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FINANCIAL INSTITUTIONS SUPERVISORY POWERS

tribel tatu. Consres. riste.
LED inter in Sankara ,Husio 4 - JUN 29
Laura
Housing

1976 HEARING

BEFORE THE

COMMITTEE ON
BANKING, HOUSING AND URBAN AFFAIRS

UNITED STATES SENATE

NINETY-FOURTH CONGRESS

SECOND SESSION

ON

S. 2304

TO STRENGTHEN THE SUPERVISORY AUTHORITY OF THE
FEDERAL BANKING AGENCIES OVER FINANCIAL INSTITU-

TIONS AND THEIR AFFILIATES

MARCH 26, 1976

Printed for the use of the
Committee on Banking, Housing and Urban Affairs

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1976

69-710 O

COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS

WILLIAM PROXMIRE, Wisconsin, Chairman JOHN SPARKMAN, Alabama

JOHN TOWER, Texas HARRISON A. WILLIAMS, JR., New Jersey EDWARD W. BROOKE, Massachusetts THOMAS J. MCINTYRE, New Hampshire BOB PACKWOOD, Oregon ALAN CRANSTON, California

JESSE HELMS, North Carolina
ADLAI E. STEVENSON, Illinois

JAKE GARN, Utah
JOSEPH R. BIDEN, JR., Delaware
ROBERT MORGAN, North Carolina

KENNETH A. MCLEAN, Staff Director
ANTHONY T. CLUFF, Minority Staff Director
CHARLES L. MARINACCIO, Special Counsel

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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:)

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