BANKING, HOUSING AND URBAN AFFAIRS NINETY-FOURTH CONGRESS SECOND SESSION ON S. 2304 TO STRENGTHEN THE SUPERVISORY AUTHORITY OF THE 1976 69-710 O MARCH 26, 1976 Printed for the use of the Committee on Banking, Housing and Urban Affairs U.S. GOVERNMENT PRINTING OFFICE 7jy76 Robert C. Holland, Governor, Federal Reserve System.... Robert E. Barnett, Chairman, Federal Deposit Însurance Corporation__ C. Westbrook Murphy, Deputy Comptroller for Law and Chief Counsel; accompanied by Robert B. Serino, Director of Enforcement and Com- pliance, Office of the Comptroller of the Currency- Ronald A. Terry, chairman, First Tennessee National Corp.; and Gerald Sinclair, executive vice president, Salem National Bank; on behalf of Letter from Governor Holland to Senator Proxmire enclosing summary of each cease and desist order and written agreement issued by the Federal Reserve System during the past five years. - Legislative proposals under FDIC consideration as a result of the failure of U.S. National Bank and related enforcement problems. FDIC adopts final regulation of inside transactions of nonmember banks.. FDIC approval and record keeping requirements pertaining to insider Proceedings brought by the Comptroller of the Currency pursuant to the cease and desist provisions of the Financial Institutions Act of 1966. FINANCIAL INSTITUTIONS SUPERVISORY POWERS FRIDAY, MARCH 26, 1976 UNITED STATES SENATE, COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS, Washington, D.C. The committee met at 10 a.m., pursuant to notice, in room 5302, Dirksen Senate Office Building, Senator William Proxmire, chairman of the committee, presiding. The CHAIRMAN. The committee will come to order. Today we hold hearings on S. 2304, a bill to strengthen the supervisory authority of the Federal banking agencies over financial institutions and their affiliates. Senator Tower and I introduced this bill on September 9, 1975 upon the joint recommendation of the Federal Reserve, the Federal Deposit Insurance Corporation and the Comptroller of the Currency. The bill would augment the authority of the regulatory agencies to take supervisory actions to cure violations of law or unsafe or unsound conditions in the banking system. In addition, the bill contains a significant change in the authority of the regulatory agencies to remove bank officials to include actions of gross negligence or in willful disregard of the safety of a bank. The bill would also give specific authority to the Federal Reserve to order divestiture of bank holding company subsidiaries and new and stiffer proscriptions against insider loans are provided. I strongly support this legislation as a step in the right direction. At the same time, in my judgment, passage of this bill will not cure the fundamental defects in our regulatory scheme which have been characterized as a competition-in-laxity and in Chairman Burns' words, "conducive to subtle competition among regulatory authorities, sometimes to relax constraints, sometimes to delay corrective measures." We all recognize that while the regulators may need more laws, what is really needed most is the will to use the powers that Congress gives them. The authority the agencies now have to conduct bank examinations is perhaps the broadest possessed by any regulatory agency. Yet the capitalization of our banking institutions has deteriorated, and it has deteriorated more gravely under some regulators more than others. Thus, while I believe that the added powers contained in S. 2304 are important, I do not believe they will do the whole job unless our regulatory structure is recast. [Copy of the bill follows:] (1) |