any books, reports, or statements of such institution under 18 U.S.C. 1006. This provision corresponds to section 8 of the Bank Holding Company Act. (See 12 U.S.C. 1847.)

Subsection (k)—Judicial review.-Any aggrieved party could obtain judicial review of an order issued by the Corporation under this section by filing a petition for review in a U.S. court of appeals within 30 days after service of the order.

Subsection (1)--Saving clause. This section provides that nothing contained in the bill shall be construed as approving any act or conduct in violation of law, or shall constitute a defense to any action involving violation of the antitrust laws.

REGULATION OF MAXIMUM RATES OF INTEREST PAID

ON TIME AND SAVINGS DEPOSITS

[S. 3133] To extend for 2 years the authority for more flexible regulation of maximum rates

of interest or dividends, higher reserve requirements and open market operations in agency issues

PURPOSE OF BILL

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S. 3133 extends for 2 additional years the authority to regulate the maximum rate of interest paid on time and savings deposits by commercial banks and insured thrift institutions. This temporary authority was first enacted by the Congress on September 21, 1966 (Public Law 89–597) to restrain excessive rate competition between financial institutions. "Rate wars" between savings and loan associations and commercial banks had severely disrupted credit markets and had an especially adverse effect upon mortgage credit and the level of new housing starts. With continued pressure on credit markets, all financial agencies of the Government agree that an additional 2-year extension of the rate control authority is absolutely essential to help prevent a similar financial disruption such as occurred in 1966.

In addition to extending the rate control authority, the bill also clarifies the authority of the bank supervisory agencies to prevent deceptive and misleading advertising with respect to time and savings deposits.

HISTORY OF LEGISLATION The legislation was first signed into law on September 21, 1966 (80 Stat. 823), and was to be effective for a period of 1 year. The authority conferred by the act was extended for an additional year by the act of September 21, 1967 (81 Stat. 266).

S. 3133, extending the authority for an additional 2 years, was introduced by Senator John Sparkman on March 11, 1968. Hearings were held on April 3 before the Subcommittee on Financial Institutions under the chairmanship of Senator William Proxmire. The bill was favorably reported by the subcommittee on May 7, 1968, with an amendment clarifying the authority of the banking agencies to prevent misleading rate advertising. On June 11, the full Senate Banking and and Currency Committee met and ordered the bill reported with an additional amendment providing the Federal Reserve Board with new authorities for stabilizing the flow of mortgage credit during periods of tight money.

The bill was reported to the Senate on June 28, 1968, and was considered by the Senate on July 23 and July 24. On July 24 the Senate deleted the second committee amendment concerning mortgage credit by a vote of 46 to 45. Following this, the Senate added three amendments which (1) permits commercial banks to offer U.S. agency issues as collateral on loans from Federal Reserve Banks; (2) increases the Federal Home Loan Bank Board's authority to regulate the liquidity conditions of savings and loan associations, and (3) eliminates the liability for share account insurance premium prepayments to the

Federal Savings and Loan Insurance Corporation on the part of savings and loan association undergoing a net annual loss in savings shares.

The Senate then passed S. 3133, as amended, on July 24, 1968.

A companion bill (H.R. 16092) was reported by thě House Banking and Currency Committee on July 26, 1968.

DIGEST OF BILL

Section 1 of the bill extends for 2 additional years the act of September 21, 1966 (80 Stat. 823) as amended by the act of September 21, 1967 (81 Stat. 226). The provisions extended include:

(1) Discretionary authority to limit rates paid by banks on time and savings deposits;

(2) Flexible authority to establish differential rate ceilings based on deposit size as well as other factors;

(3) Authority of the Home Loan Bank Board to establish rate ceilings for savings and loan associations;

(4) Authority to establish higher reserve requirements on bank time deposits;

(5) Authority of the Federal Reserve System to purchase agency issues in the open market;

(6) The requirement for consultation among financial agencies prior to rate ceiling changes. Section 2 clarifies the authority of financial agencies to promulgate rules governing the payment of interest on deposits in addition to establishing rate ceilings. Such language would make clear the authority to regulate deceptive or misleading advertising.

Section 3 authorizes the Federal Reserve System to accept as collateral for loans to member banks any obligation (including U.S. agency obligations) which is eligible for rediscount or purchase directly by the Federal Reserve System.

Section 4 increases the authority of the Federal Home Loan Bank Board to regulate the liquidity conditions of savings and loan associations. The Board would have the authority to require liquidity reserves ranging from 4 to 10 percent of deposits, compared to a spread of 4 to 8 percent in present law. In addition, the Board would have the authority to regulate the mix of instruments held for liquidity purposes.

The list of instruments which can be counted against liquidity requirements is also expanded to include time and savings deposits, State and local bonds, and banker's acceptances.

Section 5 authorizes Federal savings and loan associations to invest in any asset which can be counted against liquidity requirements. This makes it possible for Federal savings and loan associations to invest in banker's acceptances.

Section 6 eliminates the liability for share account insurance premium prepayments to the Federal Savings and Loan Insurance Corporation on the part of savings and loan associations undergoing a net annual loss in savings shares.

FEDERAL CREDIT UNION ACT AMENDMENTS

(H.R. 14907]
[Public Law 90–375, approved July 5, 1968]
To amend the Federal Credit Union Act

PURPOSE OF LEGISLATION The purpose of the legislation is to modernize and update the provisions of the Federal Credit Union Act so that Federal credit unions can meet the growing credit needs of their members. The legislation would: increase the time ceiling on secured loans from 5 to 10 years; increase the unsecured loan limit up to $2,500; permit investment in the shares of State central credit unions; permit the purchase of the notes of liquidating credit unions; permit the delegation of borrowing authority; require semiannual instead of quarterly audits; and authorize the Bureau of Federal Credit Unions to conduct consumer credit counseling programs for low income persons. In addition, the legislation makes a number of minor technical changes in the act.

HISTORY OF LEGISLATION

H.R. 14907 was introduced in the House of Representatives on January 29, 1968 by Mr. Patman, and referred to the House Committee on Banking and Currency. Related credit union bills were introduced on February 20 (H.R. 15347) and March 26 (H.R. 16218). Hearings on all three measures were held on April 25 and on April 30 the committee reported H.R. 14907 with amendments adopted from H.R. 15437 and H.R. 16218 as well as other amendments. It passed the House on May 27 and was referred to the Senate Committee on Banking and Currency on May 28.

Similar bills were introduced in the Senate on February 20 (S. 3002) by Senator Sparkman and Senator Proxmire, and on March 22 (S. 3214) by Senator Sparkman. In addition, S. 3395 dealing with consumer credit counseling was introduced on April 26 by Senator Proxmire. All three bills were referred to the Senate Committee on Banking and Currency and hearings were held on May 24 before the Subcommittee on Financial Institutions under the chairmanship of Senator Proxmire.

On June 11, the full committee met in executive session and agreed to report H.R. 14907 with an amendment adding_the provisions of S. 3395 concerning consumer credit counseling. H.R. 14907 was also amended to delete a provision authorizing the sale of accident insurance.

Section 1(7) makes a number of minor technical changes in the Federal Credit Union Act, including: the elimination of references to examinations by a credit union supervisory committee sinee examinations are distinct from audits and are the function of the Bureau of Federal Credit Unions; a provision that the audit report to members may be a summary of the report to the directors of a credit union; the substitution of the words “credit union” for “corporation” and "members” for "shareholders” in section 16 of the act, thus conforming to more familiar terminology; and a clarification that the suspension of a supervisory committee member is possible by a majority vote of the board of directors.

Section 2 authorizes the Bureau of Federal Credit Unions to conduct consumer credit counseling programs which serve low-income persons. The legislation authorizes $300,000 for this purpose in fiscal year 1969 and $1 million in fiscal year 1970.

The bill as amended was reported by the Senate Banking Committee on June 18 and passed by the Senate on June 19. On June 24, the House concurred in the Senate amendments and on July 5, 1968, the legislation was signed into law.

DIGEST OF STATUTE

Section 1(1) of the legislation extends the maximum maturity limit on secured loans from 5 to 10 years. The existing limit of 5 years would remain in effect for unsecured loans.

Section 1(2) permits federally chartered credit unions to invest in the shares of State chartered credit unions.

Section 1(3) permits Federal credit unions to purchase the notes of liquidating credit unions pursuant to the regulations of the Bureau of Federal Credit Unions. Such purchases are limited to not more than 5 percent of the purchasing credit union's unimpaired capital and surplus.

Section 1(4) permits the board of directors of Federal credit unions to delegate borrowing authority to the credit union's executive committee.

Section 1(5) increases the unsecured loan limit to 292 percent of unimpaired capital and surplus or $2,500, which ever is smaller, but in no event shall the unsecured loan limit be less than $200.

Section 1(6) changes the frequency of annual audits of Federal credit unions from four times a year to two times a year.

DIRECT PURCHASE AUTHORITY OF TREASURY

OBLIGATIONS

(H.R. 15344)

(Public Law 90-300, approved May 4, 1968] To amend section 14(b) of the Federal Reserve Act, as amended, to extend for 2

years the authority of Federal Reserve banks to purchase U.S. obligations directly from the Treasury

PURPOSE OF LEGISLATION Public Law 90–300 extends for 2 additional years the authority of the Federal Reserve Board to purchase public debt obligations directly from the Treasury up to a limit of $5 billion outstanding at any one time. This authority, which would otherwise have expired on June 30, 1968, was first granted in its present form in 1942 for a temporary period. It has been renewed by the Congress on 13 separate occasions since that time. While the direct purchase authority has been used sparingly over the years, it has proven to be essential to efficient financial management.

Continuation of the direct purchase authority is necessary for three

reasons:

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