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FOD-78-4 1 (1978-06-14)

handle is hein.gao/gaobaaxlc0001 and id is 1 raw text is: DOCUMENT RESUME 06247 - CB16667141 Savings and Loan Associations: Changes Needed in the Regulation of Their Service Corporations. FOD-78-4; B-114E27. June 14, 1978. 41 pp. + 4 appendices (14 pp). Report to the Congress; by Robert F. Reller, Acting Comptro'ler General. Issue Area: Accounting and Financial Eeporting (280C0. Contact: Field Opt:rtions Div. Budget Function: General Government: Cther General Government (806). orqaaization Concerned: Federal Home Loan Bank Board. Conqressional Relevance: House Committee on 3anking, !inance and Urban Affairs; Senate Committee cn Banking, Housing and Urban Affairs; Congress. Aothority: Home OwnersO Loan Act of 1933, as amended (12 U.S.C. 1461). Housing Act of 1964 (P.L. 88-560; 12 U.S.C. 1464(c)). =12 C.F.R. 54 . 110 Cong. Rec. 19332. H.R. 12115 (6Eth Conq.). H. Rept. 8&,1703. S. Rept. 88-1265. S. 71 (95th Conq.). Smith v. .aques, C.&. 75-939 (D. Cregon 1976). Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381 (1969). Lemel v. Rusk, 381 U.S. 1, 12 (1965). Caminetti v. United States, 242 U.S. 460, 485 (1916). Federally chartered savings and lcan associaticns were duthorized to invest in service crpcrations by the Congress in 1964. Service corporations provide savings and loan associations with numerous ways of increasing revenues and profits from investments related to housing or complementary to the operations of associations. The Federal Home lcan Bank Board (FHLBB) regulates and supervises Federal savings and loam associations$ investments in service ccrvozaticns. Findinqz conclusions: The savings and loan industry contends that service corporations have greatly increased asscciaticn profits, but analyses indicate that associations with service corporations are not doing better than associations withcut service corporations, and service cortcrati%.ns are being increasingly cited as contributing to asscciaticn jrcbleas. Although associations have expanded their financial and housing services throuqh service corporations, this expansion has not emphasized low- and moderate-income housing. A close relationship between associations and their service corporations has given associations opportunities to engage in insider dealinqs for persopal gain, manipulate the mervice ccrporation tor tax advantages, and make biased investment decisions. Fundamental issups Zacing the savings and Ican associations involve the compe itive relationship bith ccomerical banks, the competitive relationship with other industries, and the kind of competition that should be allcwed. Reccmendations: The Congress should: clarify the PHLBB's authority to regulate investments in service corporaions; deteraine whether the

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