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DOCUMENT RESUME
02138 - rA1572542] tiesUiee
Changing Ownershi? of Mutual Savings and Loan Associations: An
Evaluation. FOD-77-10; B-114827. May 26, 1977. 22 pp. +
appendix.
Report to Sen. William Proxmire, Chairman, Senate Committee on
Banking, Housing and Urban Affairs; by Elmer B. Staats,
comptroller General.
Contact: Field Operations Div.
Budget Function: General Government: Legislative Functions
(901).
Organization Concerned: Federal Home Loan Bank Board.
Congressional Relevance: Senate Committee on Banking, Housing
and Urban Affairs.
Authority: P.L. 93-495.
In 1974, the Federal Home Loan Bank Board was permittel
to approve 41 savings and loan association conversions from a
mutual to stock form of ownership. The sale-of-stock method of
conversion has provided opportunities for an association to
raise additional capital, expand operations, and increase
earnings. In eight associations reviewed by GAO, the primary
reason given for converting from a mutual to a stock association
was the need to obtain additional equity capital to meet or
increase net worth requirements. Findiigs/Conclusions: The
Board needs to increase its monitoring of associations to
determine whether they are complying with conversion regulations
and whether additional regulations or revisions to existing
reglations are required to assure equitable conversions. In the
review, it was noted that: (1) members of management and their
associates significantly increased their holdings through stock
transfer soon after conversion; (2) management and its
associates at some associations increased their savings account
balances before the eligibility record datc cf conversion; and
(3) Board regulations on rights under subsequent stock issues,
stock transfer agents, and acquisitions of converted
associations need revision because they conflict with the
objective of conversion--broad participation with little or no
benefit to insiders. Additional time is needed to monitor the
conversion process, refine regulations, and assess further the
impact of conversions on the savings and loan industry.
Recommendations: The Federal Home Loan Bank Board should:
develop and implement monitoring procedures so that existing
regulations are adhered to; identify and seek legislative
changes in the law relating to penalties and enforcement
authority; and strengthen existing regulations. (RRS)](ViewImageLocal?handle=hein.gao/gaobaacew0001&div=1&collection=&method=preview&ext=.png&size=3)