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and as their work becomes available and merits your attention, I will make it available to the Subcommittee.

Because NCUA's "Small Saver" regulation essentially broadens credit union ability to meet member savings needs, our economic impact analysis consisted primarily of the adverse effects of what would happen if we took no action. In essence, we are leaving to credit unions the decision of how to expand their share certificate programs to benefit the older and lower income members. As I noted earlier, it is up to the members of individual credit unions to determine the relative merits of changes in their dividend and lending policy.

With respect to the specific income categories specified in your letter, we are attempting now to meet the Subcommittee's information request. I have asked my staff to discuss with the staff of the Subcommittee the degree to which we are able to conduct the kind of analysis requested.

Analysis conducted assuming a Regulation Q free environment is very difficult. In addition to the obvious uncertainty of what market rates would be without Regulation Q, there is the additional problem of the fact that in many respects our small saver account proposals are part of the process of relaxing Regulation Q. Despite these analytical obstacles, we will do our best and make what analysis we derive available to this Subcommittee as soon as it is completed.

Court Decision

I agree with your assessment, Mr. Chairman, that the recent Court of

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Appeals decision could have serious repercussions on the ability of those institutions so affected to serve both borrowers and depositors fairly.

At the present time there are 976 Federal credit unions which have received approval from the National Credit Union Administration to offer share drafts to their members. Of this number, 740 are operational and over 792,000 credit union members are enjoying the benefits of a share draft account. The aggregate amount of these accounts is over $720 million while the average size of each account is $900. During the last quarter of 1978, 26.5 million share drafts were processed totalling almost $1.7 billion. Additionally, there are approximately 800 state chartered credit unions operating in 33 states with a total of 500,000 accounts.

Our assessment of the situation leads us to the conclusion that if remedial Congressional action is not completed by October 1, 1979, the tentative adjournment date, the National Credit Union Administration will be forced to announce phase-out plans for all Federal credit union share draft activites on that date. While it is difficult to assess the cost to credit unions of such a phase-out, there will be a substantial economic impact on those credit unions forced to shutdown share draft programs. This cost will be borne by each of the member/owners. As an additional matter, the decision raised serious questions concerning the use of certain related services, such as EFT, by Federal credit unions which are being

studied further at this time. This Subcommittee can be assured that as

soon as additional cost data is available, it will be immediately provided. I note with pleasure the prompt action of the Chairman in introducing

H.R. 3864, a bill to remove the prohibition on the payment of interest on demand deposits and to permit federally insured credit unions to receive demand deposits. We support this initiative and look forward to testifying before you next week. I know that the Chairman and Subcommittee members share my concern that a service with such obvious consumer benefits as the share draft program not be terminated due to our inability to resolve the

financial reform issues.

Mr. Chairman, this concludes my prepared statement. I will be glad to answer any questions you might have.

Table 1

Dividends Paid on Regular Share Accounts by
Federal Credit Unions, Selected Yearends, 1972 to 1977

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Note:

On September 13, 1973, the Administrator of NCUA increased the maximum dividend rate payable on regular shares in Federal credit unions from 6 to 7%.

Table 2

Selected Data Pertaining to Credit Union Total Savings, Six-Month Money Market Certificates (MMCs) and Certificates of Indebtedness (CIs), Monthly, 1978 and 1979

[Amounts in millions]

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Total savings, end of month (S.A.)-Net change during month:

$52,586 $52,892 $53,398 $52,456 $52,869 $53,477

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Credit union MMC's, end of month (N.S.A.)-

(2/)

$330

$600

$950

$1,278

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Total CIs and MMC's, end of month (N.S.A.) $1,505

$1,525

$1,876

$2,126

$2,445

$2,635

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1/ Preliminary.

2/ Authority to offer savings instruments similar to MMC's granted Federal credit unions on Novemeber 20, 1978. 3/ Percent of credit unions offering MMC's based on small sample of Federal credit unions with assets $5 million

or more.

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