History of SSA During the Johnson Administration 1963-1968

LEGISLATIVE CHANGES AFFECTING FEDERAL CREDIT UNIONS .

The Federal Credit Union System showed substantial growth during the period of the Johnson Administration, as illustrated by the following statistics:

	As of the Year-End, December 31
Item	1963	1967
Number of operating FCU's	10,955	12,210
Membership:	7,499,747	9,873,777
Shares	$3,452,600,000	$5,420,700,000
Loans to members	$4,017,100,000	$5,805,200,000

This growth was due, in part, to the favorable attitude toward Federal credit unions during that Administration. Many changes were made in the Federal Credit Union Act, in that five-year period, to liberalize the conditions under which Federal credit unions provide service to their members. Some other legislative actions also affected Federal credit unions.

Following is a resume of the major legislative actions directly affecting Federal credit unions. The legal language of the amendments generally is paraphrased in order to make for easier reading and to eliminate less essential wording.

Public-Law 88-395 (effective August 1, 1960) repealed the District of Columbia Credit Union Law and required that each credit union operating under the law convert to Federal charter or commence liquidation within 30 days. All of the sixteen District of Columbia credit unions converted to Federal charter. The last two conversions were completed on August 31, 1964, the deadline. These sixteen credit unions had 28,746 members as of December 31, 1963, with assets totaling $11,033,638, shares totaling $9,593,463, and loans outstanding to members totaling $8,643,965.

Public Law 88-353 (approved July 2, 1964) made several changes in the Federal Credit Union Act:

1. To expand the investment powers of Federal credit unions to include "obligations issued by banks for cooperatives, Federal land banks, Federal intermediate credit banks, Federal home loan banks; theFederal Home Loan Bank Board, or any corporation designated in section 101 of the Government Corporation Control Act as a wholly-owned Government corporation."

2. To permit Federal credit unions to have as many as five members on the supervisory committee. The number had previously been limited to three.

3. To permit Federal credit unions to pay interest refunds to borrowers for semiannual as well as annual periods, if dividends were paid for such periods.

4. To permit Federal credit unions to accept as adequate security on loans to members, subject to such regulations as the Director may prescribe, insurance obtained under Title I of the National Housing Act.

Public Law 88-353 also amended section 1014 of Title XVIII of the United States Code to make it a Federal crime for anyone willfully to give false information or to forge a document for the purpose of inducing a
Federal credit union to grant a loan.

Public Law 89-329 "The Higher Education Act of 1965" and Public Law 89-287 "The National Vocational Student Loan Insurance Act of 1965," included Federal credit unions as eligible lenders for insured loansand extended to them certain powers beyond the limits of the Federal Credit Union Act which permit them to participate fully in the student loan insurance programs. This was especially advantageous to Federal credit unions, because it permitted the making of such loans for periods in excess of the five-year limit prescribed in the Federal Credit Union Act.

Public Law 89-429 (approved May 24, 1966) known as "The Participation Sales Act of 1966," added to the investment powers of Federal credit unions by permitting them to invest in "obligations, participations, or other instruments of or insured by, or fully guaranteed as to principal and interest by, the Federal National Mortgage Association; or in participation certificates evidencing beneficial interests in obligations, or in the right to receive interest and principal collections therefrom, which obligations have been subjected by one or more Government agencies to a trust or trusts for which any executive department, agency, or instrumentality of the United States (or the head thereof) has been named to act as trustee;" . . .

Public-Law 90-44 (approved July 3, 1967) contained two amendments to the Federal Credit Union Act:

1.To expand the investment powers of Federal credit unions to permit them to invest in accounts of mutual savings banks, the accounts of which are insured by the Federal Deposit Insurance Corporation.

2. To provide more liberal limits on loans to directors and members of the supervisory and credit committees of the Federal credit union. Such loans may be made under the same conditions as loans to other borrowers, subject to certain conditions, including the following: The aggregate amount of loans outstanding to the director or committeeman will not exceed the amount of shareholdings in the credit union, not otherwise encumbered or pledged, which are pledged as security for loans to the borrower, or $5,000, whichever is greater.

The aggregate amount of loans outstanding to such borrower will not exceed 20 per centum of the unimpaired capital and surplus of the credit union; and The loan is approved by the credit committee and by the board of directors.

Public Law 90-188 (approved December 13, 1967) contained two amendments to liberalize the Federal Credit Union Act:

1.To remove prior limitations on the authority of loan officers to grant loans so that the credit committee may set its own limits on authority delegated to the loan officer.

2.To provide authority for the payment of quarterly dividends, and to allow dividend credit for the full month in which shares are paid in during the first ten days of the month and are retained until the close of the dividend period.

Public Law 90-375 (approved July 5, 1968) contained many changes in the Federal Credit Union Act:

1. To increase from five to ten years the maximum term for secured loans.

2. To increase the investment authority of Federal credit unions to permit investments in shares or deposits of any central credit union.

3. To permit Federal credit unions, in accordance with rules and regulations prescribed by the Director, to purchase from any liquidating credit union, notes made by individual members of the liquidating credit union. The aggregate of the unpaid balances of such notes may not exceed 5 per centum of the unimpaired capital and surplus of the credit union.

4. To permit the board of directors to extend its delegation of authority to the executive committee to include the purchase and sale of securities, the borrowing of funds, and the making of loans to other credit unions.

5. To permit the making of unsecured loans to members on a graduated scale up to $2,500.

6..To require the supervisory committee to make semiannual audits instead of the previously required quarterly audits.

7. To require a majority vote of the board of directors for removal of a supervisory committee member.

8. Authorizes the Director of the Bureau to conduct directly, or to make grants to or contracts with colleges or universities and certain other organizations to conduct programs for the training of persons engaged in, or preparing to engage-in, the operation of credit unions and related consumer counseling programs serving the poor. Authorizes the Director to establish a program of experimental, developmental, demonstration, and pilot projects, either directly or by grants, designed to promote more effective operation of credit unions and related consumer counseling programs serving the poor. In order to carry out the purposes of this paragraph, there is authorized to be appropriated as a supplement to other funds expended by the Director for such purposes, funds not to exceed $300,000 for the fiscal year ending June 30, 1970, and not to exceed $1,000,000 for the fiscal year endingJune 30, 1971.

9. Authorizes the Director of the Bureau to accept gifts of money made unconditionally by will or otherwise to carry out my of the functions under this Act.

Public Law 90-365 names Federal credit unions along with banks and savings and loan associations as institutions eligible to receive for deposit, checks for all or a portion of Federal employees' payroll checks. {1}

Footnotes (Footnote numbers not same as in the printed version)

{1} In the January1968 issue of the Bureau of Federal Credit Unions "BULLETIN," (enclosed) President Johnson's comments at the signing ceremony for Public Law 90-188, reproduced on page 2 of that publication reflect his evaluation of Federal credit unions as "building blocks of democracy" and his strong support of such institutions. The roster of guests at the signing ceremony (page 3 of the "BULLETIN") gives some indication of the wide-spread interest in Federal credit union legislation.