Section 4 would change existing law to require that all of the capital stock of a newly organized national bank must be paid in cash before it may commence business. Under existing law a national bank may be permitted to open for business when 50 percent of the capital stock has been paid in. It has long been the practice of the Comptroller to require that 100 percent must be paid in before a bank may be permitted to commence business. No requests for authority to pay in less than 100 percent of subscribed capital have been made in many years. Section 9 provides that if the date set in the articles of association of a national bank for holding the election of directors falls on a legal holiday, the shareholders meeting shall be held on the next following business day. Present law is silent on this situation and the practice in such cases has been to hold a brief shareholders meeting at which no business is transacted and the meeting adjourned until some subsequent date. It is desirable to cover this situation by legislation.

Section 10 would eliminate from the exceptions to the limitations on borrowing by national banks the obsolete reference to liabilities incurred under the provisions of the Reconstruction Finance Corporation Act, and would substitute therefor a reference to liabilities incurred under the provisions of the Federal Deposit Insurance Act. The purpose of this is to permit the Federal Deposit Insurance. Corporation to assist banks when necessary without regard to the borrowing limitations of the banks.

Section 11 would change from 5 to 10 days the time within which national banks must transmit required reports of condition to the Comptroller of the Currency. It is difficult for banks to compile the necessary information and furnish it within the 5 days allowed. A 10-day period would be more reasonable and equally satisfactory to our office.

Section 13 provides a general procedure for amending the articles of association of a national bank. There is no such provision in existing law.

Section 14 would extend the territorial applicability of the national banking laws throughout the United States and all of its possessions. Enactment of this section will eliminate any doubt as to whether national banks may be chartered in possessions outside of the continental United States.

Section 15 adds a new requirement that if a voluntary liquidation of a national bank involves the sale of its assets to another bank the purchase and sale agreement must be approved by two-thirds of the shareholders of the bank except in emergencies in which the Comptroller may waive the requirement for shareholder approval.

Section 18 transfers from the Comptroller of the Currency to the Federal Deposit Insurance Corporation certain specified functions in connection with national bank receiverships where the Federal Deposit Insurance Corporation has been appointed receiver. Since the Comptroller does not supervise or direct the actions of the Federal Deposit Insurance Corporation as receiver of an insured national bank, the supervising duties of the Comptroller should be transferred to the Federal Deposit Insurance Corporation.

Section 19 provides that during the absence or disability of the Comptroller, the Acting Comptroller of the Currency shall be a member of the Board of Directors of the Federal Deposit Insurance Corporation in his place. While the statute now provides that the Acting Comptroller of the Currency shall serve as a member of the Board in the event of a vacancy in the Office of the Comptroller and during the absence of the Comptroller from Washington, it says nothing about the Acting Comptroller of the Currency serving in that capacity in the event of the disability of the Comptroller. While it may be assumed that the Acting Comptroller of the Currency should serve as a director of the Federal Deposit Insurance Corporation during the disability of the Comptroller, the authority should be made statutory.

Section 20 rewrites the existing statutes on consolidations and mergers of State and national banks in order to make uniform the provisions of the various statutes. There would be eliminated the existing differences in some legal requirements such as the requirement for publication, the requirements of notice of shareholders meetings, the waiver of such notice, the procedure to be followed in determining dissenters' rights, the payment for the expense of appraisal or reappraisal made by the Comptroller, etc. It would also clarify existing ambiguities as to how long a dissenter may delay before proceeding with an appraisal, the time within which a dissenter's stock must be surrendered, the length of time which must elapse before the Comptroller can be asked to make a reappraisal, the disposition of the stock of dissenters, etc.

Section 21 would permit the directors of national banks to declare dividends on a quarterly basis as well as semiannually or annually. It would also require the approval of the Comptroller before the directors of any national bank may declare and pay to shareholders dividends in excess of retained net profits over a 3-year period. This section will tend to prevent disbursement of excessive dividends to shareholders which would result in the dissipation of needed capital funds.

Section 22 eliminates the requirement that reports of declarations of dividends must be furnished to the Comptroller, and adds a requirement that there shall be made to the Comptroller reports of payments 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 require reports of declaration of dividends no longer serves any useful purpose. The specific requirement of a report of payments of dividends conforms to the existing practice of the Comptroller of requiring reports of earnings and dividends at periodic intervals.

Section 23 would prevent any person from receiving deposits unless subjected to examination and regulation by banking laws of the United States or of the State where located.

Section 24 repeals obsolete provisions of law relating to agricultural credit corporations. The last such corporation was liquidated in 1938 and such corporations may not now be formed.

Section 25 would provide expressly that the name of every national bank shall include the word "national." Existing criminal statutes prohibit the use of the word “national” as part of the business name of anyone engaged in specified businesses, including banking, except "as permitted by the laws of the United States." This statute formerly provided also for the use of the word "national" by corporations organized under the laws of the United States, but this provision was dropped in the codification of the criminal statutes in 1948. It has always been the policy of the Comptroller's office to insist that the name of every national bank contain the word "national," but there is now no statute which expressly so provides. Enactment of this section will remove the possibility of questions arising with respect to this matter.

This completes our comments on the provisions of H.R. 8159. We believe that the provisions of H.R. 8159 are in the aggregate highly important. The national banking laws have not been revised for many years to bring them up to date from a technical standpoint. This bill in important measure accomplishes this purpose and we believe that it should be enacted. It will be very helpful to the national banking system.

The CHAIRMAN. Now we will hear from the American Bankers Association.

I recognize Mr. M. Monroe Kimbrel, who will speak today on behalf of the American Bankers Association.

STATEMENT OF M. MONROE KIMBREL, CHAIRMAN, COMMITTEE ON FEDERAL LEGISLATION; CHARLES R. MCNEILL, SECRETARY, NATIONAL BANK DIVISION; AND J. O. BROTT, GENERAL COUNSEL, AMERICAN BANKERS ASSOCIATION

Mr. KIMBREL. Thank you, Mr. Chairman.

I have asked to sit with me, with your permission, the general counsel of the American Bankers Association, Mr. J. O. Brott, and the secretary of the National Bank Division, Mr. Charles R. McNeill. For the sake of the record my name is M. Monroe Kimbrel, and I am the executive vice president of the First National Bank of Thomson, Ga.

The CHAIRMAN. You may have your statement inserted in full in the record, and then summarize it. It will appear at the close of your oral statement.

Mr. KIMBREL. I will be delighted to do that.

The CHAIRMAN. Without objection, that will be done.

Mr. KIMBREL. Essentially, our views are that we heartily endorse the two measures without any amendment whatsoever. We urge your committee to approve these as passed by the House and report them without amendment.

The CHAIRMAN. Do you agree with the last statement of the Comptroller that there is no built-in inflation in this bill?

Mr. KIMBREL. Mr. Chairman, we see none whatsoever.

The CHAIRMAN. Do you also agree with the suggestion of the chairman that we should make this bill conform to his Financial Institutions Act of 1957 by giving the same treatment to State banks that are members of the Federal Reserve System as we do to national banks that are members of that System in this matter of obligations in the form of notes secured by U.S. obligations?

Mr. KIMBREL. Mr. Chairman, we would leave that to the discretion of the committee. But we are just wondering if possibly you could not accomplish that by a separate bill rather than an amendment to this one at this point.

The CHAIRMAN. It is a very simple amendment. It does justice as we think to State banks. Even though it is rather late in the session, we could pass this bill just as the House sent it to us, with only that one change. It would be a simple matter for someone on the House side to move the bill as amended from the Speaker's desk, agree to the Senate amendment, and send it to the White House.

Mr. KIMBREL. I assure you that our association will accept the wisdom of this committee.

The CHAIRMAN. Fundamentally, you are not opposed to the State banks having the privilege of the national banks in this regard, are you?

Mr. KIMBREL. Indeed not.

The CHAIRMAN. That is the point. It is only that you do not want to see the other provisions in these bills imperiled.

Mr. KIMBREL. Exactly.

The CHAIRMAN. Are there any other questions? If not, we thank you.

(Mr. Kimbrel's prepared statement follows:)

STATEMENT OF M. MONROE KIMBREL ON BEHALF OF THE AMERICAN BANKERS

ASSOCIATION

My name is M. Monroe Kimbrel. I am executive vice president of the First National Bank of Thomson, Ga., and appear here today to testify on H.R. 8159 and H.R. 8160 as chairman of the Committee on Federal Legislation of the American Bankers Association.

The American Bankers Association favors the enactment of both H.R. 8159 and H.R. 8160. This position has been adopted without a dissenting vote by the governing bodies of the association, which are composed of individuals from both State and National banks. We recommend that your committee approve these bills as passed by the House and report them, without amendment, to the Senate.

Enactment of the changes in the law contained in H.R. 8160 and H.R. 8159 have long been needed to permit national banks to serve their customers in the most effective manner. It is necessary to amend the banking laws from time to time to meet the changing needs of our growing economy. The public interest demands both banking service and security fitted to present-day living rather than past history. These bills will bring about constructive changes in the law consistent with sound, modern banking practices.

Your committee is thoroughly familiar with the provisions of H.R. 8159 and H.R. 8160 since, with few exceptions, they consist of amendments to the national bank laws which were favorably considered by your committee and enacted by the Senate in the last Congress as a part of S. 1451, the Financial Institutions Act. Consequently, my statement will be brief. It will be confined to comment on the few substantive provisions which were not in the Financial Institutions Act or have been changed in substance from the provisions of that Senate bill. In addition, the importance of some of the other provisions of the bill will be emphasized. Section 4(b) (1) of H.R. 8160 has not previously been considered by this committee. Under that amendment to the law, the maximum loan-to-value ratio for mortgages with full amortization within a period of 20 years would be increased from 66% to 75 percent. We believe this is a desirable change to permit national banks to serve mortgage borrowers. In the present mortgage market, many borrowers are seeking mortgage loans in an amount greater than two-thirds of the value of the purchased property. Other mortgage lenders are now authorized and are making mortgage loans in an amount equal to 75 percent of the value of the property or more. Moreover, we believe the experience in recent years with amortized mortgage loans amply demonstrates that a 25-percent equity of the purchaser in the property is a sound basis for such loans. Such an equity furnishes a strong incentive for the borrower to continue the orderly liquidation of his mortgage indebtedness. This provision constitutes a desirable addition to the changes in the real estate loan provisions applicable to national banks previously approved by your committee and we recommend its favorable consideration.

The only other substantive change from the Financial Institutions Act in the real estate lending provision of the bill is contained in section 4(b)(2). This section exempts from the real estate loan limitations loans fully guaranteed or insured by a State or State authority. This committee and the Senate have given favorable consideration to such a change in the law within the last month by the passage of S. 1173. The reasons for this proposal are thoroughly documented in report No. 489 of this committee on that bill.

Another substantive change from S. 1451 appears in section 2 of H.R. 8160, which would increase the borrowing authority of national banks by permitting national banks to borrow up to 100 percent of capital plus 50 percent of surplus. S. 1451 would have increased this borrowing authority to 100 percent of surplus. While we believe the increase originally authorized by the Senate was fully justified, the provisions of section 2 will be of substantial benefit in assisting small national banks to meet the temporary seasonal needs of their communities, and we recommend its favorable consideration.

Other changes which the House has made from the bill previously passed by the Senate are that one additional Deputy Comptroller would be authorized in the Office of the Comptroller of the Currency instead of the two new deputies authorized by S. 1451. In addition, the bond for the deputies is increased from $50,000 to $100,000 and the bond of the Comptroller is increased from $100,000 to $250,000. This completes the listing of the substantive changes in H.R. 8160. We have no objection to any of them.

H.R. 8159 contains many of the clarifying changes, including most of the repeals of obsolete provisions which were in the original Financial Institutions Act. This bill also contains a few minor substantive changes in the law which will be helpful, such as the increase in the time of filing call reports from 5 to 10 days and the elimination of the requirement for a dividend report. H.R. 8159 will primarily be of service in putting the national banking laws in more usable form.

H.R. 8160 contains the major substantive changes in the national bank laws. I have discussed the two new real estate loan provisions. Probably the two most important changes in the real estate lending law will be first, the authorization for national banks to make 18-month construction loans on industrial and commercial properties without being considered a real estate loan where there is a valid and binding takeout agreement by a financially responsible lender and second, the provision which authorizes a bank making a working capital loan to a manufacturing or industrial business to take a mortgage on the business premises as an additional security against contingencies without making the loan subject to the real estate loan limitations.

Next to the amendments of the real estate loan laws, we believe that the most important changes in the law are contained in section 3 of H.R. 8160. These amendments to the legal loan limitations of section 5200 of the Revised Statutes conform it to current conditions in two respects. When section 5200

was enacted, there was no reliable means of protection of perishable staples. Accordingly, the increased lending authority in paragraph 6 was limited to paper secured by nonperishable staples. With the advent of modern refrigeration and quick freezing methods, refrigerated and frozen readily marketable staples furnish a security for which the risks are not materially greater than for nonperishable staples. It is reasonable, therefore, to permit persons dealing in such refrigerated or frozen, readily marketable staples fully covered by insurance to have available bank credit in excess of 10 percent of the capital and surplus of a national bank.

Consumer installment lending was unknown at the time of the original enactment of this statute. In recent years, however, consumer installment loans have become an important part of the business of many national banks. It is appropriate, therefore, to enact a special exemption to the lending limitation particularly applicable to all types of consumer installment paper. Under section 3(d), a national bank will be permitted to acquire consumer installment paper which bears the full recourse endorsement or unconditional guarantee of a dealer up to 25 percent of the bank's capital and surplus. This will permit many small national banks in the ever-increasing number of States which require consumer installment sales to take the form of nonnegotiable paper to finance the business of automobile dealers which is often in excess of 10 percent of the capital and surplus of the bank. Negotiable consumer installment paper acquired from a dealer is now subject to no limitation but would also be limited to 25 percent under the bill. It is important, in order not to unduly restrict present practices to provide, as the bill does, that if the bank has reasonably adequate knowledge of the financial condition of the maker of the note and an officer of the bank certifies that the responsibility of the maker has been evaluated and the bank is relying primarily upon such maker that the 10 percent limitation as to the maker of the note shall be the only applicable limitation. We believe that with this provision for individual evaluation of particular consumer installment obligations this amendment of the law is a practical and desirable amendment. In closing, I would like to emphasize the complete and wholehearted endorsement of the American Bankers Association of both H.R. 8159 and H.R. 8160 and express my appreciation on behalf of the association for the opportunity to present our views to your committee.

The CHAIRMAN. Our next witness is Mr. Aubrey G. Lanston, president, Aubrey G. Lanston & Co., Inc., New York City.

The committee is very glad to recognize Mr. Lanston.

I note you have a statement that you can place in the record, if you wish, and summarize for us.

STATEMENT OF AUBREY G. LANSTON, PRESIDENT; AND C. RICHARD YOUNGDAHL AND LEROY PISER, VICE PRESIDENTS, AUBREY G. LANSTON & CO., INC., NEW YORK, N.Y.

Mr. LANSTON. Thank you, Mr. Chairman.

First, I would like to express my gratification at the privilege of appearing before you, before such a distinguished committee. I would like to introduce Mr. Piser on my my right and Mr. Youngdahl on my left, who are vice presidents of our organization.

We were a little pushed in submitting a statement, because we had to really reduce about 110 pages of history and documentation into a few. Since then I have revised the statement and put it into two parts, which I would like to submit for the record. It is essentially the same as the original statement, although arranged a little differently.

Senator ROBERTSON. Without objection, the full statement and exhibits will be included in the record at the conclusion of our remarks. Mr. LANSTON. Thank you, sir.

I don't think it is necessary for me to read the first part of the statement in full. I would like to say that that traces the actual history