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Mr. REUSS. What about potential misconduct short of the possession of a criminal record?

Mr. CAMP. When you get into potential misconduct we are getting into a nebulous area. In our examination of the banks we are very careful to ascertain that the policies that are being laid down by the board of directors are sound and that they are being followed by the management of the bank as pointed up by the asset condition of the bank.

Now, you can't always predict absolute dishonesty. I would say here, in the case of Marlin, we took every step in my judgment that could possibly have been taken. But where you have a dishonest person it doesn't always come to light. Theoretically you can have a national bank examiner in the bank at 12 m. today and if you have rascals there with no previous record they could commit some act of thievery at 12:15.

Mr. REUSS. Thank you.

Mr. Barr, I have a question of you. Why do you not fix up your bill along the following lines my view as of this moment, I am favorably disposed toward your bill because while I deeply regret all the duplication and overlapping in our regulatory agencies, here all you want is to be told something so you can do whatever the statute now lets you do and I do not think that is unreasonable. However, I do not want to be party to forcing duplicate reporting on our banks.

If the Comptroller of the Currency's regulation, which I have not seen, is as good as Mr. Camp says it is, would you settle for an amendment to the bill so that you do not require an additional report? Would any report good enough to satisfy the Comptroller of the Currency be good enough for you, if the Comptroller is required to pass on this information under the terms of your bill?

Mr. BARR. This is in fact what we are asking for, Mr. Reuss. The information that we are asking for under this bill is practically identical to the information that is required by the Comptroller's regulation. Mr. REUSS. Your bill says, the reports requirements of this bill shall be in addition to any reports that may be required pursuant to other provisions of law. So, would not an amendment maybe of just a few words be in order to indicate that as far as you are concerned, the reports of the Comptroller now are adequate, and if they are, then all the Comptroller has to do is tell you as soon as he knows? Mr. BARR. Yes. Mr. Reuss, I would like to check with counsel on this, but this seems like a very reasonable request. The only thing we are asking here is to get this information from the Comptroller. On your suggestion that we look into the situation of the lions and tigers eating each other in the coliseum, this is something long overdue.

Mr. REUSS. We cannot go to any conclusions at this hearing.

Mr. BARR. The thing that I need at the moment is some way to get information from the Comptroller, the information that I think he has. I would be willing to take the Comptroller's opinion on what he thinks is adequate.

Mr. REUSS. Will you at this point in the record submit in mandatory language so we do not require duplicate reporting from the national banks?

Mr. BARR. Yes, we will do that.

(The information was subsequently submitted and may be found on p. 58.)

Mr. REUSS. My time is up.

Mr. BARR. May I point out that there is a simple method of doing this? The Comptroller can rescind his regulation and there would be no problem.

Mr. REUSS. In the current state of mere coexistence between the Comptroller and the FDIC I think it would be better to fix up the law. Mr. BARR. I would accept that.

Mr. REUSS. One additional question. I do not want to go over my time. Rather than answering it, please submit it for the record. You state, Mr. Barr, that you have no purpose to control or veto changes of ownership and management as the result of this bill? Mr. BARR. That is correct.

Mr. REUSS. However, I would like to have you state for the record exactly what controls under the law and under those circumstances in which you now exercise over management before there is any change in ownership, when, in effect, do you now refuse insurance to a bank on the grounds that you do not like the cut of the jib of the management. And then-that is point 1-point 2 is, if those controls are good for issuing insurance in the first instance, why are they not equally apropos under a change of ownership?

My time is up so I would appreciate your answering that.
Mr. BARR. Yes, sir.

(The information referred to follows:)

Hon. HENRY S. REUSS,

FEDERAL DEPOSIT INSURANCE CORPORATION,

House of Representatives, Washington, D.C.

OFFICE OF THE CHAIRMAN,
Washington, August 13, 1964.

MY DEAR CONGRESSMAN: During the course of the hearings yesterday on the bill which would provide for notice of change in control of management of insured banks you expressed interest in and requested information concerning what controls under the law and what practices are now exercised over bank management before there is a change in ownership. You asked if these controls are good for passing upon insurance applications in the first instance, why are they not equally applicable under a change of ownership.

Under the provisions of the Federal Deposit Insurance Act whenever a bank applies to this Corporation for deposit insurance the Board of Directors in acting upon the application must take into consideration certain factors prescribed in section 6 of the Federal Deposit Insurance Act. These factors are (1) the financial history and condition of the bank, (2) the adequacy of the bank's capital structure, (3) its future earnings prospects, (4) the general character of the bank's management, (5) the convenience and needs of the community to be served by the bank, and (6) whether the bank's corporate powers are consistent with the purposes of the Federal Deposit Insurance Act.

In the process of chartering national banks or admitting State banks to membership in the Federal Reserve System both the Comptroller and the Board of Governors of the Federal Reserve System must take into consideration the abovementioned factors. The Corporation must also give consideration to these factors in passing upon applications from insured State banks which are not members of the Federal Reserve System to establish and operate new branches or to change the locations of their main office or branches.

Under these provisions of law the Corporation is afforded an adequate opportunity to make a thorough and complete study and analysis of the caliber of a new bank's management. It is also able to give consideration to the caliber of the existing management of a bank when a bank applies for consent to change its office or to establish or change the location of a branch. There is no other statutory means except periodic examinations whereby the Corporation is able to appraise the caliber of insured banks' management. It would be virtually impossible to continuously survey all insured banks in order to determine whether the people who are serving as officers and directors of the banks are competent and honest bankers. Accordingly, neither the above statutory provisions nor the Corporation's examining authority could be employed as a device for continually determin

ing whether the management of an insured bank is the same or maintains the same standards of integrity and capability as those required by the Corporation when a bank is admitted to Federal deposit insurance.

The notice required by the bill now pending before the committee would, in our opinion, be an effective tool for the Corporation to learn of management changes between examinations to investigate the caliber of the new management of the bank and to determine what corrective action, if any, is necessary.

Sincerely yours,

The CHAIRMAN. Mrs. Dwyer?
Mrs. DWYER. No questions.
The CHAIRMAN. Mr. Ashley?

JOSEPH W. BARR, Chairman.

Mr. ASHLEY. What is the problem, Mr. Camp, with duplication? Why is duplication a bad thing? Are there not instances where duplication is actually efficient?

Mr. CAMP. I do not believe that the banks would agree to that. They have a great reporting burden on them now, sir.

Mr. ASHLEY. But this bill calls for copies, does it not? Copies of reports-not new reports, but copies of reports.

Mr. BLOOM. If I could address myself to that, Mr. Ashley. The duplication referred to in Mr. Camp's statement was a duplication between the report which the national bank would be required to file with the Comptroller and the report which would be required by the bill would not be the same report. The bill requires certain information which is different in form than the information required by our regulation. Without the amendments suggested by Mr. Reuss, you couldn't use the same piece of paper. This would be two reports. Mr. ASHLEY. You require a report from national banks that are changing ownership and control?

Mr. CAMP. That is right.

Mr. ASHLEY. Could you not duplicate that and fire it off to Mr. Barr?

Mr. BLOOM. It wouldn't comply with this bill because you have that line in there that the report under the bill shall be in addition to other reports required by law. Now, of course, if that were satisfactory to the FDIC, this could be done as an administrative matter. But, Mr. Ashley, our objection to this bill is much more than the administrative difficulty. We have a basic objection to this bill.

Mr. ASHLEY. Your statement starts with a criticism of the bill's administrative weakness. Then, on page 2, you state that your objection is not concerned merely with the jurisdictional question. Mr. BLOOM. We could not characterize it as that.

Mr. ASHLEY. If it is not administrative and not jurisdictional, what would it be?

Mr. BLOOM. There is a basic philosophical government policy question involved in this.

Mr. ASHLEY. Now we get to Mr. Reuss' arena, do we not?
Mr. BLOOM. I am afraid I do not quite understand.

Mr. ASHLEY. What philosophy?

Mr. BLOOм. I would like to have Mr. Abramson of our office address himself to that.

The CHAIRMAN. Please identify the witness.

Mr. CAMP. This is Dr. Victor Abramson who is the head of the Department of Economics in the Office of the Comptroller of the Currency.

Dr. ABRAMSON. The philosophical point that is referred to in the statement, Mr. Ashley, is the question of whether or not any regulatory powers should reside with the insuring agency. The view that is expressed here is that there wouldn't be any point in centralizing these reports in the hands of the FDIC unless they had some regulatory power, and without taking up the matter of what powers they have with respect to State-chartered banks, we don't believe they have any with respect to the national banks.

Mr. ASHLEY. The information that is sought happens to be useful for several purposes, is that not what we are getting at here?

Dr. ABRAMSON. I don't believe that Mr. Barr feels that he could take any action as the result of receiving these reports as far as national banks are concerned.

Mr. ASHLEY. Let's get back to the Marlin case for half a second. Mr. BARR. May I comment on that?

Mr. ASHLEY. Why was it that your shop did not inform Mr. Barr's shop in May?

Mr. CAMP. I think we did inform Mr. Barr. Mr. Barr sent us a letter of commendation on the alertness that we displayed there. I do not have it with me.

Mr. ASHLEY. Do you have a "duplicate," if I may use the word, of that letter?

Mr. CAMP. I do, but I don't have it with me. I will be pleased to enter it in the record.

Mr. ASHLEY. That may be interesting. Could we have that? I would like to have that letter in which you informed Mr. Barr of the Marlin change of control.

Mr. CAMP. I am saying we have a letter from Mr. Barr complimenting the Comptroller's Office on the alertness which was shown by our examiners in the Marlin case and keeping the FDIC advised at all times. I believe that is the tone of the letter.

(The information referred to has been submitted and is as follows:)
COMPTROLLER OF THE CURRENCY,
U.S. TREASURY,
Washington, D.C., August 12, 1964.

Hon. WRIGHT Patman,

Chairman, House of Representatives, Committee on Banking and Currency, Longworth House Office Building, Washington, D.C.

DEAR MR. CHAIRMAN: During the course of the hearing this morning on H.R. 12267, reference was made to the letter from Mr. Joseph W. Barr to Mr. Saxon in connection with the Marlin Tex., insolvency. During this exchange, we were requested to supply for the record a copy of this letter.

We are pleased to submit herewith a copy of this letter which is dated March 12, 1964, as it was released to the press by Mr. Barr. The letter indicates that the Federal Deposit Insurance Corporation was kept "fully informed of all the facts as they developed in the Marlin situation. Consequently, your action in closing this bank came as no surprise to this Corporation and we had all our plans made to move quickly into Marlin."

Sincerely,

WILLIAM B. CAMP, Acting Comptroller of the Currency.

The Honorable Joseph W. Barr, Chairman of the Board of Directors of the Federal Deposit Insurance Corporation, today released the attached letter: FEDERAL DEPOSIT INSURANCE CORPORATION, Washington, March 12, 1964.

Hon. JAMES J. SAXON,
Comptroller of the Currency,
Treasury Department, Washington, D.C.

DEAR JIMMY: In connection with the insolvent First National Bank of Marlin, Marlin, Tex., I want to advise you that the cooperation this Corporation and Í received from your Regional Comptroller of the Currency Norman R. Dunn, and your national bank examiner Thomas L. Cook, was all that I could possibly ask. Mr. Lloyd Thomas, FDIC supervising examiner in Dallas, and I drove to Marlin on Tuesday night (March 10) and immediately began conferences with Mr. Dunn. Mr. Thomas, Mr. Dunn, Mr. Cook, and I went to the bank together at 8 o'clock on Wednesday morning (March 11). We talked to the press together. Mr. Dunn and Mr. Cook helped us begin our payout process. I was deeply impressed with the competence and intelligence of both your representatives. I want to repeat that they could not have been more cooperative.

Mr. Dunn kept Mr. Thomas fully informed of all the facts as they developed in the Marlin situation. Consequently, your action in closing this bank came as no surprise to this Corporation and we had all our plans made to move quickly into Marlin.

I should like to state that it is my opinion that had it not been for the vigilance of your men, this Corporation and the citizens of Marlin could have taken a very heavy loss.

Sincerely yours,

JOSEPH W. BARR, Chairman.

Mr. ASHLEY. You are testifying, are you, Mr. Camp, that Mr. Barr was notified in May by the Comptroller of the Currency by letter? Mr. CAMP. I couldn't say, sir, just when Mr. Barr was notified. Mr. ASHLEY. That is a matter of some importance.

Mr. CAMP. It would go to the point here, that I think Dr. Abramson and Mr. Bloom have raised. Since the FDIC has no regulatory power, what action would they have taken had we notified them at any point, shall we say?

Mr. ASHLEY. Mr. Barr, what is your comment to that?

Mr. BARR. It would depend on the nature of the information, Mr. Ashley. If we seriously thought of this, and had indication that things were serious enough, we have the power to go in and examine a national bank. We do have the power to go in an examine the bank and submit our findings to the Comptroller and see what action we can get from him.

Mr. ASHLEY. If you find that the situation is serious enough, can you withdraw your insurance?

Mr. BARR. Not from a national bank. It is only the Comptroller who can do this. However, we do have the power to move in with our examination first. It has never been done. Frankly, I have considered it recently. I have decided not to do it. The only reason I have considered doing it recently is that we have had no information from the Comptroller.

May I correct my statement? I made an error, Mr. Ashley. We do have the right to withdraw insurance from any bank, national as well as State. So we could move in if we felt the condition was serious enough. We could examine the bank and withdraw insurance. This Corporation has never done this to a national bank. But, prior to 1944, termination proceedings were commenced against national banks in a number of cases.

Mr. ASHLEY. If you had the information on which to base it.

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