The Federal Credit Union System: A Legislative History by JOHN T. CROTEAU*

In the years since the adoption of the Federal Credit Union up as a separate unit in the Farm Act in 1934, many amendments have been proposed, hearings Credit Administration. The revised and discussions have been held, and some amending legislation bill was passed by the Senate by has been Dossed. The development of the act is reviewed in the unanimous consent 2 days before the following-pages. close of the session. It was signed by the President on June 26, 1934, and HE credit union system in the concerned with the depression and became Public Law No. 467. United States had its beginning with emergency legislation. Two at- T long before the adoption of the tempts were made to bring up the bill Provisions of the Law Federal legislation? Credit unions on the consent calendar, but it was A brief summary of the provisions first acquired legal status in 1909, passed over. of the original Federal Credit Union when the Massachusetts Legislature Meanwhile it was imperative to find Act may serve as a Point of reference passed a law providing for the char- an agency to administer the act. The for the subsequent amendments. tering and organization of credit Federal Reserve Board and the Treas- After section 1 (the citation), section unions. ury Department, logical agencies for 2 defined a Federal credit union as “a the purpose, did not believe that they cooperative association organized . . . The 1934 Law should administer such an act. The for the purpose of promoting thrift Legislative History Farm Credit Administration expressed among its members and creating a Twenty-four years later-on May an interest in the bill, however, and source of credit for provident or pro- 11,1933-Senator Sheppard, of Texas, a group from that agency, with the ductive purposes.” Section 3 set out introduced three bills designed to set help of other officials, secured Presi- the method by which any seven or up a Federal credit union system. The dential endorsement. more natural persons become incorpo- first, S. 1639, was to establish a sys- Senator Sheppard brought in a se- rated, and section 4 determined the tem of Federal credit unions and ries of amendments that would place procedure for investigation and ap- statewide central credit unions under the program under the jurisdiction of proval of the charter. Section 5 es- Federal supervision; S. 1640 was an the Banks for Cooperatives, within tablished organization and supervision amendment to the Federal Reserve the Farm Credit Administration. fees. Section 6 requiredFederal super- Act under which Federal reserve These amendments were adopted, and vision and examination; it established banks would be permitted to receive on May 10, 1934, the Senate, without the principle that: “The Governor [of deposits from credit unions; and S. debate, approved the bill. the Farm Credit Administration] 1641 would authorize the postal sav- To obtain Presidential approval, it shall fix a scale of examination fees ings system to accept credit union was necessary to delete the second designed, as far as is practicable, so deposits. part of the bill, which had provided that in each case the fee to be paid On June 1, hearings were opened for the incorporation of statewide shall equal the expense of such ex- before a subcommittee of the Senate central credit unions. The other pro- amination.” Committee on Banking and Currency. visions were unchanged when, on Section 7 itemized the powers of a The first session of the Seventy-third June 15, the Chairman of the House Federal credit union. Besides stating Congress ended with the bills resting Committee on Banking and Currency the general powers of a corporation, within the Committee. submitted a unanimous report favor- subsections defined the essential op- On March 27, 1934, the Committee ing the bill and asked that the House erations of these new institutions: reported S. 1639 favorably, with one consider it. Only 30 minutes were al- (5) To make loans with maturities amendment-deletion of the provi- lowed for debate, and no one spoke not exceeding two years to its mem- sion exempting Federal credit unions in opposition. When the formal vote bers for provident or productive pur- (but not their members) from all was taken, there were 180 ayes and poses upon such terms and conditions 2 noes. as this Act and the by-laws provide Federal taxation except taxes upon and as the credit committee may ap- real property. Credit unions roused The legislation as passed by the House was in the form of an amend- prove, at rates of interest not exceed- little interest, however, in a Congress ment, which struck out the entire ing 1 per centum per month on unpaid Senate bill after the enacting clause balances (inclusive of all charges in- cident to making the loan) : Provided, l Professor of Economics. University of and substituted a redrafted bill. In Notre Dame. that no loans to a director, ofiicer, or 1 See Erdis W. Smith, “Federal Credlt the revision, control was taken from member of a committee shall exceed tTnions: Origin and Development,” Social the Banks for Cooperatives, and a the amount of his holdings in the Securitv Bulletin. November 1955. Federal credit union section was set Federal credit union as represented 10 Social Security by shares thereof. No director, officer, Governor of the Farm Credit Admin- Bureau aimed merely to set up inde- or committee member shall endorse istration certain rather broad powers. pendent units designed to provide for borrowers. A borrower may repay He was empowered “to prescribe rules workers with savings facilities and to his loan, prior to maturity, in whole and regulations for the administra- take care of their need for consump- or in part on any business day. tion of this Act (including, but not tion credit. Any system that developed (6) To receive from its members pay- by way of limitation, the merger, con- would be tied together by educational ments on shares. solidation, and/or dissolution of cor- or sympathetic bonds, rather than by (7) To invest its funds (a) in loans porations organized under this chap- financial integration. While the spon- exclusively to members; (b) in obli- ter ) .” Apparently to answer possible sors of the original Federal Credit gations of the United States of Amer- objections to the constitutionality of Union Act, in providing for statewide ica, or securities fully guaranteed as central credit unions, had attempted to principal and interest thereby. the statute, section 17 was inserted: it provided that a Federal credit un- to break new ground, they were forced (8) To make deposits in national ion “shall act as fiscal agent of the to accept the limitations of the model banks and in State banks, trust com- act. panies, and mutual savings banks OP- United States and shall perform such erating in accordance with the laws services as the Secretary of the Treas- The legislative history of Federal of the State in which the Federal ury may require.” Section 18 con- credit unions has thus been a strug- credit union does business. cerned taxation. gle between two concepts. Under one (9) To borrow (from any source) in a legal base for a system of coopera- an aggregate amount not exceeding Nothing herein contained shall Pre- tive credit would be developed that 50 per centum of its paid-in and un- vent the shares of stock in any Fed- would give broad freedom to manage- impaired capital and surplus. . . . eral credit union organized hereunder ment and that would integrate verti- from being included in the valuation cally the credit unions into a regional The remaining three subsections gave of the personal property of the own- or even a national structure of Co- the credit unions power to fine mem- ers or holders of such shares in as- operative consumer finance. The other bers, to enforce a lien upon shares in sessing taxes imposed by authority of concept is of the Federal credit union order to collect delinquent loans, and the State in which the Federal credit as an essentially independent finan- union is located or shall prevent the cial unit, with management rather to exercise incidental powers. taxation of any Federal credit union Section 8 provided for a standard or its property by authority of such closely hemmed in by detailed legal set of bylaws. Section 9 limited Fed- State in the manner and not to ex- regulations, that is integrated hori- eral credit union membership “to ceed the rate imposed upon domestic zontally-with an educational or pro- groups having a common bond of oc- banking corporations. motional, rather than a financial cupation or association, or to groups basis-into various forms of State within a well-defined neighborhood, Section 19 provided for the appro- league organizations that are, in turn, community, or rural district.” The priation of $50,000 for administra- united in the Credit Union National fiscal year of a Federal credit union tion. Finally, section 20 provided Association. would end on December 31, according that, if part of the act was held to to section 10, and the annual meet- be invalid, the remainder would not Amendments to the 1934 Act ing was to be held in January. The be affected. The final clause of sec- Since the adoption of the Federal cooperative principle of “one-man, tion 20 stated: “The right to alter, Credit Union Act, not a session of one-vote” was to be followed, and no amend, or repeal this Act or any Congress has passed without attempts proxy voting would be allowed in elec- part thereof, or any charter issued at amending it. Eleven laws amend- tions. Section 11 set up the familiar pursuant to the provisions of the Act, ing or adding to the original act were organization of a board of directors, is expressly reserved.” adopted from 1936 to 1955. A twelfth, which would elect its own officers, a There was little that was new in amending the District of Columbia credit committee to pass on loan ap- the Federal Credit Union Act of 1934. Credit Union Act, affects the super- plications, and a supervisory commit- With the exception of section 17, this visory powers of the Bureau of Fed- tee to audit the books regularly. was the traditional credit union act, eral Credit Unions. Section 12 stated that “all entrance going back to the Massachusetts law fees and fines provided by the bylaws of 1909. Prewar Activity and 20 per centum of the net earn- The critics of the Massachusetts During the Seventy-fourth Con- ings of each year, before the declara- law had had some influence on Fed- gress, Senator Sheppard introduced tion of any dividends, shall be set eral legislation at the time the Fed- three amendments to the Federal aside . . . as a reserve fund against eral Farm Loan Act of 1916 was Credit Union Act. One dealt with ex- possible bad loans.” Section 13 pro- passed, since that law was modeled emption from taxation, the second vided for the declaration of dividends, after the Raffeisen plan, as they ad- with limitation of membership, and section 14 for the expulsion and with- vocated. They had visualized a sys- the third with investment of credit drawal of members, and section 15 for tem of cooperative banks-people’s union funds in central credit unions. the accounts of minors or trust ac- banks--integrated in central banks He also proposed a bill that passed counts. and connected with the money mar- the Senate; it provided that a Federal Sections 16-20 were confined to ket. Model legislation sponsored by credit union might invest “in loans to technical matters. Section 16 gave the the Credit Union National Extension other credit unions in the total Bulletin, May 1956 11 amount not exceeding 25 per centum In the hearings held on the pro- personal property; to permit the of its paid-in and unimpaired capital posed legislation, the Farm Credit Farm Credit Administration to con- and surplus.” The House of Repre- Administration-the agency in charge duct research on the problems that sentatives did not act on any of these of Federal credit unions from 1934 persons of small means have in ob- bills. to 1942 - endorsed three proposed taining credit at reasonable rates of In the Seventy-fifth Congress, Sen- amendments : to exempt Federal interest: and to provide space in ator Sheppard brought back these credit unions from all taxes except Federal buildings for employees’ proposals with a few additional ones. those upon real property and tangible credit unions. It opposed an amend-

Summary of changes in the Federal Credit Union Act, 193455

Provkion - - 1937 1940 1942 1946 1948 1949 1952 19.54 - -. -- .- Supervising agency-.-. Farm Credit _ redera De. bureau estab _. Administra- posit Insw pepedmy tion (Oover- am3 Corps nor). ration. 2 Security Supervision Agency.8 fee- ______b10a year..--. ______. ______-__ -. ______“z%af%d Federal credit unions with asset.5of more than 84,lm.’ Examination Audit reports ‘ermissible ______-__ -- .--______-.. Of practic- exception for - ing public Federal accomltants credit accepted unions with from Fed- assetsOf less eral credit than $25,009 unions with eliminated. 5 assetsof less than $25,ooo. Examination fee. ______F~;~zl;: be ‘ym& ______-- ___-__.___--_ Governor to credit union cover ex- topaytobe pense of ex- considered. 1i amination. Loans: Unsecured Not to exceed ed ______P

Summary of changes in the Federal Credit Union Act, 1934~S-Continued

Provision 1937 1940 1942 1946 1948 1949 1952 1954 - -- Interest rate- Jot. to exceed __-__--_-___-_ _- ______.__._ __ ‘cnwlty for ex- ______. Refund to 1% a month cessive in- members on unpaid terest.’ permitted.1~ balance. Membership. ‘orsons and sharesin joint ___._-_. _-_--. organiza- tenancy.~ tions. Bonding----. loard of dircc. . ______..---. __ ‘Suffirient” ______. iuthority of tars fixes g;;;Y;fPaY- Director amount of speciEed. surety premiums bonds. by credit unions au- thorized.’ Passbook-... Audit _ __ . __ ‘Passbook” ______. required. defined.7 Credit corn. mittee--... Getings at _. rToticefrom ______. _- least once B treasurernot month on required.’ notice from treasurer. Liquidation _ feneral au- __ nvolunt1ry thority of liquidation Governor in pmcedure involuntary detailed.? liquidations exprcsscd generally. Taxation.-... gtate may tax Exempted -. .- ______Federal fmm all tax- credit ation except unions as it on real and does domes- personal tic banking pmperty.s gg* - Other: Spacein Federal buildingr _. ._ _. _-______

REYh studies.. c+overnor au. ______-__._. .______. ______thorized ta conduct re. search in cooperative thrift andI credit.6 Fair labor practices Employer proI- _ _. ______vision t facilities nZ1 a violatior I of the Na tionsl Labo r Relations Act.6 ______.______-.--_. ______Bureau 00% cials mw administer oaths.‘2 - - 1 P. L. 467,74th Gong. fi P. L. 630,76th Gong. ’ P. L. 574,79th Gong. * P. L. 376,81st Gong. 3 Executive Order 9148,Apr. 27,1942;transfer made permanent by Reorganizs- QP. L. 337,82d Gong. 10P. L. 329,82d Gong. ‘1 P. L. 576,83d Con& tion Plan No. 1 of 1947. ‘2 P. L. 454,83d Gong. ‘3 P. L. 656,83d Gong. ” P. L. 197,7&h tong. * P. L. 813,Wh Cong. ’ P. L. 322,82d Gong. 5 P. L. 416,7&h Cong. Bulletin, May 1956 13 in S. 2675, were passed by both Houses sections in the act. It was reintro- sociation, objecting to an increase in and became Public Law No. 416, ap- duced in the next session but again the unsecured ‘loan limit and also to proved December 6, 1937. An amend- failed of enactment. the tax-exempt status of Federal ment was added, when the bill was The most important action taken credit unions, was read into the hear- on the floor of the House, to permit during the Seventy-seventh Congress ings. The bill passed the Senate on employer provision of facilities for that affected Federal credit unions July 17, the House on July 19, and the operations of a Federal credit un- was their transfer by Executive order was approved on July 31, 1946, when ion without violation of the National from the jurisdiction of the Farm it became Public Law No. 574. Labor Relations Act. Credit Administration to that of the Representative Voorhis introduced Most of the hearings had been de- Federal Deposit Insurance Corpora- at the same session a bill to permit voted to a bill (H.R. 6287) to permit tion. From May 16, 1942, to July 29, Federal credit unions “to enter into Federal credit unions to occupy space, 1948, they remained under the Cor- contracts for group insurance cover- rent-free, in Government buildings, poration’s jurisdiction. No Federal ing the lives of its members.” The which was taken up as emergency credit union legislation was passed matter was settled administratively, legislation. The Comptroller Gener- by that Congress, although again a however, because the supervisory al’s office had raised the question. number of bills were introduced. agency, which had forbidden Federal There were then about 600 credit un- The Seventy-eighth Congress was a credit unions to take group insurance ions among Federal employee groups. wartime Congress. Credit union legis- on the lives of borrowers and mem- To forbid credit unions to operate in lation obviously could expect little bers, reconsidered and ruled that Federal buildings would have given consideration. Few amendments were such insurance-the so-called “life the movement a serious blow. The introduced, and none was even re- savings insurance”-could be author- Credit Union National Association ported out of committee. These were ized by a credit union board of di- convinced the Committee on Banking difficult years for credit unions; rectors. and Currency of the importance of liquidations exceeded new charters, Early in the Eightieth Congress, the this matter, and the bill became Pub- and the number of operating credit President, in his Reorganization Plan lic Law No. 19’7on July 9. 1937. unions was decreasing. No. 1 of 1947, made permanent the In this session also a bill was intro- Only one credit union proposal-a transfer of Federal credit unions to duced to transfer jurisdiction over the bill endorsed by the Credit Union Na- the Federal Deposit Insurance Cor- District of Columbia credit unions to tional Association and presented by poration. Administration by the Cor- the Farm Credit Administration, and Representative Jerry Voorhis-occu- poration had been looked upon by a similar bill was introduced in 1941. pied the attention of the Seventy- most as a temporary war measure. Al- Neither of these bills got as far as a ninth Congress. Most of its provisions though credit unions had been expe- hearing. had been presented in 1940 in S. 4230 riencing difficulties with low earnings and again in 1941. In the House hear- and a high liquidation rate, at the Defense and War Period ing it was superseded by another bill time of the 1946 hearings neither the During the next three sessions Con- that contained the same material but representative of the Corporation’s gress was immersed in the problems incorporated certain rewording sug- Federal credit union section nor the of defense and war, and while a num- gested by the Federal Deposit Insur- representative of the Credit Union ber of amendments to the Federal ance Corporation. This bill provided National Association had raised the Credit Union Act were introduced, for (1) a specific penalty-the refund issue of administration. Apparently few advanced even to a subcommittee of the entire amount of interest paid all recognized that the difficulties that hearing. Only one amendment, which -for charging excessive interest on beset the credit unions were a by- became Public Law No. 630 (approved a credit union loan; (2) a clarifying product of the war. June 15, 1940), was adopted by the clause for issuing shares in joint ten- The permanent transfer, however, Seventy-sixth Congress. The bill (S. ancy; (3) a clarifying clause regard- did not meet the approval of either 25681, as originally presented, sought ing the bonding of employees: (41 re- the Federal Deposit Insurance Cor- to raise the limit on unsecured loans moval of the requirement that notices poration or the Credit Union National from $50 to $300. An amendment in be sent “by the treasurer”; (5) rais- Association. The former, a self- committee raised the Iimit to only ing the unsecured loan limit to $300; supporting agency, was incurring a $100. The restriction in the original (6) extending the use of the term loss of about $200,000 a year in its act was retained, however, that “no “passbook”; and (7) extending the credit union activities. The Credit loan shall be made to any member in operations of Federal credit unions to Union National Association indicated excess of $200 or 10 per centum of the the Panama Canal Zone. On the rec- that it wanted something more than Federal credit union’s paid-in and ommendation of the Federal Deposit an impartial supervisory and exami- unimpaired capital and surplus, Insurance Corporation, a section was nation service. whichever is greater.” added after the Senate hearings that Like the credit unions, the social Several other amendments were in- amended section 16(b) of the act and security programs were designed to troduced during the Seventy-sixth gave the administrator definite power promote the economic security of the Congress; no action was taken on to handle the many problems result- family and the individual; the them. One (S. 42301 was a lengthy ing from involuntary liquidations. A thought therefore developed that the bill intended to clarify a number of letter from the American Bankers As- Federal Security Agency (which had 14 Social Security the responsibility for administering era1 Security Agency, which indicated percent of the total amount of mem- the Social Security Act) would be an willingness to administer the program bers’ shareholdings but-under a new appropriate agency to administer the if it were placed in that agency. The provision-gave the Director of the Federal Credit Union Act. Through matter of expense to the Government Bureau power to require special re- Senator Raymond E. Baldwin a bill was stressed in this hearing, and it serves “to protect the interests of (S. 2225) was accordingly introduced was agreed that the problem could shareholders . . . when found by the that provided for transferring the ad- best be handled by placing the Fed- director to be necessary for that pur- ministration of Federal credit unions eral credit unions permanently in an pose.” to the Federal Security Agency2 and agency where the annual appropria- This version was endorsed by the reimbursing the Federal Deposit In- tions are made by Congress. S. 2225 Federal Security Agency, and both surance Corporation for the outlays was reported favorably, passed the the Senate and House committees re- it had incurred in credit union ad- House on June 15 and the Senate the ported the bill favorably. H.R. 6185 ministration. The personnel and following day, and was approved and passed the House on October 13, property of the credit union section enrolled as Public Law No. 813 on passed the Senate (as an amendment would be transferred to the Federal June 29, 1948. Credit union activities, to the Senate bill) on October 1’7,and Security Agency, and the section when transferred to the Federal Se- was approved as Public Law No. 376 raised to the status of a bureau-the curity Agency, were placed in the on October 25, 1949. Bureau of Federal Credit Unions. Social Security Administration. In September 1950 the provisions In the Senate hearings that started The Eightieth Congress also saw of the Social Security Act became ap- March 4, 1948, not only the transfer the introduction of a bill providing plicable to employees of Federal cred- of jurisdiction but the whole record for the insurance by the Federal De- it unions, under the 1950 amendments and cost of the program were ex- posit Insurance Corporation of mem- to the Social Security Act. plored. An excerpt from a letter from bership share balances in Federal The Eighty-second Congress saw 12 the Comptroller General of the credit unions. amendments to the Federal Credit United States was read into the hear- In the Eighty-first Congress one Union Act proposed and three-on ings. Referring to the Federal De- credit union bill (H.R. 6185) was which there was no controversy- posit Insurance Corporation, he said: passed, and no hearings were held. enacted into law. The most important Of the other bills introduced, one was amendment that was adopted con- The Corporation has the extraneous on the insurance of shares and the cerned fees paid to the Bureau of function of supervising and examin- other on investments in shares or ac- Federal Credit Unions for supervisory ing Federal credit unions . . . We re- counts of a State-chartered institu- services. In June 1950 the Federal spectfully suggest that this function tion. Neither was reported out of com- Security Agency had sent Congress should not continue to be supervised the draft of a proposed bill, explain- by Federal Deposit Insurance Cor- mittee. poration since it has no relation to The legislative effort of the ses- ing that its principal purpose was “to the Corporation’s general functions sion related to the proposals in a bill increase the schedule of supervision and since it is desirable that the Cor- introduced by Representative Pat- fees to be paid by Federal credit un- poration’s directors should devote all man, acting in behalf of the Credit ions having assets in excess of $40,000 of their attention to the highly im- Union National Association. It would and thereby provide the basis where- portant objectives of the Corporation. have removed entirely the a-year by the Federal credit union system limitation on loans; permitted Fed- can become self-supporting (so far A letter from the Director of the eral credit unions to invest funds “in as Government supervision is con- Federal Deposit Insurance Corpora- shares of central credit unions”; au- cerned) within eight or ten years.” tion called attention to this statement thorized annual meetings to be held S. 2447 and its companion bill H.R. and added: in January, February, or March; 6103, which were introduced in the raised the unsecured loan limit to Eighty-second Congress, proposed a We are of the opinion that, in order $500, with a technical rewording of more complicated schedule of super- to avoid any possibility of criticism or the section; and placed a ceiling of visory fees that was intended to make suggestion of conflicting interests, the 10 percent of members’ shares as the the Bureau financially independent by supervision of Federal credit unions be lodged in another agency, such as limit for a reserve fund. 1954 or 1955. The proposed changes the Federal Security Agency. Accord- After study of this bill by the Bu- were supported by both the Bureau ingly, we have no objection to the reau of Federal Credit Unions, in Sep- of Federal Credit Unions and the enactment of S. 2225. tember identical bills, S. 2560 and Credit Union National Association. S. H.R. 6185, were introduced. These 2447, which became Public Law No. The representative of the Credit bills dropped the controversial mat- 322, was reported favorably by the Union National Association also ter of investment in central credit Senate and the House Committees on pressed for a change in administra- unions and the less important exten- Banking and Currency, was enacted, tive agency. He presented a letter sion of time for the annual meeting: and was approved April 17, 1952. from the Administrator of the Fed- they extended the maturity of loans This amendment exempted credit from 2 to 3 years, raised the limit on unions from fees during the year in “The Department of Health, Education, unsecured loans from $300 to $400, which a charter is issued or the year and Welfare, beginning April 11, 1953. and placed a ceiling on reserves of 10 of final distribution in a liquidation. Bulletin, May 1956 15 Starting with 1952, the maximum fee era1 Credit Union Act. To change that vious sessions were separated: S. 1665, for those with total assets of $500,000 act in its essentials would therefore and its companion bill H.R. 2868, or less became 30 cents per $1,000; be, in effect, a violation of this im- contained the generally acceptable with $500,001-$l,OOO,OOO:$150 plus 25 plied contract. In his testimony the amendments concerning patronage cents per $1,000 in excess of $500,000; Director pointed out that certain em- refunds and the power of ofllcers of with $l,OOO,OOl-$2,000,000:$275 plus ployers probably have permitted cred- the Bureau to administer oaths; S. 20 cents per $1,000 in excess of it unions to be established in their 1666 and H.R. 2867 contained the de- $l,OOO,OOO;with $2,000,001-$5,000,000: plants on the grounds that the law batable items of loans to credit union $475 plus 15 cents per $1,000 in ex- contained the safeguard that officers, officials, the freezing of examination cess of $2,000,000; and for those with directors, and committeemen could fees, and the extension of maturity total assets of more than $5,000,000, not borrow. This objection was re- of loans from 3 years to 5. Hearings it became $925 plus 10 cents per peated in hearings held at the next were held on the Senate bills in the $1,000 in excess of $5,000,000. session, and it was effective. spring of 1953. A minor amendment, H.R. 6101, In connection with the central The Bureau suggested a technical which extended the provisions of the credit union provision, the Bureau’s change in the provision in S. 1665 Federal Credit Union Act to the Vir- Director stated that, while the Bureau that would permit patronage divi- gin Islands, became law May 8, 1952 was not opposed to such credit un- dends; and the precaution was added (Public Law No. 329). Also enacted ions, it did not want the particular that interest refunds “to members of was H.R. 2608, which provided that amendment offered in S. 1330. It pre- record at the close of business on De- Federal credit unions could extend ferred to have a central credit union cember 31” be paid “subject to such their investments to shares or ac- system set up by separate legislation regulations as may be issued by the counts of institutions, the accounts “in an organized and formal way.” Director.” This change and another of which are insured by the Federal Two bills attacking the tax-exempt unimportant technical amendment Savings and Loan Insurance Corpora- status of Federal credit unions were were approved by the Credit Union tion. It was approved May 13, 1952 also introduced in the Eighty-second National Association, and the sub- (Public Law No. 337). Congress. They were not successful, committee reported the bill favor- The controversy of the Eighty- and Federal credit unions still enjoy ably. It was also reported favorably second Congress centered around S. the status conferred by the amend- by the full Committee on Banking 1330, the companion bill to H.R. 3459, ment of 1937. Another bill on which and Currency. S. 1665 was enacted in which Representative Patman had no action was taken would have froz- the second session of the Eighty-third introduced at the request of the en examination fees at the then cur- Congress and was approved on June Credit Union National Association. rent rate of $56 a day. Finally, four 30, 1954 (Public Law No. 454). This bill would (11 permit, with safe- bills were introduced to provide for At the hearings on S. 1666, the rep- guards, loans to officers and commit- insurance of members’ ‘shareholdings, resentative of the Credit Union Na- teemen: (2) permit credit unions to but they were not acted upon. One tional Association was questioned invest in shares of central credit un- would have provided insurance by the closely about the proposed amend- ions: (3) allow patronage dividends, Federal Deposit Insurance Corpora- ments. The Director of the Bureau or refunds of interest to borrowers; tion; two through the Federal Sav- of Federal Credit Unions opposed the and (4) authorize employees of the ings and Loan Corporation; and the bill. The basis of his opposition was Bureau to administer oaths and to fourth, the Eberharter bill, would consistently the same as in the 1952 take affidavits. The last two provi- have set up a fund for share insur- hearings-that the legislation-con- sions made no essential change in the ance to be administered by the Direc- tract theory of the nature and scope law, and there was general agreement tor of the Bureau of Federal Credit of the Federal credit unions pre- on their inclusion. On the first two Unions. cluded any substantial change in the provisions, there was substantial dis- Four bills to provide insurance on provisions of the original Federal agreement between the Bureau of member shareholdings were also in- Credit Union Act. A letter from the Federal Credit Unions and the Credit troduced in the Eighty-third Con- Secretary of the Department of Union National Association. Some of gress: three of them would have pro- Health, Education, and Welfare these controversial provisions were vided such insurance through the stated the position of the Department reintroduced in the next session. Federal Deposit Insurance Corpora- on the question of loans to directors: During the hearings held in Janu- tion: the fourth was the reintroduced “The present limitation . . . has fre- ary 1952, the Bureau firmly opposed Eberharter bill. A bill to permit a quently been recognized as an impor- making loans, beyond the amount Federal credit union to serve as ex- tant consideration in making a de- held on shares, to credit union offi- ecutor or administrator of small es- cision to organize a Federal credit cials. The opposition was based on tates was also introduced. None came union and in enlisting full support what may be called a legislation-con- out of committee. from the employer or sponsoring tract theory; in other words, the Bu- The first session of the Eighty- group.” reau believed that credit union or- third Congress centered its attention The opposition to the freezing of ganizers in their dealings with man- on two pieces of legislation in which examination fees was a more practi- agement enter into a quasi-contract the noncontroversial and the contro- cal matter, having in view the objec- based on the provisions of the Fed- versial amendments proposed in pre- tives of the movement. The Depart- 16 Social Security ment stated : “Since it is contem- union officials had been under the of only two credit union bills-com- plated that the Federal credit union jurisdiction of the board of directors panion bills S. 1641 and H. R. 5258. program will become a self-sustain- of the individual credit union. Under They provided for amending section ing one beginning with the fiscal year the bill, which became Public Law No. 7 to permit a Federal credit union 1954 it is vital that the authority to 656 on August 24, 1954, the board of to invest “in shares of other credit assess adequate fees remain unim- directors still retains the responsi- unions in the total amount not ex- paired.” bility but must operate according to ceeding 10 per centum of its paid-in The objection to an extension of Bureau regulations. and unimpaired capital and surplus.” loan maturities rested in a concept During the same session hearings The Department of Health, Educa- of the nature of the Federal credit were held in both Houses on S. 3683, tion, and Welfare filed an unfavor- union as a specialized institution, a bill sponsored by the District of Co- able report with the congressional rigidly restricted to caring for the lumbia Credit Union League and in- committees on these bills. No hear- short-term credit needs of the Amer- troduced by Senator Case. This bill ings were held, nor was any action ican people. S. 1666 was disapproved transferred from the Comptroller of taken on them during the first session by the Committee, and its companion the Currency to the Bureau of Fed- of the Eighty-fourth Congress. bill was also dropped. eral Credit Unions the supervision The table summarizes the amend- In the second session of the Eighty- and examination of District-char- ments to the Federal Credit Union third Congress, Representative Talle tered credit unions and made appli- Act through 1954. As the table shows, introduced H. R. 9236. This bill re- cable for them the scale of fees paid the amendments have served for the quired the board of directors of a Fed- by Federal credit unions. The bill most part to clarify administration eral credit union to fix the amount was approved August 10, 1954 (Public and to keep pace with inflation. The Law No. 576). Federal credit union has essentially and character of surety bonds in com- S. 2890, providing for a regional pliance with regulations prescribed by credit union system, was introduced the same nature and scope as it did the Director of the Bureau of Federal February 3, 1954; no action was under the act of 1934; it is an inde- Credit Unions and also gave the Di- taken. pendent, local society designed to op- rector power to regulate bonding re- The 1955 session of the Eighty- erate in the short-term, consumer quirements. The bonding of credit fourth Congress saw the introduction area.

OASI BENEFICIARIES fifths said they were unable to work. ularly if they were living alone. Some -those who could-met this situa- (Continued ffom page 9) One out of every 10 beneficiaries was hospitalized during the survey year, tion by working, usually a part of the monthly wage was low because of with only about a fourth of the hos- year but a few throughout the year; part-time work or absence from work pitalized group covered to any degree others shared homes with relatives, on account of disability, unemploy- by hospital or sickness insurance. and some of them received part of ment, or other reasons. Such periods Others were sick in bed at home. Al- their support from the relatives; a not only lowered the average monthly together, almost two-fifths of the sixth received public assistance: and wage on which benefits were based beneficiary groups had a member hos- a fourth supplemented their incomes but often have made it necessary for pitalized or sick in bed at home; some by drawing on their savings during the worker to use up savings. Some married couples had both the hus- the year studied. beneficiaries, of course, had worked band and wife bedridden. Other dis- In the light of these facts the sur- in noncovered employment, with the abled benefioiaries who were ambu- prising aspect of the amount of asset result that their average monthly latory required medical care and holdings at the end of the survey wage was reduced and their benefits drugs. year by old-age and survivors insur- lowered; they were probably not A fourth of the beneficiaries in the ance beneficiaries is not that so many forced, however, to use their savings. sample had been on the benefit rolls had so little, but that so many had Two-fifths of the retired-worker from 6 to 12 years and half from 4 to something, especially in liquid assets. beneficiaries had quit working and 12 years, getting along on independ- The picture emerges of beneficiaries filed for benefits because of ill health. ent retirement incomes that were in- making small economies and dipping At the time of the interview, three- adequate to meet their needs, partic- only cautiously into their savings.

Bulletin, May 1956 17