(2) Obligations secured by warehuse receipts securing title to readily marketable nonperishable staple goods including livestock when actual value is 115 percent and is fully insured. Rhode Island.-Ten percent of capital and surplus. Limitation does not apply to the discount of commercial or business paper owned by the party negotiating same. South Carolina.-Ten percent of capital and surplus. May be extended to 15 percent by vote of directors. Limitation does not apply to (1) Commercial or business paper actually owned by the person. (2) Obligations secured by warehouse receipts of readily marketable nonperishable staples fully insured. If the value is 150 percent an additional 25 percent may be loaned. If value is 120 percent, 30 percent may be loaned with 5 percent increase for each 5 percent increase in the value, with a limit of 50 percent. South Dakota.-Twenty percent of capital and surplus. Limitation does not apply to discount of business or commercial paper owned by the party negotiating same. Tennessee. Fifteen percent of the capital and surplus but may be extended to 25 percent by the Board. Limitation does not apply to obligaitons secured by warehouse receipts covering readily marketable nonperishable staples fully insured. Loans up to 25 percent may be made if the value is 115 percent with an increase of 5 percent for each 5 percent of value increase up to 50 percent. Texas.-25 percent of capital and surplus. Limitation does not apply to (1) Discount of commercial or business paper by the actual owner. (2) Indebtedness evidenced by notes secured by liens upon agricultural products, manufactured goods, and other chattels in storage when the value is not less than 125 percent of the indebtedness. Utah.-15 percent of capital and surplus. Limitation does not apply to (1) Discount of commercial paper owned by person negotiating same. (2) Loans secured by warehouse receipts on readily marketable nonperishable staples fully insured; if the value is 115 percent an additional 15 percent may be loaned with an increase of 5 percent for every 5 percent increase in value up to 45 percent additional. Vermont.-$10,000 or 1 percent of gross assets, whichever is greater. Limitation does not apply to— (1) Commercial or business paper discounted by actual owner. (2) Indebtedness secured by liens on agricultural products, manufactured goods or other chattels the value of the security being not less than 125 percent. (3) Indebtedness arising out of dairy transactions. Virginia.-15 percent of capital and permanent surplus. Limitation does not apply to (1) Discount of commercial or business paper actually owned by person. (2) Obligations secured by livestock the value of which is 115 percent. An additional 15 percent may be loaned thereon. (3) Obligations secured by readily marketable nonperishable staples fully insured. If the value is 115 percent of the obligation 15 percent additional may be loaned; with each increase of 5 percent in value 5 percent additional may be loaned to a limit of 50 percent. Washington.-10 percent capital and surplus. Limitation does not apply to(1) Discount of commercial paper actually owned by person negotiating same. (2) Obligation secured by collateral security having a market value of 15 percent more than the loan. West Virginia.-10 percent of capital stock, debentures, and surplus. Limitation does not apply to (1) Discount of commercial or business paper actually owned by the person negotiating same. (2) Obligations secured by readily marketable nonperishable staples fully insured. An additional 25 percent may be loaned if the value is 115 percent, with an additional 5 percent for each 5 percent increase in value, to a limit of 50 percent. Wisconsin.-20 percent capital and surplus or 15 percent of capital and surplus together with listed exceptions. Exceptions include loans which may be made up to 30 percent secured by warehouse receipts covering readily marketable nonperishable staples fully insured, valued at 140 percent. Limitation does not apply to discount of commercial or business paper actually owned by the person negotiating same. Wyoming.-20 percent of capital paid in and surplus. Limitation does not apply to (1) Discount of commercial paper actually owned by person negotiating same. (2) Obligations secured by warehouse receipts covering readily marketable nonperishable staples fully insured. An additional 10 percent may be loaned if the value is 130 percent, with an additional 10 percent for each increase of 10 percent in value with a limit of 50 percent. FEDERAL STATUTORY LENDING LIMITATIONS ON LOANS MADE BY NATIONAL BANKS SECURED BY A FIRST LIEN ON REAL PROPERTY Fifty percent of appraised value for loans of 5 years; 66% percent of appraised value for loans of 10 years amortized; 66% percent of the appraised value for loans of 20 years amortized. STATE STATUTORY LENDING LIMITATIONS ON LOANS MADE BY STATE BANKS SECURED BY A FIRST LIEN ON REAL PROPERTY Alabama.-No statutory limitation. Arizona.-No statutory limitation for commercial banks; 60 percent of the market value for savings banks. Arkansas. No statutory limitation. California.-60 percent of the sound market value on 10-year loan; 66% percent of sound market value on 20-year loan on single-family residence; 66% percent of sound market value on 20-year loan on farm property; 85 percent of sound market value on 6-month loans. Colorado.-50 percent of appraised value on 5-year loan; 60 percent appraised value on 10-year loan amortized. Connecticut.-50 percent appraised value; 66% percent appraised value not to exceed $20,000 or one-half of 1 percent of capital and surplus whichever is greater for a 25-year loan amortized. Delaware.-Security must have a value 15 percent greater than the loan. Florida. No statutory limitation. Georgia.-50 percent of the fair market value; 75 percent of the fair market value for loans amortized. Idaho.-50 percent of the appraised value for loans of 5 years; 66% percent of the appraised value for loans of 10 years amortized; 66% percent of the appraised value for loans of 20 years amortized. Illinois. No statutory limitation. Indiana.-50 percent of the appraised value for loans of 10 years; 66% percent of the appraised value for loans of 20 years amortized. Iowa.--50 percent for loans of commercial banks; 60 percent of the appraised loans of savings banks of 10 years amortized. Kansas.-No statutory limitation. Kentucky. No statutory limitation. Louisiana.-No statutory limitation. Maine.-60 percent of the market value for loans made by savings banks. Maryland.-No statutory limitation. Massachusetts.-50 percent for loans of 3 years; 60 percent for loans of 5 years amortized, and 66% percent for loans of 20 years amortized. 40 percent for loans of 3 years; 60 percent for loans from 3 to 20 years amortized; 70 percent for loans of 5 to 20 years amortized and limited to $25,000; 75 percent for loans from 10 to 20 years amortized with a limit of $12,000; 80 percent of the value for loans of 20 years amortized with a limit of $12,000, for loans by savings banks. Michigan.-50 percent of the appraised value for loans of 5 years; 66% percent of the appraised value for loans of 10 years amortized; 66% percent of the appraised value for loans of 20 years amortized. Minnesota.-40 percent of cash value. Missouri.-No statutory limitation. Montana.-50 percent for 5 years; 60 percent for 10 years amortized. Nevada. No statutory limit; loans must be repayable in 30 years. New Jersey.-66% percent of the appraised value for loans of 20 years amortized; 80 percent of the first $15,000 and 50 percent of the excess for loans on single-family houses with a limit of $25,000 for 20 years amortized; 80 percent for the first $20,000 plus 50 percent of the excess for loans on 2-, 3- and 4family units for 20 years amortized; savings banks 80 percent of the appraised value or $25,000, whichever is less, for loans of 20 or 25 years amortized; 80 percent of the appraised value on the first $30,000 and 50 percent of the excess for loans on two or more family dwellings for 20 or 25 years amortized; 66% percent of the appraised value on other than family dwellings for loans of 10 years and amortized. New Mexico.-50 percent of the appraised value; 66% percent of the appraised value for 20 years amortized. New York.-663 percent of the appraised value; savings banks 60 percent of the appraised value, 66% percent of the appraised value if improved; $25,000 or 80 percent of appraised value, whichever is less, for property improved by a single-family residence not more than 10 years old, to be repaid within 75 percent of the useful life of the building, and amortized; $25,000 or 90 percent, which ever is less, for a loan on a single-family house not more than 2 years old having a duration of 75 percent of the life of the house or 30 years, amortized. North Carolina.-No statutory limit. North Dakota.-50 percent for loans of 5 years; 60 percent for loans of 10 years amortized. Ohio. 50 percent of the appraised value for loans of 5 years; 66% percent of the appraised value for loans of 20 years amortized. Oklahoma.-50 percent of the appraised value; 70 percent of the appraised value for loans of 10 years amortized. Oregon.-50 percent of appraised value and 66% percent for loans of 10 or 20 years amortized. Pennsylvania.-66% percent of the actual value for loans of 10 years; 66% percent of the actual value for loans of 20 years amortized. Rhode Island.-Savings banks 40 percent for unimproved real estate and 60 percent for improved real estate. South Carolina.-60 percent for loans of 10 years. South Dakota.-No statutory limitation. Tennessee.-No statutory limitation. Texas.-66% percent for loans on residential property to be paid off in 240 months; 60 percent for loans of 5 years and 50 percent for all others. Utah.-60 percent. Vermont. 40 percent for loans of 5 years; 66% percent for loans of 20 years. Virginia.-50 percent; 66% percent for loans of 20 years amortized. Washington.-60 percent of value; 66% percent of residential property; 80 percent of residential property which is less than 2 years old, to be loaned on the first $10,000, 50 percent for the amount over that for a loan of 20 years, for loans by savings banks. West Virginia.-No statutory limitation. Wisconsin.-No statutory limitation. Wyoming.-50 percent for loans of 5 years; 60 percent for loans of 10 years. renewable. Mr. MULTER. I think that in many instances our State banks in New York can lend on real estate up to the extent of 66 percent. Mr. GIDNEY. That is true. Mr. MULTER. I think that you are heartily in accord with the dual banking system and want to preserve it? Mr. GIDNEY. We are very much in accord with it and we don't want to take banks into the national system by greater liberality. We have some figures regarding this ratio: In New York the limit. is 66% percent of the appraised value of real estate. In several other States, they have sliding scales. California has 60 percent for loans of not more than 10 years, 66% on single family residences. 663 percent on farms, 85 percent for loans of not more than 6 months. Mr. MULTER. Just to emphasize what you said about the change of law as we are talking here it occurs to me that this very year in New York, the State legislature did change the provisions as to real estate loans and some institutions can now lend up to 90 percent on amortized loans on homes. Mr. GIDNEY. Then we are going to get 75 percent against their 90 percent. In New Jersey they can lend 66% for 20 years, 80 percent of the first $15,000, and 80 percent of the first $20,000 under certain conditions. Friends from up there say they are trying hard to get their law amended to give them 80 percent, and I believe their savings banks have it. I believe that Federal Savings and Loan Associations have been given 90 percent basis by the Home Loan Bank Board. So this provision will not put us out in front. Mr. MULTER. On the other hand, I think subdivision 4 of section 4 would just about equalize you with State banks, would it not, 18month construction loans? Mr. GIDNEY. I believe so. Of course, we have a 9-month basis for residental properties under construction, but not for commercial. Mr. MULTER. Yes, sir. Now, with refernece to subdivision 1 of section 4, on leaseholds, I think you may agree with me that the language is a little too loosely drawn. It provides that we may lend on a leasehold that runs for 10 years, or that may run for 10 years if the lessee extends his option. Shouldn't it rather read provided the lease runs for at least 10 years beyond the period of the loan or has been extended accordingly? If the bank is going to lend money on a lease that has an option, and the lessee fails to exercise the option, you have no security. Mr. GIDNEY. Counsel says that it would be intended that that option should run to the bank, would need to run to the bank. It would be assigned to the bank, so that the bank would be able to exercise it. Mr. MULTER. Will the bank have the facilities for watching that kind of a situation and be able to move in and exercise the option? Mr. JENNINGS. I am sure that it would, Congressman. Mr. MULTER. Are we not in a situation there where the lessee who has pledged the lease might say this lease isn't worth extending, and the bank in order to keep the security sound must go in and become a tenant? Mr. GIDNEY. Yes, sir. Mr. MULTER. It would have to extend the lessee's option and extend the lease, and then foreclose on the leasehold. Mr. GIDNEY. Or foreclose first. Mr. MULTER. Yes, sir, you would have to have a legally sufficient clause to permit the option to survive the foreclosure because what you are foreclosing is the lease as it stands. Mr. JENNINGS. All of those possibilities exist in connection with leasehold loans that may be made under the present law. However, we have experienced no trouble or found no trouble with such loans in the banks that make them. Mr. GIDNEY. We have some in the new State of Hawaii. The tendency is to have things done on leaseholds, and they don't run as long as a hundred years. I think they are 25 years. Then one of the matters that brought this to our attention was the matter of people acquiring a piece of property, or at least acquiring tenancy of a piece of property along the railroad, like a warehouse, and the best they can get on that is a lease for a period of years. Yet it is very good security. So this is to facilitate those loans which seem to be all right. Now the great mass of real estate loans are fee titles which are not covered at all. But there again different States have different methods. Mr. KILBURN. Mr. Multer, would you yield? Mr. MULTER. I yield. Mr. KILBURN. I want to say, Mr. Gidney, that it is a great pleasure to have you before us. I think you are one of the greatest Comptroller of the Currency we have ever had. I also want to say that it is a great pleasure to have our old friend Jesse Wolcott before this committee. He is our next witness, and I am sorry I cannot stay. His words of wisdom steered our side of this committee for a great many years, ever since I have been on it, and, of course, since he has left I have to think for myself a little bit and fumble around, and I am not half as good as he was. I wish he was up here controlling our side of this comittee again. If he ever does come back, I wish he would take my place. Mr. MULTER. I endorse all that Mr. Kilburn has said about Mr. Gidney and his associates and, of course, about Mr. Wolcott. Mr. Gidney, referring now to H.R. 6093, in section 5 is a reference to "commencement of business." Does that contemplate commencement of business by the taking of deposits? Or would that also prohibit doing the necessary things to get ready to do business? That is, would this require all capital to be paid in before they could rent or buy quarters and employ help and buy equipment, and so forth? Mr. GIDNEY. Well, I think those things could be accomplished before we issue the charter. Of course, usually most of those things are quite well completed before the charter is issued. Mr. JENNINGS. Oh, yes, they are. And the money, of course, would be paid in and held in a bank account under the control of the group of organizers. After they sign certain documents which our office requires, the group becomes a body corporate and may spend such portion of the money as is required, for furniture and fixtures and a banking house. Mr. MULTER. And this commencing business means opening the doors to the public and taking deposits, and investing the money. Mr. JENNINGS. That is right. Mr. MULTER. With reference to reports, I think you may be relaxing your controls a little too much when you change your rule as to requiring reports with reference to dividends. As I read the proposed statute, it seems to me that there is no advance notice that will be required if this bill is enacted as submitted. There will be no advance notice required in advance of declaring dividends. You would get notice only after dividends are declared; is that right? Mr. GIDNEY. I think that is true. Mr. JENNINGS. We now receive notice of the declaration of dividends. We have not found them of any particular value. Of course, there is another section of the bill that does provide a safeguard that does not now exist. In other words, a bank's board of directors may |