Mr. BARR. What we can do about this, Mr. Fino, is in cooperation with the State bank supervisors, whom we work with very closely, keep the new management under scrutiny until we are satisfied as to its character. We do have an extraordinary provision in that we can withdraw the bank's insurance. This, in effect closes the bank. This would destroy the bank, but we do have that power. Actually, the way I think this would work is that in cooperation with the State supervisors, we can take corrective action, step by step. They have the intermediate powers. Our power is the cannon at the end of the line. If the management doesn't behave properly we can withdraw insurance and as a result cause the closing of the bank.

Mr. FINO. Let me ask you this for my own edification: What provision is there in the law regarding the giving of notice to any agency of Government of any change in management and control? Mr. BARR. There is no such provision in the law, Mr. Fino.

Mr. FINO. What is the objection of the Comptroller of the Currency?

Mr. CAMP. Our objection is that it may be a first step in vesting regulatory powers, we feel, in the hands of the FDIC.

Mr. FINO. Where in the bill does it give any authority to the FDIC?

Mr. CAMP. It requires that the Comptroller of the Currency, who has the jurisdiction and responsibility for examination and regulation of national banks give these reports to the FDIC and the Federal Reserve.

Mr. FINO. Reports of what?

Mr. CAMP. Changes in ownership where it would have an effect. Mr. FINO. You say this is now a requirement in the law?

Mr. CAMP. We have been doing it since 1962 as far as the national banks are concerned and we do not feel that it is necessary to include them in the bill.

Mr. FINO. Mr. Barr, have you received notice from the Comptroller about the five failures or changes in management of those five banks that failed?

Mr. BARR. In the case of Marlin, Mr. Fino, we were notified when the bank was going down. We were not notified and we get no notices from the Comptroller of the Currency in spite of the fact that the law specifies that we shall have access to his reports of examination. We do not have this access and we have not had it for nearly a year. He will not give us this information.

We feel, Mr. Fino, that like any insurance company we should have an idea of what we are insuring. All we can do is to take the word of the Comptroller of the Currency. We are not asking to regulate these banks.

Mr. ASHLEY. Will the gentleman yield?

Mr. FINO. Just a minute.

I would imagine if your department, your Comptroller, cooperated with the FDIC and kept the FDIC fully apprised of everything that was going on, I do not think Mr. Barr would have been here this morning. Apparently he is not satisfied with the notices he has been getting or has not been satisfied with the situation, with the result that he has come in here and asked us to give him the type of legislation that will make it mandatory on these banks to serve notice of change of management. I do not see anything objectionable. After all, he has the responsibility. He was insuring these banks and then he has

to pay off whenever there is a failure. I think the responsibility carries also the obligation of having notice of what is going on.

Mr. CAMP. Sir, I believe that Mr. Barr has said earlier that, of the bank failures of recent vintage and which we have under consideration here, there has only been one national bank involved. We do not have supervision over the State banks and I am sure that Mr. Barr would agree, that in the one instance involving a national bank he was kept fully informed and, as a matter of fact, as I pointed out earlier, he sent us a letter very kindly pointing out the fact that he was fully informed.

Mr. FINO. Mr. Camp, I cannot for the life of me see the objection where Mr. Barr comes in here and all he is asking us to do is to give him or require that notice of change in control and management be given to his agency and he says in his own statement he wants to make it abundantly clear that he is not asking for any legislation or for the authority to control or veto changes in ownership or management. He is not asking for anything. He just wants to be kept apprised. I do not see any objection, none whatsoever, and I am going to support this legislation. I am sorry but my time is up.

The CHAIRMAN. Mr. Reuss?

Mr. REUSS. Mr. Chairman, I am struck once again as I have been when I heard the Comptroller and the FDIC and the Fed going their different ways on bank regulation. How much this is like the Romans in the old Coliseum when they used to watch the lions and tigers tear each other apart. I think it would be a good idea if one of these years our committee turned its attention to the whole group-to the role of the Fed, the FDIC, and the Comptroller to see if we cannot produce a more rational and harmonious bank regulatory structure, but that is another story.

Mr. Barr, how did you fellows hear about the fiasco in Marlin, Tex. National Bank?

Mr. BARR. We were informed, if my memory serves me correctly, that this bank was in difficulty along about January. This is just when I came in and we watched it with the Comptroller of the Currency.

Mr. REUSS. If I may interrupt-how long prior to the January signs of trouble had the change of ownership occurred?

Mr. BARR. In May 1963.

Mr. REUSS. But you did not hear anything about that change of ownership?

Mr. BARR. No.

Mr. REUSS. You did not hear anything about it for 8 months, May to January?

Mr. BARR. That is correct, Mr. Reuss.

Mr. REUSS. Mr. Camp, is the requirement of the Comptroller, that changes in ownership in national banks, be normally communicated to the Comptroller is that under the authority of statutes?

Mr. CAMP. That is by regulation, sir.

Mr. REUSS. Do you have a copy of your regulation?

Mr. CAMP. Yes; I will read it to you.

Mr. REUSS. Do you have a copy of the statute on which you base your regulation?

Mr. CAMP. I refer to Mr. Bloom.

Mr. REUSS. I would like to have both the regulation and the statute on which you based this offered in evidence.

The CHAIRMAN. It will be inserted in the record at this point. (The information referred to follows:)

Hon. WRIGHT PATMAN,

COMPTROLLER OF THE CURRENCY, U.S. TREASURY,
Washington, D.C., August 12, 1964.

Chairman, House Banking and Currency Committee,

House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: At today's hearing on H.R. 12267, we were asked to submit a copy of our existing regulation requiring reports of change of control of the management of national banks and a copy of the statute pursuant to which the regulations were issued.

The regulation appears in section 12.1 of title 12 of the Code of Federal Regulations, a copy of which is attached.

Section 12.1 was promulgated in December of 1962 as part of an overall regulation dealing with corporate practices and procedures of national banking associations. At that time, in addition to the change of control reports, we instituted for the first time disclosure requirements on national banks requiring annual financial reports to stockholders, use of proxy statements in connection with shareholders' meetings and other disclosure requirements. The entire regulation was issued pursuant ot the general supervisory authority of the Comptroller of the Currency which is conferred by the National Bank Act, 12 U.S.C. 1 et seq. In addition to the general supervisory authority which may be inferred from the act as a whole, in connection with section 12.1 specifically, ample authority exists for requiring the reports specified therein in 12 U.S.C. 161 which confers authority on the Comptroller to call for reports from any national bank "whenever in his judgment the same are necessary for his use in the performance of his supervisory duties."

Sincerely,

Part 12. Ownership Reports of Capital Stock

ROBERT BLOOM, Chief Counsel,

§ 12.1 On and after the date hereof, each national bank shall promptly notify the Comptroller of the Currency whenever a change occurs in the ownership of its outstanding voting stock of sufficient magnitude to effect a change in control of the bank. It shall be the duty of the president or other chief executive officer of the bank to submit such a report whenever he has reason to believe that such a change has taken place. If there is any doubt concerning whether a particular change in ownership is sufficient to effect a change in control, such doubt shall be resolved in favor of submitting a report to the Comptroller. The report shall be in letter form and shall contain the number of shares involved, the identity of the sellers and purchasers of record, the identity of the beneficial owners of the shares involved, if such information is known to the reporting officer, the purchase price if known to the reporting officer, the total number of shares owned by the sellers and purchasers of record both immediately prior to and after the transaction being reported and the total number of shares owned by the beneficial owners of the shares involved both immediately prior to and after the transaction being reported if such information is known to the reporting officer.

The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the bank.

BANK EXAMINATIONS; REPORTS

§ 161. Reports to Comptroller of the Currency-Reports of condition; form; contents; date of making; publication

(a) Every association shall make reports of condition to the Comptroller of the Currency in accordance with the Federal Deposit Insurance Act. The Comptroller of the Currency may call for additional reports of condition, in such form and containing such information as he may prescribe, on dates to be fixed by him, and may call for special reports from any particular association whenever in his judgment the same are necessary for his use in the performance of his supervisory duties. Each report of condition shall contain a declaration by the president, a vice president, the cashier, or by any other officer designated by the board of directors of the bank to make such declaration, that the report is true and correct to the best of his knowledge and belief. The correctness of the report of condition shall be attested by the signatures of at least three of the directors of the bank other than the officer making such declaration, with the declaration that the report

has been examined by them and to the best of their knowledge and belief is true and correct. Each report shall exhibit in detail and under appropriate heads the resources and liabilities of the association at the close of business on any past day specified by the Comptroller, and shall be transmitted to the Comptroller within ten days after the receipt of a request therefor from him; and the statement of resources and liabilities in the same form in which it is made to the Comptroller shall be published in a newspaper published in the place where such association is established, or if there is no newspaper in the place, then in the one published nearest thereto in the same county, at the expense of the association, and such proof of publication shall be furnished as may be required by the Comptroller. Special reports called for by the Comptroller need contain only such information as is specified by the Comptroller in his request therefor, and publication of such reports need be made only if directed by the Comptroller.

Payment of dividends

(b) Every association shall make to the Comptroller reports of the payment of dividends, including advance reports of dividends proposed to be declared or paid in such cases and under such conditions as the Comptroller deems necessary to carry out the purposes of the laws relating to national banking associations in such form and at such times as he may require.

Reports of affiliates; form; contents; date of making; publication; definition; penalties

(c) Each national banking association shall obtain from each of its affiliates other than member banks and furnish to the Comptroller of the Currency not less than four reports during each year, in such form as the Comptroller may prescribe, verified by the oath or affirmation of the president or such other officer as may be designated by the board of directors of such affiliate to verify such reports, disclosing the information hereinafter provided for as of dates identical with those for which the Comptroller shall, during such year, require the reports of the condition of the association. For the purpose of this section the term "affiliate" shall include holding company affiliates as well as other affiliates. Each such report of an affiliate shall be transmitted to the Comptroller at the same time as the corresponding report of the association, except that the Comptroller may, in his discretion, extend such time for good cause shown. Each such report shall contain such information as in the judgment of the Comptroller of the Currency shall be necessary to disclose fully the relations between such affiliate and such bank and to enable the Comptroller to inform himself as to the effect of such relations upon the affairs of such bank. The reports of such affiliates shall be published by the association under the same conditions as govern its own condition reports. The Comptroller shall also have power to call for additional reports with respect to any such affiliate whenever in his judgment the same are necessary in order to obtain a full and complete knowledge of the conditions of the association with which it is affiliated. Such additional reports shall be transmitted to the Comptroller of the Currency in such form as he may prescribe. Any such affiliated bank which fails to obtain and furnish any report required under this section shall be subject to a penalty of $100 for each day during which such failure continues. As amended Sept. 8, 1959, Pub.L. 86-230, §§ 11, 22(b), 73 Stat. 458, 466; July 14, 1960, Pub.L. 86-671, § 5, 74 Stat. 551. Mr. REUSS. Does the Comptroller of the Currency concern himself with the competency and character of the people who run national banks?

Mr. CAMP. Yes, sir; that is one of his prime considerations.

Mr. REUSS. Well, what do you do about it? Suppose you find inexperienced people or people with criminal records, let us say, running a national bank. What do you do about it? Does something have to happen before you do something?

Mr. CAMP. Say a person with a criminal record, under the statute, and I have to refer this to Mr. Bloom, as to the particular statute, but anybody who has been convicted of a crime cannot serve as a director of a national bank,

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 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.