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June 26, 1951•
FEDERAL STATUTORY CHANGES
1900 - 1951
GOVERNING THE ISSUANCE OF MONEY
AND
RESTRICTING OR DEFINING BANK CREDIT
-FOREWORD
This memorandum contains summaries of major statutory changes
in Federal Law since 1900 governing the issuance of money and restricting
or defining bank credit*
In view of the nature of the subject and in order to present
an integrated picture of the legislative developments in these fields,
the memorandum includes summaries of some provisions #iich may be
related to the subject only indirectlyf
In some cases in which changes
were especially detailed or technical, the memorandum merely gives a
general reference to the nature of the change. Some minor changes that
had only a mechanical rather than a substantive effect upon the monetary
or banking system have been omitted. In the case of statutes dealing
with several different subjects only those provisions that are relevant
to the fields under consideration are summarized.
The summaries, of course, are not intended to be technically
exact or complete as to all details* They are arranged in chronological
order.
ACT OF MARCH 14, 1900
(Gold Standard Act of 1900)
Standard of value fixed, - This Act.reaffirmed the Act of .
February 12, 1873 by providing that the dollar, consisting of 25 and
3/lOths grains of gold 9/lOths fine, shall be the standard unit of value
and all fonus of United States money shall be maintained at a parity of
value with this standard and it shall be the duty of the Secretary of the
Treasury to maintain such parity. (31 Stat. 45, sec. 1)
Redemption in gold* - United States notes and Treasury notes
issued under the Act of July 14, 1890, were to be redeemed by the Treasury
in gold coin, and a reserve of $150,000,000 in gold established for such
purpose# Under the provisions of the above mentioned Act, such notes had
been redeemable in gold or silver coin at discretion of the Secretary of
the Treasury. (31 Stat. 45, sec, 2)
Legal tender quality of silver dollar, - It was provided that
nothing contained in this Act shall be construed to affect the legal*tender quality of the silver dollar or any other money of the United
States, (31 Stat. 45, sec* 3)
Division of issue and redemption. - A separate division was
established in the Treasury Department to separate the monetary functions
from those of a fiscal character, (31 Stat, 45, sec, 4)
Silver Certificates substitutes for Treasury notes. — The
Secretary of the Treasury was directed to retire Treasury notes equal
in amount to newly coined silver dollars and issue silver certificates
in lieu thereof, (31 Stat. 45, sec, 5)
Gold certificates as la?rful reserve, ~ The Secretary of the
Treasury was directed to receive deposits of gold coin and to issue
gold certificates therefor which, when held by national banks, could
be counted as a part of their lawful reserves, thereby reenacting a
provision similar to section 12 of the Act of July 12, 1882. (31 Stat,
45, sec, 6)
Denominations of currency. -* Certain changes were made with
regard to the various denominations of gold and silver certificates to
be issued by the Secretary of the Treasury. (31 Stat. 45, sees. 6,7)
National bank minimum capital requirements lowered. —
Section 5138 of the Revised Statutes was amended by lowering the previously established minimum requirement of $50,000 for places not ex-*
ceeding 6,000 people to -^25,000 for places not exceeding 3,000 people.
(31 Stat. 45, sec. 10)
Security for, and limitation on amount of, national bank
circulation, etc* - National banks could receive circulating notes in
an amount equal to the par value of the bonds deposited therefor, and
any such bank having less than such amount of circulating notes was
declared to be entitled to an increase thereinj but the total amount
of notes issued any one bank could not exceed the amount of its paidin capital stock. (Previously, the amount of such circulating notes
could not exceed 90 per cent of the par value of the bonds deposited.)
National banks were authorized to substitute for any bonds on deposit
to secure their circulation or deposits of public moneys, the 2 per cent
gold bonds issued by the Secretary of the Treasury in exchange for
certain 3 per cent, h per cent and 5 per cent bonds of the United States.
That part of the Act of July 12, 1882, which prohibited national banks
that made deposits of lawful money in order to withdraw their circulating
notes from receiving any increase therein for 6 months, was repealed.
(31 Stat. k9> sees. 11 and 12)
Tax on national bank circulation secured by 2 per cent gold
bonds. - National banks having circulating notes secured by the aforementioned 2 per cent gold bonds were required to pay a tax of one-fourth
of 1 per cent each half year upon the average amount of notes in circulation secured by such bonds. Such tax was declared to be in lieu of
the tax on circulation imposed by section 5>2ll* of the Eevised Statutes,
providing for a tax every half year of one-half of 1 per cent on the
average amount of notes in circulation. (31 Stat. 1*9, sec. 13)
International bimetallism. - It was also provided that the
provisions of this Act were not intended to preclude the accomplishments of international bimetallism whenever conditions made it expedient
and practical to secure the same by action of leading commercial nations
of the world and at a ratio which shall insure permanence of relative
value between gold and silver. (31 Stat. I|9, sec. lU)
ACT OF MARCH 3, 1903
Smaller cities as reserve cities. - The Act of March 3, 1887,
authorizing the designation of cities of"lTo,000 people as reserve
cities, was amended so as to authorize cities of 25,000 people to be
so designated. (32 Stat. 1223, Ch. 10lU)
ACT OF DECEMBER 21, 1905
Tax on national bank circulation secured by Panama Canal Bonds•
Certain changes were made in the rate of tax on circulating notes of.
national banks secured by 2 per cent Panama Canal Bonds. This tax
was declared to be in lieu of existing tax on circulating notes imposed
by section 5>2lU of the Revised Statutes. (3U Stat. 5, sec. l)
ACT OF JUNE 22, 1906
Limitation on loans to one obligor. - Section 5200 of the
Revised Statutes3 limiting to one-tenth of a national bankfs paid-in
capital stock the total liabilities of any one obligor thereto but
ezcepting from such limitation the discount of bills of exchange drawn
in good faith, etc., was amended by expanding the one-*tenth limitation
to include the bank's unimpaired surplus fund; and the total of such
liabilities was prohibited from exceeding 30 per cent of the capital
stock of any such bank. (3U Stat. k$l> Ch. 35>l6)
ACT OF MARCH h, 1907
Amendment re gold certificates, etc, - Section 6 of the Act
of March II*, 1900, providing, inter alia, for the repeal of the law
authorizing the issuance of demand certificates to national banks
depositing United States notes with the Secretary of the Treasury, and
providing that gold certificates issued by him might be counted as
reserves of such banks, was reenacted with certain technical amendments. (3U Stat. 1289, sec. 1)
Deposits for withdrawal of circulating notes; amendment. Section 9 of the Act of July 12, 1882, as amended by section 12 of the
Act of March lU, 1900, providing for the withdrawal of circulating notes
of national banks upon their deposit of lawful money with the United
States Treasurer, etc., was amended so as to make such withdrawals
dependent upon the approval of the Comptroller of the Currency and the
Secretary of the Treasury, and by raising the maximum deposits of lawful
money for such purpose in any one month from $3*000,000 to $9*000,000.
(3U Stat. 1290, sec. U)
ACT OF MAY 30, 1908
(Aldrich-Vreeland Act)
National currency associations. - Subject to specified capital
and surplus requirements, ten or more national banks were authorized
to form (voluntary) national currency associations with the usual
corporate attributes. Such an association could be composed only of
national banks not members of any other such association, and there
could be only one such association in any one city. The affairs of
such an association were required to be managed by a board consisting
of one representative from each member bank, and the board's powers
could be exercised through its executive committee. These associations
were empowered to render available, under the direction and control
of the Secretary of the Treasury, any securities, including commercial
paper, held by national banks, as a basis for additional circulation.
-U-
To obtain such additional circulation, any member bank having circulating notes outstanding not less than a specified amount and with a
specified capital and surplus, was authorized to deposit with the
association, in trust for the United States, such of the securities
above mentioned as the Board might approve. Upon the association's application, the Comptroller of the Currency, with the approval of the
Secretary of the Treasury, was authorized to direct the issuance of
additional circulating notes to the association not exceeding 75 per
cent (90 per cent in case of State or municipal bonds) of the cash
value of the securities or commercial paper so deposited. The member
banks were made jointly and severally liable to the United States for
the redemption of such additional circulationj and the association
could require its members to deposit additional securities to secure
such circulation and, upon failure to comply, could sell the securities
already deposited or sue delinquent banks for any deficiency. Should
any member bank fail to maintain its redemption funds as required by
law, ultimately the redemption funds of other member banks could be
used to supply the deficiency. (35 Stat. 546, 548, sees. 1, 2, and 6)
Issuance of additional notes secured by bonds. - Any national
bank having outstanding circulating notes secured by United States
bonds to a specified amount and with a specified capital stock and
surplus, was authorized to apply to the Comptroller of the Currency
for authority to issue additional circulating notes on the security of
State or municipal bonds. Such notes could be issued only upon the
approval of the Secretary of the Treasury. The provisions of the Revised Statutes relating to custody, etc., of bonds deposited to secure
circulating notes and the redemption thereof were made applicable to
the notes here involved^ but the amount of outstanding notes so issued
could not exceed $500,000,000. (35 Stat. 548, sees. 3, 4, and 5)
Equitable distribution of notes» - To maintain an equitable
distribution of notes issued under this i\ct, for which national banks
were required to maintain with the Treasury an additional redemption
fund of 5 per cent of the outstanding amounts thereof, the Secretary
of the Treasury was required to observe the proportion of unimpaired
capital funds of national banks in one State to the total unimpaired
capital funds of all national banks. (35 Stat. 550, secs#6 and 7)
Tax on circulating notes. - Section 5214 of the Revised
Statutes, as amended, relating to the tax on national bank circulation,
was amended to make certain changes in the rate of tax imposed on
circulating notes of national banks. (35 Stat. 550, sec. 9)
Withdrawal and redemption of circulation* - Section 9 of the
Act of July 12, 18b2, as amended by the Act of March k> 19Q7j permitting
national banks to withdraw their circulating notes by depositing lawful
money or national bank notes with the United States Treasurer, was.
amended so as to permit a bank to withdraw also circulating notes
secured other than by United States bonds * (35 Stat* 551, 552, sec* 10)
Deposits of public moneyj reserves and interest* - The provisions of section 5191 of the Revised Statutes, prescribing the
lawful money reserves of national banks, were rendered inapplicable
to deposits of public money in those designated as depositaries^ and
national banks so designated were required to pay interest on the
deposits of certain public money at a rate not less than one per cent
per annum on the average monthly amount of such deposits* (35 State
552, sees, ll| and 15)
National Monetary Commission created, etc* - The "National
Monetary Commission", composed of nine Senators and nine Representatives, was established to inquire into, and report to Congress on,
necessary or desirable changes in the country's monetary system or
in the laws relating to banking and currency* (35 Stat* 552, 553*
sees. 17, 18 and 19)
19lUo
Expiration of law* - This Act was to expire on June 30$
(35 Stat* 553* sec. 20)
ACT OF MARCH U, 1909
Criminal statutes relating to national bank notes* - This
Act codified, revised, and amended the penal statutes relating,
inter alia, to the counterfeiting, forging, etc*, of national bank
notes, United States obligations, etc*; the theft, improper use, etc*,
of equipment for printing such notes and obligations, etc*j the
issuance and circulation of notes after the expiration of a national
bank's charterj the issuance and circulation of notes representing
fractional parts of a dollar; the use of national bank notes or likenesses thereof in advertising, etc*} and the mutilation, disfigurement,
etc*, of such notes* (35 Stat. 1088, 1103-1133, Ch. 321)
ACT OF MARCH 2, 1911
Panama Canal bonds; eligibility as security for national
bank.circulation, - The Secretary of the Treasury was authorized to
have inserted in the additional issue of Panama Canal bonds authorized
by the Act of August 5* 1909 (36 Stat. L, 117)* a provision prohibiting
such bonds from being received as security for the issuance of circulating notes of national banks. (36 Stat. 1013, Ch» 195)
ACT OF DECEMBER 23, 1913
(Federal Reserve Act)
Federal Reserve System established. - This Act provided
for the establishment and operation of the Federal Reserve System,
composed of the Federal Reserve Board, the Federal Reserve Banks, and
member banks consisting of all national banks in the United States, anfl
such State banks as apply for and are admitted to membership. The
United States was divided into districts, not to exceed twelve, with
a Reserve Bank in each district. Such districts were to be apportioned
with due regard to the convenience and customary course of business.
Each Federal Reserve Bank was authorized to establish branches within
its district, to be operated under rules and regulations approved by
the Federal Reserve Board. (38 Stat. 251 > sees. 2, 3)
Stock of Federal Reserve Baiks. - Each Federal Reserve Bank
was required to have a subscribed capital stock of $U million before
it commenced business. If the stock subscription by the member banks
was insufficient, stock could be offered for sale to the public, no
person being allowed to hold more than $25 thousand par value of such
stock. Should the total subscription of stock by banks and the public
be insufficient, stock could be purchased by the United States. (38
Stat. 251, sec. 2)
Corporate powers of Federal Reserve Banks. - The usual
corporate powers were conferred upon Federal Reserve Banks, such as
the power to adopt a seal, to make contracts, to sue and be sued, to
prescribe by-laws, etc. Among the powers specifically conferred was
the power to issue circulating notes (Federal Reserve Bank notes) in
the same manner as that relating to national banks. (38 Stat. 251*
sec. U)
Directors of Federal Reserve Banks. - A board of nine
directors was provided for each Federal Reserve Bank with three-year
terms of office and divided into three classes: Class A and Class B
chosen by the member banks, and Class C appointed by the Federal
-7-
Reserve Board. Class A directors were to be representative of the
member banks and Class B were to be actively engaged in commerce,
agriculture, or industry, and not officers, directors, or employees
of any banks. Provision was made for fair representation between the
large, medium, and small member banks. Class C directors could not be
officers, directors, employees, or stockholders of any bank. The Federal Reserve Board was to designate one Class C director as chairman of
the board and as "Federal Reserve Agent11, who was required to be a
person of tested banking experience and to maintain a local office of
the Board on the premises of the Federal Reserve Bank* (38 Stat. 25>1,
sec. k)
Capital stock of Federal Reserve Banks. - The capital stock
of each Federal Reserve Bank was divided into shares of $100 each and
could be increased or decreased from time to time as member banks increased or decreased their capital stock and surplus. Member banks
were required to subscribe to the capital stock of each Federal Reserve
Bank in amounts equal to six per centum of their paid-up capital stock
and surplus. Federal Reserve Banks were required to pay a dividend of
six per cent per annum on paid-in capital stock, such dividend to be
cumulative. (38 Stat. 2£l, sec. h)
Division of earnings. - After the payment of dividends, all
net earnings of the Federal Reserve Bank were required to be paid to
the United States as a franchise tax, except that one-half of such net
earnings were to be paid into a surplus fund until it amounted to
i*0 per cent of the paid-in capital stock of the Reserve Bank. In the
event of liquidation of a Federal Reserve Bank, all surplus remaining,
after payment of dividends, debts and par value of its stock, was to be
paid to the United States. (38 Stat. 2$1, sec. 7)
State banks as members. - Provision was made for voluntary
membership in the Federal Reserve System by State banks upon approval
of applications therefor by the Federal Reserve Board and upon the
payment for stock of the Federal Reserve Bank. Such applying bank was
required to comply with the reserve and capital requirements and be
subject to examination and regulations prescribed by the Federal Re^
serve BQard and was required to have a paid-up and unimpaired capital
sufficient to entitle it to become a national bank in the place where
it was situated. Such applying bank was also required to conform with
the provisions of law imposed on national banks respecting the limita-*
tion of liability incurred by any person, the prohibition against purchasing or making loans on stock of banks, the withdrawal or impairment
of capital or the payment of unearned dividends and such other rules
-8-
and regulations as the Federal Reserve Board may prescribe* Provision
was also made for forfeiture of membership after hearing for violations
of the Federal Reserve Act or regulations of the Board. (38 Stat.
25, sec. 9)
Federal Reserve Board* - A Board of seven members was provided,
consisting of the Secretary of the Treasury and the Comptroller of the
Currency as members ex officio, and five members appointed by the
President and confirmed by the Senate, In selecting the five appointive
members, the President was required to give due regard to fair representation of the different commercial, industrial and geographical
divisions of the country; and not more than one such member was to be
selected from any one Federal Reserve district and at least two of such
members were to be persons experienced in banking or finance. The
Act provided that no member of the Board should be an officer, director
or stockholder of any bank or trust company. The Board was authorized
to levy assessments against the Federal Reserve Banks semiannually
in amounts necessary to pay its estimated expenses and salaries*
(38 Stat. 251, sec, 10)
Powers of Federal Reserve Board* - The Board was authorized
to permit, or on the affirmative vote of at least five members to
require, Federal Reserve Banks to rediscount the discounted paper of
other Federal Reserve Banks at rates of interest to be fixed by the
Board; to suspend within limited periods the reserve requirements
specified in the Act; to establish a graduated tax to be paid by
Federal Reserve Banks for deficiency in reserves against deposits as
well as the gold reserve against Federal Reserve notes; to classify
and reclassify reserve and central reserve cities; to exercise general
supervision over Federal Reserve Banks; and to examine and require
statements and reports from Federal Reserve Banks and member banks.
(38 Stat. 251, sec. 11)
Federal Advisory Council. - A Federal Advisory Council was
created consisting of one member from each Federal Reserve district
selected by the board of directors of the Federal Reserve Bank. This
Council was required to meet in Washington at least four times each
year (a) for the purpose of conferring directly with the Federal Reserve Board on general business conditions, (b) to make oral or written
representations to the Board concerning matters within its jurisdiction and (c) to call for information and make recommendations in regard
to discount rates, note issues, reserve conditions, purchase and sale
of gold or securities by Reserve Banks, open market operations and the
general affairs of the Reserve Banking System, (38 Stat. 251, sec, 12)
-9-
Powers of Federal Reserve Banks. - Federal Reserve Banks were
authorized to receive from their member banks and from the United States,
deposits of current funds, notes and checks, and to discount notes,
drafts and bills of exchange arising out of actual commercial transactions, upon the endorsement of a member bank, which may be secured by
staple agricultural products or other merchandise* Such notes, drafts
and bills were required to have a maturity at the time of discount of
not more than ninety days, except that notes, drafts and bills drawn
for agricultural purposes or based on livestock could have a maturity
not exceeding six months. Federal Reserve Banks were not permitted to
discount paper covering merely investments or drawn for the purpose of
carrying or trading in stocks, bonds or other investment securities
except obligations of the Government. Also, Federal Reserve Banks
were authorized to (a) discount acceptances based on the importation
or exportation of goods having a maturity at the time of discount of
not more than three months and endorsed by a member bank, (b) deal in
gold coin and bullion at home or abroad and to make loans thereon, to
exchange Federal Reserve notes and gold or gold coin, (c) purchase
from member banks and to sell bills of exchange arising out of commercial transactions, (d) establish from time to time, subject to review
and determination of the Federal Reserve Board, rates of discount to
be charged by the Federal Reserve Banks for each class of paper, such
rates to be fixed with a view to accommodating commerce and business,
and (e) establish accounts with other Federal Reserve Banks for exchange purposes and with the consent of the Federal Reserve Board to
open and maintain banking accounts in foreign countries and to establish
agencies in foreign countries where it may be deemed best for the purpose of purchasing, selling or collecting bills of exchange. (38 Stat,
&
sec. 13)
Open market operations. - Federal Reserve Banks were
authorized under rules and regulations prescribed by the Federal Reserve
Board to purchase and 1 sell in the open market at home or abroad cable
transfers and bankers acceptances and bills of exchange of the kinds
and maturities made eligible for rediscount with or without the endorsement of a member bank. Also to buy and sell bonds and notes of the
United States and tax anticipation securities issued by States,
counties and municipalities as well as irrigation and reclamation districts having maturities of not exceeding six months. (38 Stat. 5
sec. U)
Government deposits. - The Secretary of the Treasury was
authorized to deposit in the Federal Reserve Banks moneys held in the
general fund of the Treasury, and Federal Reserve Banks when required
by the Secretary of the Treasury were authorized to act as fiscal agents
of the United States. (38 Stat. 2£L, sec. $)
-10-
Federal Reserve notes* - Provision was made for the
issuance of Federal Reserve notes, at the discretion of the Federal
Reserve Board, for the purpose of making advances to Federal Reserve
Banks through the Federal Reserve agents. It was provided that they
shall be obligations of the United States and redeemed in gold on
demand at the Treasury Department or at any Federal Reserve Bank.
Collateral for Federal Reserve notes was required to be in an amount
equal to the sum of the Federal Reserve notes issued and to consist
of notes and bills accepted for rediscount by the Federal Reserve Bank
under other provisions of the Act* Each Federal Reserve Bank was
required to maintain reserves in gold or lawful money of not less than
35 per centum against its deposits, and reserves in gold of not less
than UO per centum against Federal Reserve notes in actual circulation*
It was provided that no Federal Reserve Bank shall pay out notes issued
through another Federal Reserve Bank except under a penalty of a tax of
10 per centum upon the face value of notes so paid out. Each Federal
Reserve Bank was required to maintain on deposit in the Treasury of the
United States a sum of gold sufficient for the redemption of Federal
Reserve notes issued by it, but in no event less than 5 per centum*
The Federal Reserve Board expressly was given the right to grant or
reject, in whole or in part, any application of a Federal Reserve
Bank for Federal Reserve notes* Federal Reserve Banks were required
to pay such rate of interest on the notes as may be established by the
Board. (38 Stat. 251* sec* 16)
Check clearing and collection* - Federal Reserve Banks were
authorized to receive on deposii at par from member banks or from
Federal Reserve Banks, checks and drafts drawn on any of its depositors*
The Federal Reserve Board was authorized to fix the charges to be
collected by member banks from its patrons whose checks are cleared
through the Federal Reserve Bank and the charge which may be imposed
for the service of clearing or collection rendered by a Federal Reserve
Bank. The Board was also authorized to make regulations governing the
transfer of funds among Federal Reserve Banks and the exercise of the
functions of a clearing house for member banks* (38 Stat. 251* sec. 16)
Refunding bonds. - A procedure was set up whereby member
banks desiring to retire their circulating notes could file with the
Treasurer of the United States an application to sell for their account
Uaited States bonds securing circulation to be retired. The Federal
Reserve Banks were authorized to purchase such bonds and were then
permitted to take out an amount of circulating notes equal to the par
value of such bonds. Such notes were to be obligations of the Federal
Reserve Bank and were to be issued and redeemed under the same terms
and conditions as national bank notes. Provision was made for the
issuance and exchange by the Secretary of the Treasury of certain
bonds and notes bearing the circulation privilege*. (38 Stat* 251*
sec. 18)
Reserves of member banks* - A member bank not in a reserve
or central reserve city was required to maintain reserves equal to
12 per centum of its demand deposits and 5 per centum of its time
deposits; a member bank in a reserve city was required to maintain
reserves equal to 15 per centum of its demand deposits and 5 per centum
of its time depositsj and a bank in a central reserve city was required
to maintain reserves equal to 18 per centum of its demand deposits and
5 per centum of its time deposits. Certain percentages of such reserves
for specified periods of time were required to be held in the vaults
of the member bank or in the vaults of the Federal Reserve Bank or
national banks in reserve or central reserve cities* After three
years after the establishment of the Federal Reserve Bank no member
bank shall keep on deposit with any nonmember bank a sum in excess of
10 per centum of its own paid-up capital and surplus* In estimating
reserves the net balance of amounts due to and from other banks shall
be taken as a basis for ascertaining the deposits against which reserves
shall be determined* (38 Stat, 2£L, sec. 19)
Bank examinations. - Every member bank was required to be
examined at least twice in each calendar year and the Federal Reserve
Board was authorized to accept examinations by State authorities of
State member banks and trust companies. The Federal Reserve Board was
also required to order an examination of each Federal Reserve Bank
at least once each year. (38 Stat. 251, sec. 21)
Loans on farm lands by national banks. - National banks not
located in central reserve cities were authorized to make loans secured
by improved farm lands situated within the Federal Reserve district.
Maturities were limited to five years and the amount loaned limited to
50 per centum of the actual value of the property offered as security.
The Federal Reserve Board was authorized to add to the list of cities
in which national banks should not be permitted to make real estate
loans. (38 Stat. 251 > sec. 2U)
Foreign branches of national banks. - The Federal Reserve
Board was authorized to permit national banks possessing a capital and
surplus of $1 million or more to establish branches in foreign countries
or dependencies of the United States for the furtherance of the foreign
commerce of the United States. The Federal Reserve Board was authorized
to order special examinations of such foreign branches at such times
as it is deemed best. (38 Stat. 251* sec. 5)
Act authorizing national cux'rency associations5 etc.,
extended. - The provisions of the Act of May 20, 1908 (AldrichVreeland Act)* authorizing national currency associations, the
issuance of additional national bank circulation, and creating the
National Monetary Commission, which would have expired on June 30>
191U, were extended to June 30, 1915. (38 Stat, 2£l, sec* 27)
Circulating notes of national banks, amended. - Section 5172
of the Revised Statutes," providing for the printing, etc*, of national
bank notes in certain denominations, e t c , was amended to read as such
section read prior to the amendment thereto by the Act of May 30, 1908,
which Act changed the denominations in which such notes were to be
printed. (38 sbat0 251, sec 27)
Tax on Circulation of national banks* - Section $21k of the
Revised Statutes, as amended, relating to taxes on the circulation of
national banks, was amended to make certain changes with regard to the
rate of tax imposed on these circulating notes* (38 iStat* 25l, sec* 27)
Reduction of Capital, - Section 5lU3 of the Revised Statutes,
providing for the reduction of their capital stock by national banks,
was reenacted and amended so as to require that any such reduction be
approved by the Federal Reserve Board as well as the Comptroller of
the Currency* (38 Stat. 25lj sec, 28)
ACT OF AUGUST U, 19lU
Issuance of emergency currency» « Section 27 of the Federal
Reserve Act was amended so as to add a proviso authorizing the Secretary
of the Treasury to suspend the limitations imposed by sections 1, 3
and $ of the Aldrich-Vreeland Act on the issue of additional national bank
notes secured otherwise than by bonds of the United States, and to extend
the privileges of the Aldrich-Vreeland Act to all qualified State banks
and trust companies which had joined the Federal Reserve £^stem or
which might contract to do so within a limited time* (38 Stat* 682)
ACT OF AUGUST 15, 19lU
Reserves» - Section 19 of the Federal Reserve Act was amended
to permit State member banks, during the three-year transition period
provided in the original Federal Reserve Act for changing reserve requirements, to count as reserves held with a national bank in a reserve
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or central reserve city, any amounts which the State law permitted
'.hern to keep with other State or national banks. Previously such
Jeposits could be so counted only when they were in other State banks
and I*ere required by the State law to be kept in this manner, rather
than merely permitted. (38 Stat* 691)
ACT OF OCTOBER 15, 19lh
(Clayton Act)
Interlocking directorates* - This Act prohibited any person
from being, at the same time, a director, officer or employee of more
than one bank either of which had capital funds of $5*000,000 and when
either, or both, was organised under Federal law. Also, banks organized under Federal law and located in cities of over 200,000 people
were forbidden from having as a director, officer, or employee any person employed in a similar capacity with any other bank in the city,
except where the two institutions were owned by the same stockholders.
A class A director of a Federal Reserve bank was permitted to be, at
the same time, an officer or director of one member bank* The Federal
Reserve Board, after hearing, was empowered to issue cease and desist
orders in the case of violation^ and provisions for court relief and
enforcement were provided. (38 Stat. 732-7335 73h~736, sees. 8 and 11)
ACT OF MARCH 3, 1915
Acceptances. - Section 13 of the Federal Reserve Act was
amended so as to authorize the Federal Reserve Board, in its discretion, to increase the amount of acceptances based on the importation
or exportation of goods which a member bank of the System might make
and which a Federal Reserve Bank might discount. (38 Stat* 958)
ACT OF MAY 15, 1916
Interlocking directorates; Board's permission to serve. Section 8 of the Act of October 15/191U (Clayton Act) was amended
by adding a proviso which authorized the Federal Reserve Board to
permit interlocking directorates in any case between not more than
three banks coming within the provisions of the Clayton Act, provided
such banks were not in "substantial competition"• (39 Stat. 121)
ACT OF JULY 17, 1?16
(Federal Farm Loan Act)
Purchase of Federal Farm Loan obligations, - Member banks
were authorized to buy farm loan bonds issued under this Actj and such
bonds were made eligible for purchase by the Federal Reserve Banks when
they have a maturity not exceeding six months from date of purchase.
(39 Stat. 380)
ACT OF SEPTEMBER 1, 1916
Reserves, - Section 11 of the Federal Reserve Act was amended
by the addition of a new subsection (m) which authorized the Federal
Reserve Board, upon an affirmative vote of not less than five of its
members, to permit member banks to carry in the Federal Reserve Banks
any portion of their reserves then required to be held in their own
vaults. (39 Stat. 752)
Deposits with Federal Reserve Banks* - Section 13 of the
Federal Reserve Act was amended so as to authorize Federal Reserve
Banks to receive on deposit from member banks all checks and drafts
payable on presentation, and also, for collection, maturing bills•
Prior to this amendment the Federal Reserve Banks were authorized to
receive on deposit only those checks and drafts which were drawn upon
solvent member banks and other Federal Reserve Banks• The amendment
also authorized any Federal Reserve Bank to receive from other Federal
Reserve Banks, solely for purposes of exchange or collection, checks
and drafts payable upon presentation within its district and maturing
bills payable within its district* (39 Stat. 752)
Rediscounts. - Section 13 of the Federal Reserve Act was
amended so as to provide that the indorsement by a member bank of
notes, drafts, and bills of exchange discounted with its Federal Reserve Bank should be deemed to constitute a waiver of demand, notice and
protest by the member bank, as to its own indorsement exclusively. Prior
to the amendment member banks were required to execute waivers of demand, notice and protest. Section 13 was further amended so as specifically to provide that certain notes, drafts, and bills of exchange
having a maturity of 90 days, exclusive of days of grace, might be admitted to discount* Prior to this amendment the statute was silent on
the question as to whether the maturity included days of grace*
Section 13 was further amended so as to provide that the discount of
notes, drafts, and bills of exchange drawn for agricultural purposes
or based on livestock and having a maturity not exceeding six months
should be limited to a certain percentage of the total assets of the
Federal Reserve Bank. Prior to this amendment, the discount of such
paper was limited to a certain percentage of the capital of a Federal
Reserve Bank instead of its total assets. By another amendment to
section 13, the aggregate of notes, drafts, and bills bearing the
signature of any one borrower (other than bills of exchange drawn
against actually existing values) discounted for a member bank, was
limited to 10 per cent of the unimpaired capital and surplus of the
member bankt Prior to this amendment, Federal Reserve Banks were not
permitted to discount notes or bills bearing the signature or indorsement
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of any one person, company, firm, or corporation to an amount in excess
of 10 per cent of the capital and surplus of the member bank, whether
such person, firm or corporation was the borrower or not. (39 Stat. 752)
Acceptances* - Section 13 of the Federal Reserve Act was amended
so as to broaden greatly the powers of member banks with regard to acceptances. Prior to this amendment, member banks were permitted to
accept only such drafts or bills of exchange as grew out of transactions
involving the importation or exportation of goods. Under section 13*
as so amended, member banks were permitted to accept drafts or bills
of exchange (1) arising from transactions which involved the importation or exportation of goods, and the domestic shipment of goods,
provided shipping documents conveying or securing title were attached
at the time of acceptance, (2) secured at the time of acceptance by
warehouse receipts or other such documents conveying or securing title
covering readily marketable staples, and (3) drawn (under regulations
of the Federal Reserve Board) by banks or bankers in foreign countries
or dependencies or insular possessions of the United States for the
purpose of furnishing dollar exchange as required by the usages of
trade in the respective countries> dependencies> or insular possessions. (39 Stat. 752, 753)
Advances to member banks. - Section 13 of the Federal Reserve
Act was amended so as to authorize! Federal Reserve Banks to make advances to member banks on their promistsory notes for a period not
exceeding 15 days, such notes being secured by notes, drafts, bills of
exchange, or bankers1 acceptances eligible for rediscount or for purchase by Federal Reserve Banks, or by bonds or notes of the United
States. (39 Stat. 753)
Banking accounts for foreign correspondents. - Section
of the Federal Reserve Act was amended so as to permit Federal Reserve
Banks, with the consent of the Federal Reserve Board, to open and
maintain banking accounts for foreign correspondents or agencies.
(39 Stat. 5U)
Security for Federal Reserve notes. - Section 16 of the
Federal Reserve Act was amended so as to permit Federal Reserve notes
to be secured also by drafts, bills of exchange, or acceptances rediscounted under the provisions of section 13* or bills of exchange indorsed by member banks of any Federal Reserve district and purchased
under the provisions of section liu Prior to this amendment, Federal
Reserve notes could be secured only by notes and bills of exchange
accepted for rediscount under section 13* (39 Stat, Sh)
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National bank loans on real estate. - Section 2U of the Federal
Reserve Act, which authorized national banks not in central reserve
cities to make loans up to five years on farm lands within their Federal
Reserve districts, was amended so as to permit such banks also to make
loans up to five years on farm lands within a radius of 100 miles,
regardless of district lines, and to make loans on other improved and
unencumbered real estate within the same 100 mile area, but not for a
period exceeding one year* (39 Stat. 75U)
Foreign banking business, - Section 25 of the Federal Reserve
Act was amended so as to permit national banks, with the approval of
the Federal Reserve Board, either to establish branches in foreign
countries or dependencies or insular possessions of the United States
or to invest an amount not exceeding 10 per cent of their paid-in
capital stock and surplus in one or more corporations incorporated
under the laws of the United States or of any State, and principally
engaged in international or foreign banking* Prior to this amendment
national banks were only authorized to establish foreign branches*
(39 Stat. 755)
ACT OF APRIL 2h$ 1917
(First Liberty Bond Act)
Reserves against Government deposits. - Reserve requirements
of member banks were made inapplicable to deposits of Government funds*
(U0 Stat. 37* sec. 7) Ihis was reenacted by the Acts of September 2ii,
1917 (U0 Stat. 291-292, sec* 8) and April U, 1918 (I4O Stat. 5oU, sec* 5)
ACT OF JUNE 21, 1917
Branches of Federal Reserve Banks, - Section 3 of the Federal
Reserve Act was amended so as to authorize the Federal Reserve Board to
permit or require any Federal Reserve Bank to establish branch banks
within its district. (1*0 Stat. 232)
Membership of State banks and trust companies, - Section 9
of the Federal Reserve Act, relating to the admission of State banks
and trust companies into the Federal Reserve System, was amended so as
to provide that, subject to the provisions of the Federal Reserve Act
and to the regulations of the Federal Reserve Board made pursuant thereto, any State bank or trust company becoming a member of the Federal
Reserve Astern should retain its full charter and statutory rights and
might continue to exercise all corporate powers granted to it by the
State in which it was created and be entitled to all the privileges
of member banks. However, Federal Reserve Banks were prohibited from
discounting for any such State member bank any note, draft, or bill of
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exchange of any one borrower liable to the member bank for more than
10 per cent of its capital and surplus, excluding bills of exchange
drawn /..gainst actually existing value and commercial or business paper
actually owned.
The amendment took away from the Comptroller of the Currency
the power granted by section 21 of the Federal Reserve Act to examine
State member banks and trust companies, but provided that such banks
should be subject to examinations by direction of the Federal Reserve
Board or of the Federal Reserve Bank by examiners selected or approved
by the Federal Reserve Board. Examinations by State authorities, when
approved by the directors of the Federal Reserve Bank, could be accepted
in lieu of examinations by examiners approved by the Federal Reserve
Board. Reports of condition and of dividend payments were required to
be made to the Federal Reserve Bank instead of the Comptroller of the
Currency* State member banks and trust companies were authorized to
withdraw from the Federal Reserve System after six months1 written
notice. (I4O Stat. 232-23U, see* 3)
Clearing and collection for nonmember banks. - Section 13 of
the Federal Reserve Act was amended so as to authorize Federal Reserve
Banks, solely for the purposes of collection or exchange, to receive
deposits of currency, checks, drafts, and maturing notes or bills from
any nonmember bank or trust company maintaining with the Federal Reserve
Bank a balance sufficient to offset the items in transit held for its
account by the Federal Reserve Bank. Section 13> as amended, also
authorized any member bank to make reasonable charges, to be determined
and regulated by the Federal Reserve Board, but in no case to exceed
10 cents per $100 or fraction thereof, for the collection or payment
of checks and drafts and remission therefor by exchange or otherwise.
It was provided, however, that no such charges should be made against
the Federal Reserve Banks. (UO Stat. 23U-23S, sec. k)
Acceptances by member banks. - Section 13 of the Federal Reserve
Act was further amended so as to restore that provision authorizing the
Federal Reserve Board to permit member banks to accept drafts and bills
of exchange drawn against foreign and domestic shipments of goods or
against warehouse receipts covering readily marketable staples up to
100 per cent of the capital and surplus of the accepting bank, (UO
Stat. 235* sec. k) (This provision had been inadvertently omitted
from section 13 by the amendment of September 7, 1916^
Foreign agencies of Federal Reserve Banks. - Section lli(e)
of the Federal Reserve Act was amended so as to authorize the Federal
Reserve Board to permit or require Federal Reserve Banks to open and
maintain accounts in foreign countries, etc., and also to provide for
participation accounts by other Federal Reserve Banks. (UO Stat. 23$*
sec. 6)
Issue of Federal Reserve notes against gold* - Section 16
of the Federal Reserve Act was amended so as to authorize the issue
of Federal Reserve notes upon the security of gold or gold certificates
and so as to provide that gold or gold certificates held by Federal
Reserve agents as collateral security should be counted as part of the
gold reserve required of Federal Reserve Banks against these circulating notes. As so amended, this section also authorized the issue of
Federal Reserve notes upon the security of 15-day notes of member banks
secured by eligible commercial paper or by bonds or notes of the United
States. (UO Stat. 236-238, sec. 7)
Deposits of gold for settlement fund* - Section 16 of the
Federal Reser/e Act was further amended so as to authorize the Treasurer
of the United States or any Assistant to receive deposits of gold or
gold certificates when tendered by any Federal Reserve Bank or Federal
Reserve agent for credit to its or his account with the Federal Reserve
Board, thus facilitating the establishment of a settlement fund by
which balances between different parts of the country may be settled
by bookkeeping entries without the physical shipment of funds,
(IiO Stat. 238, sec. 8)
Deposits of Government bonds with the Treasurer. •- Section 17
of the Federal Reserve Act was amended so as to repeal any provision
of law requiring any national bank to maintain a minimum deposit of
bonds with the Treasurer of the United States. (iiO Stat. 239, sec, 9)
Reserves of member banks. - Section 19 of the Federal Reserve
Act was amended so as to require the immediate transfer of all reserves
of member banks to Federal Reserve Banks. Section 11(m), which permitted member banks to carry a portion of their vault reserves in a
Federal Reserve Bank, was rendered obsolete as member banks were no
longer required to maintain any reserves in their oxm vaults. The
..percentages of required reserves were reduced from 12 to 7 per cent
against demand deposits in country banks; from 15 to 10 per cent against
demand deposits in reserve city banks; from 18 to 13 per cent against
demand deposits in central reserve city banks; and from 5 to 3 per
cent against time deposits in all three classes of banks. (iiO Stat.
239, sec. 10)
Balances with nonmember banks. - Section 19 of the Federal
Reserve Ac"t formerly provided that no member bank should keep on
deposit with "any nonmember bank!t any sum in excess of 10 per cent
of its own capital and surplus. That restriction necessarily applied
to balances with foreign banks as well as to balances with nonmember
State banks and trust companies. Such provision was amended so as to
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apply only to deposits with "any .State bank or trust company11 not a
member bank, (UO Stat. 239> sec, 10*)
Membership of banksbeyond the United btates, - Section 19
of the Federal Reserve Act was amended to repeal the prohibition against
national banks located in the Philippine Islands be coming; member bank s,
and also to permit banks organized under local law in any of the
dependencies or possessions to become member banks, (UO Stat, 21*0,
sec, 10.)
Salaries or fees of directors, officers, or employees, Section 22 of the Federal Reserve Act was amended by the addition of
provisos to the effect that directors, officers, employees, or attorneys should not be prohibited from receiving the same rates of
interest paid to other depositors of the bank, and that notes, drafts,
b i l l s , or other evidences of debt executed or indorsed by directors
or attorneys of the bank might be discounted with such bank on the
same terms and conditions as other notes, drafts, b i l l s or other evidences of debt upon the affirmative vote or written assent of a majority
of the members of the board of directors of such member bank. (UO 5tat«
2I4O, sec. 11 # )
ACT OF OCTOBER 5, 1917
Denominations of circulating notes, - The prohibitions against
national banks receiving notes of less denomination than $$ and placing
in circulation more than one-third of their circulating notes in the
denomination of $$} were repealed. After the passage of this Act,
national banks were entitled to receive and circulate, in any proportions, notes in denominations of $1, $2, $$> $10, $20, $5>0, and $100,
except that no bank could have more than «?25,QOO in &l»s and $2*s
at any one time, (UO Stat. 3U2-3U3, Ch, 7U.)
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ACT OF OCTOBER 6, 1917
(Trading with the Enemy Act)
Presidential power to regulate foreign exchange, transfers
of credit, etc, - Section 5(b) of this Act, among other things,
authorized the President, by means of licenses or otherwise, to
prescribe such rules and regulations as he may deem necessary to investigate, regulate, or prohibit any transactions in foreign exchange,
export or earmarking of gold or silver coin or bullion or currency,
and transfers of credit in any form (other than credit relating solely
to transactions to be executed wholly within the United States)«
Section 16 of this Act provided that whoever willfully violated any
provision of the Act or of any license, rule, or regulation issued
thereunder, shall be fined not more than $10,000 or imprisoned for not
more than 10 years, or both* (UO Stat* Ul5>) (Pursuant to this authority,
the President suspended all banking transactions within the United States
by Presidential Proclamation of March 6, 1933*)
ACT OF APRIL 5, 1918
(War Finance Corporation Act)
War Finance Corporation - This Act set up the War Finance
Corporation which was empowered to make advances, under certain conditions, to banks and trust companies which facilitated the prosecution of the war. The Federal Reserve Banks were authorized to discount obligations of member banks secured by the Corporations bonds
and to rediscount eligible paper so secured and endorsed by member
banks; and the Federal Reserve Banks, pursuant to the approval of the
Federal Reserve Board, were authorized to use any obligation or paper
so acquired for any purpose for which they had authority to use obligations or paper secured by obligations of the United States not bearing
the circulation privilege. (UO Stat. 506, !>08, £10, sees. 1, 1> and 13)
Exception to limitation on indebtedness of a national bank. Section 5202 of the Revised Statutes, which was made a part of section 13 of the Federal Reserve Act and which limits the total indebtedness of a national bank, was amended to provide that liabilities incurred under the provisions of the "War Finance Corporation Act should
be exempt from such limitation. (Uo Stat. $12, sec. 2))
ACT OF APRIL 23, 1918
(The Pittman Act)
Federal Reserve Bank notes to replace silver certificates
retired, -"This Act, among other things, authorized the melting
of a maximum of 350^000^000 silver dollars to be sold as bullion,
fixed a minimum price for the sale of silver, and made provisions for
the purchase of native silver to replace the coin sold. The Act also
provided that the sales of silver bullion may be made for the purpose
of conserving the existing stock of gold, of facilitating settlement
in silver of adverse foreign trade balances, and of providing silver
for subsidiary coinage and for commercial use, In order to prevent
contraction of the currency, the Federal. Reserve Board was authorized
to permit or require Federal Reserve Banks to issue Federal Reserve
Bank notes aggregating not exceeding the amount of silver dollars
melted up and sold as bullion upon the deposit with the Treasurer
of United States certificates or one-year gold notes as security
therefor* When silver dollars were coined out of native bullion purchased, Federal Reserve Bank notes issued under this Act were to be
retired in an amount equal to the amount of silver dollars so coined.
ACT OF SEPTEMBER 2i*, 1918
Limitation on liabilities of one obligor, - Section 5200
of the Revised Statutes, prescribing the limitation on the total indebtedness of one obligor to a national bank, was amended by including among the transactions excepted from the 10 per cent unimpaired
capital funds limitation the purchase or discount of any notes secured
by not less than an equal amount of United States bonds issued since
April 2U, 1917 (date of First Liberty Bond Act) or certificates of
indebtedness of the United States; but the total liability in any such
case could exceed such 10 per cent limitation only with the oermission
of the Comptroller of the Currency and the Secretary of the Treasury*
The provision of the old law specifying that the total of such liabilities to a national bank should, in no event, exceed 30 per cent
of its capital stock, was eliminated, (I4.O Stat» 967* sec. 6)
ACT OF SEPTEMBER 26, 1918
Election of Federal Reserve Bank officers. - Section k of
the Federal Reserve Act was amended so as to leave to the discretion
of the Federal Reserve Board the grouping of the member banks in each
district into three general groups or divisions, without the former
requirement that each group should contain, as nearly as possible,
-22-
one-third of the aggregate number of the banks in the districts
Section 4 was further amended so as to permit each member bank, by a
resolution of its board of directors or by an amendment to its by-laws,
to authorize its president, cashier, or some other officer to cast its
vote in elections of Federal Reserve Bank directors in place of the
former method of electing by ballot a district Reserve elector at a
regularly called meeting of the board of directors of each member bank
in the district to cast its vote at a particular time* A provision
was added to prevent any officer or director of a member bank from
serving as a class A director unless nominated and elected by member
banks of the same group as his member bank, and to prevent any director
or officer or more than one member bank from being eligible for nomination as a class A director except by banks in the same group as his
largest bank. (40 Stat. 967, sec, 1)
Issuance of Federal Reserve Notes* - Section 16 of the Federal
Reserve Act was amended to make certain changes with regard to the various
denominations of Federal Reserve notes that the Federal Reserve Banks are
authorized to issue, (/,0 Stat. 969 ~ 970, sec. 3)
Reserves of member banks in outlying districts. - Section 19
of the Federal Reserve Act was amended so as to authorize the Federal
Reserve Board, upon the affirmative vote of five members, to permit member banks located in outlying districts of a reserve city or in territory added to such city by the extension of its corporate charter, to
maintain only such reserves as required of country banks; and to permit
member banks similarly located in central Reserve cities, or in territory similarly added to such cities, to maintain only such reserves as
required of country banks or banks in Reserve cities. (40 Stat. 970,
sec. 4)
Commissions for obtaining loans. - Section 22(c) of the
Federal Reserve Act was amended so as to prohibit any officer, director,
employee or attorney of a member bank from receiving a commission or
other thing of value for procuring loans, for purchases or discount
of any commercial paper or similar obligations. (40 Stat. 971, sec. 5)
Purchases from, and sales to, directors. - Section 22(d)/of
the Federal Reserve Act was amended so as to prescribe the conditions
under which a member bank may contract for, or purchase or sell,
securities or other property where a director of such bank is the
other party in interest in the transaction* (40 Stat. 971)
Interest on deposits of officers, directors, or employees. ~
Section 22(e) of the Federal Reserve Act was amended so as to prohibit
the payment of a greater rate of interest to any officer, director,
employee or attorney than that paid to any other depositor. (40 Stat.
971, sec. 5)
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ACT OF NOVEMBER 7, 1918
Consolidation of national banks» - Any two or more national
banks located in the same county, city, or village, after a two-thirds
vote of the shareholders thereof and with the approval of the Comptroller
of the Currency, were authorized to consolidate into one association
under the charter of either bank* The consolidated institution's
capital stock was required to be not less than that required under the
law for the organization of a national bank in the same localityj and
shareholders dissenting from any such consolidation were required to be
paid the value of their shares as determined by a committee to be named
for that purpose or, upon its failure to agree, by the Comptroller of
the Currency* The consolidating banks could not be required to deposit
money for their outstanding circulation; but the consolidated association was required to report the assets and liabilities of the former
institutions, the rights, franchises, property, etc*, of which passed
to the consolidated institution by operation of the statute* (UO Stat*
llU)
ACT OF MARCH 3> 1919
Earnings of Federal Reserve Banks* - Section 7 of the Federal
Reserve Act was amended so as to permit Federal Reserve Banks to accumulate a surplus of 100 per cent of their subscribed capital, instead of UO per cent of their paid-in capital as previously provided,
before paying the excess of such net earnings to the United States as
a franchise tax* (1*0 Stat* 131k, sec. 1)
Rediscount of loans in excess of 10 per cent secured by
Government bonds or notes* - 2he provision of section 11(m), made
obsolete by the Act of June 21, 1917 CSee summary of Act of June 21, 1917,
page 19 of this memorandum©) was removed and there was substituted a new
section ll(ra) which authorized the Federal Reserve Board, upon the
affirmative vote of not less than five of its members, to permit Federal
Reserve Banks to discount for member banks paper bearing the signature or
endorsement of any one borrower in excess of the 10 per cent amount
allowed under section 9 and section 13, but in no case to exceed 20 per
cent, of the member bank's capital and surplus, provided that all such
paper was secured by a like face amount of bonds or notes of the United
States issued since April 2ii, 1917* In effect, sections 9 and 13 were
amended; but the provision was to l^pse after December 31, 1920*
(UO Stat* 1315, sec. 3)
ACT OF SEPTEMBER 17, 1919
Investments by national banks in foreign banking corporations* •
Section 25 of the Federal Reserve Act was amended so as to authorize
any national bank, until January 1, 1921, subject to the approval of
the Federal Reserve Board but without regard to the amount of its capital
and surplus, to invest not exceeding 5> per cent of its capital and
surplus in the stock of one or more corporations chartered under Federal
or State law and principally engaged in phases of international or
foreign financial operations necessary to facilitate exports from the
United States. (Ul Stat. 285)
ACT OF OCTOBER 22, 1919
Exception to limitation on indebtedness of a national bank, Section 5202 of the Revised Statutes, made a part of section 13 of
the Federal Reserve Act, and limiting the total indebtedness of a national bank, was amended so as to exempt from such limitation liabilities created by the indorsement of accepted bills of exchange
payable abroad actually owned by the indorsing bank and discounted at
home or abroad. (Ul Stat, 297* sec. 2)
Limitation on liabilities of one obligor. - Section 5200
of the Revised Statutes, relating to the limitation on the indebtedness
of one obligor to a national bank, was amended so as to exempt the
discount of (1) drafts and bills of exchange secured by shipping documents conveying or securing title, (2) demand obligations secured by
documents covering commodities in shipment, (3) bankers1 acceptances
as described in section 13 of the Federal Reserve Act, and (h) notes
(for not more than 6 consecutive months in any one year) secured by
shipping documents, warehouse receipts, etc., conveying or securing
title to insured readily marketable nonperishable staples, including
livestock, should the actual value of the security be not less than
115 per cent of the value of the paper. It was also provided, however,
that the total liabilities to any national bank of any person, firm,
etc., on notes of the kinds described in clause (U) above, should
never exceed 25 per cent of the amount of the bank*s unimpaired capital
funds. (Ul Stat. 296-297)
ACT OF DECEMBER 2U> 1919
"Edge corporations"* - Section 25(a) was added to the Federal
Reserve Act, providing for the Federal incorporation of institutions
to engage in international or foreign banking or other financial
operations. (Ul Stat. 378)
ACT OF APRIL 13, 1920
("Phelan Act")
Graduated discount rates. - Section 1U of the Federal Reserve
Act was amended so as to authorize Federal Reserve Banks, subject to
the approval, review, and determination of the Federal Reserve Board,
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to establish discount rates graduated or progressed on the basis of
the amount of the advances and discount accommodations extended by
the Federal Reserve Bank to the borrowing bank, (ill Stat. ££0)
ACT OF MAY 26, 1920
Interlocking directorates* - Section 8 of the Act of
October l£, 19±h (Clayton Act) was amended to add private bankers to
the classes of persons to whom the Federal Reserve Board was authorized
to grant permits, in certain circumstances, permitting them to serve a
limited number of banks within the prohibitions of the section, (ill
Stat. 626)
ACT OF MAY 29, 1920
Performance of subtreasury functions by Reserve Banks. The laws authorizing the establishment or maintenance of offices of
assistant treasurers or of subtreasurxes of the United States were
repealed and the Secretary of the Treasury was authorized to transfer
their duties and functions to the Treasurer of the United States or
the United States mints, or to utilize the Federal Reserve Banks for
this purpose. With respect to deposits of certain Treasury trust funds
or special funds, the Reserve Banks were required to segregate such
deposits from their assets and to hold them in joint custody with the
Federal Reserve agent. The Secretary was authorized to assign rooms,
vaults, etc* in the buildings used by the subtreasuries to any Federal
Reserve Bank acting as fiscal agent of the United States. (Ul Stat.
65h, 65$)
ACTS OF FEBRUARY 27, 1921
Edge _corporations. - Section 2£(a) of the Federal Reserve
Act was amended by adding to the first paragraph thereof a proviso to
the effect that nothing in said section should be construed to deny
the right of the Secretary of the Treasury to use any corporation
organized thereunder as a depositary in the Panama Canal Zone, the
Philippine Islands, and other insular possessions and dependencies
of the United States. (Ul Stat. 11U5)
Rediscount for member banks of paper of any one borrower
secured by United States bonds. - This Act reenacted, with a slight
modification, the provisions of section 11(m) of the Federal Reserve
Act, which had expired by limitation on December 31* 1920, and extended
them to October 31* 1921. These provisions authorized the Federal Reserve
Board to permit Federal Reserve Banks to discount for any member bank
-26-
the paper of a single borrower up to 20 per cent of the member bank's
capital and surplus* provided that a l l such paper in excess of 10 per
cent was secured by Liberty bonds* Victory notes* or United States certificates of indebtedness• This amendment further required that
security consisting of Liberty bonds and Victory notes should be offered by the original subscriber thereto in order to permit rediscounts
in excess of 10 per cent* (41 Stat. 1146*)
ACT OF MAY 27* 1921
Values for conversion of foreign money» ~ This Act provided
that should i t be necessary to convert foreign currency into United
States currency in the assessment and collection of duties on imports* such conversion* in the absence of a declaration of value by
the Secretary of the Treasury or if the value so declared should
vary over 5 per cent
from the New York market value* should be made
at the "buying rate11 for cable transfers as determined by the Federal Reserve Bank of New York. (42 Stat. 17* Sec. 403*)
ACT OF JUNE 14* 1921
Edge corporations. - Section 25(a) of the Federal Reserve
Act was further amended so as to provide that a corporation organized
thereunder with an authorized capital in excess of $2*000*000 and with
paid-in capital of 12,000*000 may* with the consent of the Federal
Reserve Board* have i t s unpaid capital paid in on call of the corporation's board of directors* but in a l l events 25 per cent of the total
authorized capital was required to be paid in before the corporation
commenced business. (42 Stat. 28.)
ACT OF JUNE 3, 1922
Personnel of Federal Reserve Board. ~ Section 10 of the
Federal Reserve Act was amended by increasing the number of appointive
members of the Federal Reserve Board from five to six and providing
that* in their selection, the President "shall have due regard to a
fair representation of the financial* agricultural* industrial and commercial interests* and geographical divisions of the country11* instead
of considering merely "a fair representation of the different commercial* industrial and geographical divisions of the country"* as this
formerly provided. The amendment also eliminated the requirement that
at least two of the appointive members had to be persons experienced
in banking or finance* (42 Stat. 620.)
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ACT OF JULY 1, 1922
Rediscounts for State member banks of paper of any one
borrower* - Section 9 of the Federal Reserve Act was amended so as to prohibit Federal Reserve banks from discounting for a State member bank the
paper of any one borrower who had borrowed from such bank an amount
greater than could be lawfully borrowed therefrom under the provisions of
section 5200 of the Revised Statutes if it were a national bank* Previously such an amount, with some exceptions, could not be greater than
10 per cent of the capital and surplus of such State bank or trust company*
This amendment put State member banks upon a basis of substantial equality
with national banks in this regard* (U2 Stat* 821*)
ACT OF MARCH k, 1923
(Agricultural Credits Act of 1923)
Purchase of stock by member banks of agricultural credit
corporations* - This Act, in addition to providing for the establishment of agricultural credit corporations under the jurisdiction
of the Office of the Comptroller of the Currency and providing other
credit facilities to agriculture, also provided that member banks*
with the approval of the Comptroller of the Currency, may invest not
to exceed 10 per cent of their "paid-in capital stock and surplus" in
the stock of any such corporations* (1*2 Stat* ll£U* lU66wli|.69»)
Capital requirements of member banks* - Section 9 of the
Federal Reserve Act was amended so as to permit banks to become member
banks with a capital of 60 per cent of the amount previously required,
with the proviso that such banks should increase their capital to the
full amount previously required for membership within the time and
under conditions prescribed by the Federal Reserve Board, but in all
cases such banks should set aside annually at least 20 per cent of
their net income for the preceding year as a fund to be devoted
exclusively to such increase of capital* (1*2 Stat* ll±78, sec* l±01*)
Discount of factors1 paper* - Section 13 of the Federal
Reserve Act was amended to make notes, drafts, and bills of exchange
of factors, issued for the purpose of making advances exclusively to
producers of staple agricultural products in their raw state, eligible
for discount by Federal Reserve banks* (1*2 Stat* lli78j sec* l±02*)
Sight and demand bills of exchange* - Section 13 of the Federal
Reserve AcT was further amended to provide for the discount and purchase
by Federal Reserve banks of sight and demand bills of exchange drawn to
finance the domestic shipment of nonperishable, readily marketable
staple agricultural products, and secured by satisfactory shipping
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documents* The amendment required that such bills be forwarded promptly
for collection and forbade a Federal Reserve bank in any event to hold
such bills for a period in excess of 90 days. (42 Stat. 1478, sec. 402,)
Maturity of acceptances» - Section 13 of the Federal Reserve
act was further amended so that the maturity of acceptances eligible for
discount, formerly described as "three months1 sight", was changed to
read "90 days' sight". (42 Stat. 1479, sec. 403.)
Six months * agricultural acceptances. - Section 13 of the
Federal Reserve Act was also amended so as to broaden further the
power of Federal Reserve banks to discount acceptances by authorizing
the discount of acceptances with maturities up to six months when drawn
for an agricultural purpose and secured at the time of acceptance by
documents of title covering readily marketable staples. (42 Stat. 1479*
sec. 403•)
Nine months* agricultural paper. ~ Section J3a of the Federal
Reserve Act which was1 added, extended the maturity of agricultural
paper eligible for discount from six to nine months. It provided further,
however, that such paper having maturities in excess of six months would
not be eligible as a basis for the issuance of Federal Reserve notes
unless secured by negotiable warehouse receipts or similar documents
covering readily marketable staple agricultural products or by chattel
mortgage upon livestock being fattened for market. This provision in
effect, therefore, amended that portion of section 16, relating to collateral security for Federal Reserve notes* (42 Stat. 1479* sec. 404.)
Discounts for Federal intermediate credit banks. - Section
13a of the Federal Reserve Act also authorized Federal Reserve banks to
discount eligible agricultural paper for Federal intermediate credit
banks, which latter corporations were one class of the credit institutions established by other provisions of the Act. However, the
Reserve banks were not authorized to discount such paper which bears
the endorsement of a nonmember bank which is eligible for membership.
(42 Statt 1480, sec. 404.)
Purchasei end * sale of debentures issued by Federal intermediate credit banks and national agricultural credit corporations. ~
Section 13a of the Federal Reserve Act further authorized the Federal
Reserve banks to buy and sell debentures and other similar obligations
issued by Federal intermediate credit banks and national agricultural
credit corporations, such transactions, however, to be subject to the
same limitations as those upon the purchase and sale of farm loan bonds,
and State, county, and municipal bonds and warrants. (42 Stat# 1430,
sec. 404*)
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Paper of cooperative marketing associations. ~ Section 13a
of the Federal Reserve Act prescribed when paper of cooperative marketing
associations could be deemed to be issued or drawn for an agricultural
purpose* Such paper would thus be classified as agricultural paper
when (a) the proceeds thereof vie re advanced by the association to its
members for an agricultural purpose* (b) the proceeds were used by the
association in making payments to members for agricultural products
delivered by the members* or (c) such proceeds were used by the association to pay for grading* processing* packing* or marketing any
agricultural products handled by the association for its members.
This section also contained a proviso that the egress enumeration of
certain classes of paper of cooperative marketing associations as
eligible for discount* should not be construed as rendering ineligible
any other class of such paper which was otherwise eligible for discountt
(42 Stat. 14-80* sec. 404.)
Limitation of amount of paper which Federal Reserve banks
may discount0 - Section ]3a of the Federal Reserve Act also authorized
the Federal Reserve Board to limit to a percentage of the assets of a
Federal Reserve bank the amount of six months1 paper and the amount of
nine months* paper which such bank may discount, (42 Stat. 1480*
sec. 404»)
Open-market dealings in acceptances of Federal intermediate
credit banks and national agricultural credit corporations. - Section
14 of the Federal Reserve Act was amended by adding a new subsection (f)
which authorized Federal Reserve banks to purchase and sell in the open
market acceptances of Federal intermediate credit banks and national
agricultural credit corporations* whenever the Federal Reserve Board
declares that the public interest so requires* (42 Stat. 1480* sec. 4O5»)
Federal Reserve banks as depositories and fiscal agents. Section 15 of the Federal Reserve Act was amended by adding a new para~
graph which authorized Federal Reserve banks to act as depositories for*
and fiscal agents of* any national agricultural credit corporation or
Federal intermediate credit bank. (42 Stat. 1480* sec. 406.)
Repeal of progressive discount rate. ~ Section 14(d) of the
Federal Reserve Act was in effect amended by the repeal of the "Phelan
Act"* approved April .13* 1920* #iich provided for progressive discount
rates. (42 Stat. 1480* sec. 407.)
Exceptions to limitations on indebtedness of a national bank. This Act amended "section 502 of the Revised Statutes* as amended11
(incorporated as a part of section 13) so as to add another exception to
the limitation on the indebtedness of national banks* ite.* liabilities
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incurred under the provisions of the Federal Farm Loan Act, approved
July 17, 1916. (Instead of "section 502 of the Revised S t a t u t e s " ,
the Act obviously meant section 5202 of such S t a t u t e s , for only
section 5202 contains the matters intended t o be amended.) (42 S t a t .
1482;, s e c , 5040
ACT OF FEBRUARY 25> 1927
("McFadden Act")
Consolidation of State and national banks. ~ The Act of
November 7, 1918, was amended so as to permit the consolidation of
any State bank with a national bank under the charter of the l a t t e r
(provided the two banks were located in the same county, c i t y or
v i l l a g e ) , under s u b s t a n t i a l l y the same conditions as those p r e v a i l ing in the case of the consolidation of two national banks. (44
S t a t . 1224-1226, sec. 1.)
Charters of national banksj investment s e c u r i t i e s ; safe
deposit business, - Section 5136 of the Revised Statutes was amended
so as to authorize them t o buy and s e l l "investment s e c u r i t i e s * , as
defined by the Comptroller of the Currency. The t o t a l amount of such
secufcitl&ft of sny one obligor held by a bank could not exceed 25 per
cent of i t s unimpaired c a p i t a l funds and national banks were permitted
t o invest not more than 15 per cent of t h e i r unimpaired c a p i t a l funds
in the stock of State corporations conducting a safe-deposit business.
(44 S t a t . 1226-1227, s e c . 2,)
Capital requirements for banks in outlying d i s t r i c t s . ~
Section 5138 of the Revised Statutes was amended so t h a t in the
outlying d i s t r i c t s of c i t i e s over 50,000 where State banks could
be organized with c a p i t a l of $100,000 or l e s s , the minimum c a p i t a l
requirements for national banks should be -fl00',000 instead of the
$200,000 regularly applicable for c i t i e s of t h i s s i z e . (44 S t a t .
1227, s e c . 4 0
Branches of national banks. ~ Section 5155 of the Revised
S t a t u t e s , providing for the r e t e n t i o n of i t s branches by a State
bank converting i n t o a national bank, was amended t o provide for
(1) the r e t e n t i o n and operation of any branches by a national bank
which were in lawful operation on February 25* 1927, (2) the r e t e n t i o n and operation by a national bank of not more than one
branch continuously maintained fqr over 25 years immediately p r e ceding February 25* 1927, and (3) the operation of the branches of
converting or consolidating banks ( s t a t e or national) by a national
bank if such branches were lawfully operated on February 25* 1927 •
It was also provided that after February 25, 1927, national banks
could establish and operate new branches in the head-office city
or town if State banks in such location were permitted to do so by
State law, but the population of any such municipal unit was required to be at least 25,OQOj if such population should not exceed 50,000, not more than one branch could be established? and,
if such population should not exceed 100,000, not more than two
branches could be established. In larger municipal units, the
number of branches established was made to depend upon the discretion of the Conptroller of the Currency» Branches of national
banks could not be established or moved without the approval of
the Comptroller of the Currency} and a branch was defined as any
additional office at which deposits were received, checks paid,
or money lent. Also, section 5190 of the Revised Statutes, requiring a national bank to transact its business at the place
designated in its charter, was amended so as to include branches
lawfully established* (44 Stat. 1228-1229, sees* 7 and 8 f )
Conditions of membership for State banks. - Section 9 of
the Federal Reserve Act was amended so as to require that the conditions
imposed by the Federal Reserve Board upon State banks admitted to
membership in the Federal Reserve System shall be pursuant to the
Federal Reserve Act. (44 Stat. 1229, sec. 9 0
Branches of State member banks. ~ Section 9 of the Federal
Reserve Act was further amended so as to provide that no State bank
could become a member of the Federal Reserve System or remain a member
of the Federal Reserve System except upon relinquishing any branch or
branches established after February 25, 1927, beyond the limits of the
city, town, or village in which the parent bank was located. On the
other hand, this section also provided that any State bank which on
February 25> 1927, had established and was operating a branch or branches
in conformity with the State law could retain and operate such branch
or branches while remaining, or upon becoming, a member of the Federal
Reserve System. (44 Stat. 1229, sec. 9.)
Limitation on liabilities of one obligor. - Section 5200 of
the Revised Statutes, relating to the limitation on the total liabilities
of any one obligor to a national bank, was amended in certain particulars, many of a technical nature. The old law limited "The total
liabilities to any association of any person or of any company, corporation, or firm for money borrowed, including in the liabilities of a
company or firm the liabilities of the several members thereof # # #."
This Act limited "The total obligations to any national banking association of any person, copartnership, association, or corporation
*- # *." The term "obligations" was defined to mean "the direct liability of the maker or acceptor of paper discounted with or sold to
such association and the liability of the indorser, drawer, or guarantor who obtains a loan from or discounts paper with or sells paper under
his guaranty to such association and shall include in the casec£tobligations of a copartnership or association the obligations of the several
members thereof". The new law, like the old, made the basic limitation
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10 per cent of a national bankfs unimpaired capital funds, with numerous
exceptions thereto• However, the exception covering obligations of
any person, etc*, in the form of notes, etc., secured by shipping
documents, etc., transferring or securing title covering insured
readily marketable nonperishable staples, was made subject to graduated
limitations, depending on the market value of the underlying security,
up to 45 per cent of the bank's capital funds. (44 Stat. 1229-1230,
sec* 10*)
Exception to limitation on indebtedness of a national bank, Section 5202 of the Revised Statutes made a part of section 13 of the
Federal Reserve Act, and limiting the total indebtedness of a national
bank, was amended by this Act to provj.de that liabilities incurred
under the provisions of section 202 of Title II of the Farm Loan Act,
as amended by the Agricultural Gredits Act of 1923* were to be exempt
from such limitation. National banks could thus rediscount with, or
sell to, Federal intermediate credit banks without limitation the
classes of agricultural or livestock paper covered in the section
referred to* (44 Stat* 1231* sec* 11*) (This amendment was contained
in the Agricultural Credits Act of 1923 but was erroneously cited; and
this section of the Act of February 25, 1927, was merely intended to
correct that mistake.)
Real estate loans by national banks; interest on time deposits* - Section 24 of the Federal Reserve Act relative to loans by
national banks upon the security of real estate and farm lands was
materially changed. The more important of these changes were as follows: National banks in central Reserve cities were authorized to
make real estate loans; loans on city real estate were placed upon the
same basis as to time and territorial limits as loans on farm lands;
a loan on real estate was defined so as to require that the entire
amount of the obligation be made or sold to the national bank; and the
permissible aggregate of real estate loans was changed from 25 per cent
of the bank's capital and surplus or one-third of its "time deposits11
to 25 per cent of capital and surplus or one-half of "savings deposits11 •
National banks were authorized to continue to receive time and savings
deposits, but were forbidden to pay interest on such deposits at a
greater rate than that permitted by law for State banks in the same
State. (44 Stat. 1232, sec. 16*)
Discontinuance of Federal Reserve branch banks. - Section 3
of the Federal Reserve Act was amended so as to authorize the Federal
Reserve Board to require any Federal Reserve bank at any time to discontinue any of its branches* (44 Stat. 1234, sec* 19.)
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ACT OF MARCH 9, 1928
Interlocking; directorates. - The last proviso of section 8.
of the Act of October 15, 1914. (Clayton Act), was amended so that the
Federal Reserve Board was authorized to grant permits for interlocking
directorates when the permitted relationships are "not incompatible
with the public interest", rather than when the banks affected are
"not in substantial competition". The Board also was authorized to
grant permits covering certain interlocking directorates (such as those
between a joint-stock land bank and a nonmember State bank), which were
subject to the Act but which had been excluded from the Board's power
to issue permits due to the peculiar wording of the proviso* (45 Stat.
2530
ACT OF JiAY 7, 1928
State member banks as depositaries of public money• — Section
9 of the Federal Reserve Act was amended by adding a new paragraph providing that State banks and trust companies which are members of the Federal
Reserve System may be depositaries of public money, when designated for
that purpose by the Secretary of the Treasury, and may be employed as
financial agents of the Government. Satisfactory security must be
required of such banks and trust companies for the proper performance
of their duties in these respects. (45 Stat. 492.)
ACT OF M Y 29, 1928
Purchase or discount of sight or demand bills. - The provision
of section 13 of the Federal Reserve Act authorizing Federal Reserve
Banks to discount or purchase bills of exchange payable at sight or on
demand, was materially broadened^ Under the statute as it previously
existed a Federal Reserve Bank was authorized, subject to certain
prescribed conditions, to discount or purchase sight or demand bills
drawn to finance the domestic shipment of nonperishable, readily
marketable staple agricultural products when secured by bills of lading
or other shipping documents conveying or securing title. Under the law
as amended a Federal Reserve Bank was authorized to purchase or discount
sight or demand bills which grow out of the exportation, as well as the
domestic shipment, of nonperishable, readily marketable staples, whether
or not such staples are of an agricultural character. (45 Stat. 975•)
ACT OF FARCH 2, 1929
Interlocking directorates. — The first proviso to section
8 of the Act of October 15, 1914 (Clayton Act), exempting mutual
savings banks from the prohibition against interlocking directorates,
was amended to exempt also joint stock land banks and other banks
doing noncommercial business. (45 Stat* 1536.)
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ACT OF JUNE 17, 1929
Treasury bills and certificates of indebtedness. - The
Secretary of the Treasury was authorized to issue a new form of
Treasury obligation to be known as "Treasury bills", a n d the Act
provided that "wherever the words "bonds and notes of the United
States" or certain similar phrases were used in the Federal Reserve
Act they "shall be held to include" such Treasury bills and also
certificates of indebtedness. This, in effect, amended sections 13
and 14, and authorized Federal Reserve Banks to rediscount notes
secured by Treasury bills or certificates of indebtedness; to make
short-term advances to member banks on their promissory notes so
securedj and to purchase in the open market Treasury bills and certificates of indebtedness. Prior to this enactment, certificates
of indebtedness of the United States were considered eligible for
the purposes stated and in this respect the new law was merely a
specific statutory confirmation of the existing practice* (46
Stat. 19.)
ACT OF APRIL 12, 1930
Limitations upon rediscounts for one borrower. — Section 13
of the Federal Reserve Act was amended so as to make the limitations
therein on the amount of eligible paper of any one borrower which
could be rediscounted by a Federal Reserve Bank for a member bank
conform to the limitations of section 5200 of the Revised Statutes,
as amended, with regard to the amount which a national bank could
lend to a single borrower* (4-6 Stat. 162.)
ACT OF JUNE 17, 1930
Values for conversion of foreign money. ~ Section 522 of
this Act made certain technical changes in the Act of May 27, 1921,
relating to the authority of the Federal Reserve Bank of New York to
determine the "buying rate" in connection with the conversion of
foreign currency in the matter of import duties. (46 Stat. 739-740#)
ACT OF JANUARY 22, 1932
(Reconstruction Finance Corporation Act)
Loans to banks3 etc. ~ This Act created the Reconstruction
Finance Corporation, the management of which was vested in a board
of directors consisting, among others, of the Governor of the Federal
Reserve Board. The Corporation was authorized during a limited peri-*
od which later was several times extended, to make loans, in accordance with specified conditions, to any bank, building and loan association, etc., to aid the financing of agriculture, commerce,
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industry, e t c . j but not more than $200,000,000 could be used for the
relief of closed or liquidating banks. (47 Stat,
Exceptions to limitation on indebtedness of a national bank. ~
Section 5202 of the Revised Statutes, made a part of section 13 of the
Federal Reserve Act, provided that no national bank should be indebted
or liable in an amount exceeding its capital stock, with certain exceptions,
one of which was liabilities incurred under the provisions of the TJar
Finance Corporation Act* This Act struck this exception from the law
and in lieu thereof made an exception in favor of liabilities incurred
under the provisions of the Reconstruction Finance Corporation Act*
(47 Stat. 8, sec, 6.)
ACT OF FEBRUARY 27, 1932
("Glass-Steagall Act")
Advances to member banks on ineligible paper* - Sections
10(a) and 10(b) of the Federal Reserve Act were added, under the
provisions of which, in unusual circumstances, member banks that were
without adequate amounts of eligible and acceptable assets to enable
them to obtain sufficient credit accommodations from the Federal Reserve
Banks, through rediscounting or other methods provided by the Federal
Reserve Act, could receive assistance under certain conditions on the
basis of other security satisfactory to the Federal Reserve banks.
Under section 10(a), which was permanent legislation, a Federal Reserve
Bank could make advances upon such security to a group of its members1
banks for distribution to such bank or banks within the group as were
in need of assistance, and under section 10(b) the Federal Reserve
Banks were authorized, until March 3> 1933> to make advances upon such
security to individual member banks having a capital stock of not more
than $5,000,000. (47 Stat. 56.)
United States obligations as collateral for Federal Reserve
notes. -~ Section 16 of the Federal Reserve Act was amended so as to
authorize the Federal Reserve Board until March 3, 1933 > to permit the
use of United States Government obligations as specific collateral for
Federal Reserve notes, (47 Stat. 57, sec. 3*)
ACT OF MAY 19, 1932
Security for 15»~day advances to member banks. - Section 13 of
the Federal Reserve Act was amended so as to enlarge the classes of
security which could be used as collateral for advances to member banks
for periods not exceeding 15 days, to include debentures or other such
obligations of Federal intermediate credit banks which were eligible for
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purchase by Federal Reserve Banks. (47 Stat# 160, sec» 6 # )
Discount for Federal intermediate credit banks, ~ Section 13a
of the Federal Reserve Act was amended so as to authorize Federal Reserve
Banks to discount notes payable to and bearing the indorsement of any
Federal intermediate credit bank, covering loans or advances made by
such bank direct to any national or State bank, trust company, agricultural credit corporation, incorporated livestock loan company*
savings institution, cooperative bank or cooperative credit or marketing association of agricultural producers, or to any other Federal
intermediate credit bank, when such notes had maturities at the time
of discount of not more than 9 months and were secured by paper eligible for rediscount by Federal Reserve banks. (47 Stat. 160, see, $•)
ACT OF JULY 21, 1932
(Emergency Relief and Construction Act)
Loans to individuals, partnerships, and corporations• Section 13 of the Federal Reserve Act was amended so that the Federal
Reserve Board, in unusual and exigent circumstances and by the affirmative vote of not less than five members, could authorize any
Federal Reserve Bank, during such periods as the Federal Reserve
Board might prescribe, to discount for any individual, partnership,
or corporation, which was unable to secure adequate credit accommodations from other banking institutions, notes, drafts, and bills
of exchange of the kinds and maturities eligible for discount for
member banks, when such paper was indorsed and otherwise secured
to the satisfaction of the Reserve Banks, (47 Stat. 715, sec, 210,)
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ACT OF JULY 22, 1932
Security for national bank circulation* ~ All outstanding
bonds of the United States which paid interest at a rate not exceeding 3^3/8 per cent were made acceptable, subject to certain conditions,
as security for the issuance of circulating notes to national banks for
a period of three years, (47 Stat. 740, sec, 29.)
ACT OF FEBRUARY 3, 1933
Advances to member banks on ineligible paper, - Section
10(b) of the Federal Reserve Act was amended so as to extend until
March 3 9 1934j the time within which Federal Reserve Banks might make
advances to individual member banks having a capital not exceeding
$5*000,000 which lacked sufficient eligible and acceptable assets to
enable them to obtain adequate credit accommodations from the Federal
Reserve Banks by the customary methods. (47 Stat, 794)
United States obligations as collateral for Federal Reserve
notes, ~ Section 16 was amended so as to extend until March 39 1934*
the authority of the Federal Reserve Board to permit the use of direct
obligations of the United States as collateral security for Federal
Reserve notes• (47 Stat, 794)
ACT OF FEBRUARY 25, 1933
Powers of State banking authorities vested in Comptroller
of the Currency• ~ The Comptroller of the Currency, with the approval of the Secretary of the Treasury was authorized to exercise
with respect to national banks any powers of the State banking authorities over State banks in the States of location of such national
banks* The establishment of branches and consolidations were excepted from the foregoing grant of authority; and such authority was
stated to expire in six months unless extended for an additional six
months by a Presidential proclamation, (47 Stat. 907-908)
ACT OF MARCH 9, 1933
(Bjnergency Banking Act of 1933)
Expansion of Presidential Power to Regulate "Transfers of
Credit" During National Emergency, - This Act confirms the President's
banking holiday proclamation of March 6, 1933* issued pursuant to section 5(b) of the Trading with the Enemy Act and amended such section 5(b)
to make it applicable to any war or any other period of national emergency
declared by the President, It further amended section 5(b) to give
greater power to the President by authorizing him to regulate, among other
things, any "transfers of credit between or payments by banking institutions
as defined by the President", (48 Stat, 1, sec, 2)
Recapture of gold, - Section 11 of the Federal Reserve Act was
amended by adding at the end thereof subsection (n) which authorized the
Secretary of the Treasury when, in his discretion, such action was necessary
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to protect the currency system of the United States, to require all
individuals, partnerships, associations, and corporations to deliver
to the Treasurer of the United States all gold coin, gold bullion,
and gold certificates ovned by them. The Secretary of the Treasury
was required to pay therefor an equivalent 8mount of other forms of
coin or currency, together with all costs of transportation. Failure
to comply with this provision was made subject to a penalty of twice
the value of the gold or gold certificates in respect to which such
failure occurred. (4£ Stat. 1-2, sees. 1-3)
Transaction of banking business in emergencies. - This Act
prohibited a member bank, during such emergency period as the President of the United States might prescribe, from transacting any banking business except in accordance with regulations, limitations, and
restrictions prescribed fcy the Secretary of the Treasury with the approval of the President, and penalties were provided for violations
of this prohibition, (/f8 Stat. 2, sec. 4«)
lasu&nco of Federal Peserve bank notes, - Section 18 of the
Federal Reserve Act wss amended so as to authorize the issuance, under
certain prescribed conditions, of circulating notes to Federal Reserve
BanKS, usually known as Federal Reserve bank notes, upon the security
of direct obligations of the United States in amounts eo,ual to the face
value of such obligations, or upon the security of any notes, drafts,
bills of exchange, or bankers1 acceptances acquired by Federal Reserve
banks under the Federal Peserve Act in amounts equal to not more than
90 per cent of the estimated value of such collateral security. Prior
to the passage of the Act of March 9, 1933, it had been possible under
the law to issue Federal Reserve bank notes only against the security
of United States bonds which were eligible as security for national
bank notes; and it was provided that no Federal Reserve banx notes
could be issued after the President declared that the emergency recognised by him in his proclamation of March 6, 1933, had terminated, unless they were secured by bonds of the United States bearing the circulation privilege. (4.8 Stat. 6, sec. 401.)
Advances to member banks in exceptional circumstances. Section 10(b) of the Federal Reserve Act, which authorized advances
by Fefle-al Reserve Banks in exceptional and exigent circumstances to
individual member banks without sufficient eligible ana acceptable assets to enable them to obtain adequate credit accommodations from the
Federal Reserve Banxs through other methods provided by the low, was
further amended by this Pot by the elimination of the requirement for
action by the Federal Peserve Board with respect to such advances and
the limitation of 15,000,000 upon the capital of member banks receiving
such advances and also by providing that no such advances could be made
after March 3, 1934, or after the expiration of such additional period,
not exceeding 1 year, as the President might prescribe. (48 Stat. 7,
sec, 402.)
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Advances to individuals, partnerships, or corporations on
the security of obligations of the United States, - Section 13 of
the Federal Reserve jAct vas amended so as to add thereto a new paragraph authorizing a Federal Reserve Bank, under such regulations as
the Federal Reserve Board might prescribe, to make advances for periods
not exceeding 90 days to any individual, partnership, or corporation
on promissory notes secured by direct obligations of the United States.
(48 Stat- 7, sec. 403.)
Conservators of national banks, etc, - This Act authorized
the Comptroller" of tlie Currency, in order €b conserve the assets of
national banks, to appoint a conservator for any such bank. Such conservator, under the Comptroller's direction, was required to take possession of any such bank's assets and act in a capacity similar to that
of a receiver of an insolvent national bank, except that he could permit
the bank to transact a limited banking business pending reopening, reorganization or liquidation. After investigation, the Comptroller of
the Currency was authorized, in his discretion, to terminate the conservatorship and he could permit any such bank to operate on a restricted basis. Federal Reserve Banks were authorized to maintain
separate deposits of segregated, current deposits (not subject to restrictions) of national banks under a conservator and of .State banks
in similar circumstances. Provision was also made relating to the reorganization of national banks and turning the affairs of such banks
under conservators back to the directors, (!$ btat, 1, sees. 201-211.)
Preferred stock of national banks. - With the approval of
two-thirds of their shareholders and the Comptroller of the Currency,
national banks were authorized to issue preferred stock carrying no
double liability in such amounts as the Comptroller might approve.
With the approval of the President and upon the request of the Secretary
of the Treasury, the Reconstruction Finance Corporation was authorized
to subscribe to such preferred shares, (U8 Stat, 1, sees, 3Ol-3Olw)
ACT OF MARCH 2U, 1933
Loans to nonmember banks. - The Act of March 9, 1933, was
amended by adding thereto a new section which authorized Federal
Reserve Banks under certain conditions to make loans to any State
bank or trust company not a member of the Federal Reserve System
upon security approved by such Federal Reserve Bank and after a
thorough examination of the borrowing institution. During the time
that such borrowing bank or trust company was indebted to a Federal
Reserve Baik it was required to comply in all respects with the provisions of the Federal Reserve Act applicable to State member banks
and the regulations of the Federal Reserve Board issued thereunder,
including the maintenance of the reserve balance reqmired under
-40-
section 19 of the Federal Reserve Act, but was not required to subscribe to stock in the Federal Reserve Bank* Notes representing such
loans were eligible as security for Federal Reserve Bank notes issued
to Federal Reserve Banks under the conditions prescribed in section 18
of the Federal Reserve Act. Loans could be made under this section
during the existing emergency in banking or until the section was
declared no longer operative by proclamation of the President, but in
no event after March 2U, 193lw (U8 Stab. 20, Ch. 8.)
ACT OF MAY 12, 1933
(Thomas Amendment)
Purchase of obligations of the United States by the Federal
Reserve Banks, «- Section U3 of Title III of this Act, known as the
Thomas amendment, authorized the President in his discretion, whenever he found that any one of certain stated conditions existed, to
direct the Secretary of the Treasury to enter into agreements with
the Federal Reserve Banks and the Federal. Reserve Board under which
such banks were to agree to conduct open market operations, pursuant
to existing law, in obligations of the United States or of corporations in which the United States was the majority stockholder
and to purchase and hold for an agreed period of time Treasury
bills or other obligations of the United States in an aggregate
sum of $3,000,000,000 in addition to those held on May 12, 1933#
It was also provided that no suspension of reserve requirements
of the Federal Reserve Banks necessitated by reason of operations
in accordance with such authority was to require the imposition
of a graduated tax upon deficiencies in such reserves nor an
automatic increase in rates of interest or discount charged
by any Federal Reserve Bark, which were provided for in section
ll(c) of the Federal Reserve Act* (U8fatat • 5l> sec, 1*3.)
Prevention of undue credit expansion, - This Act provided
that "The Federal Reserve board, with the approval of the Secretary
of the Treasury, may require the Federal Reserve Banks to take such
action as may be necessary, in the judgment of the Board and of the
Secretary of the Treasury, to prevent undue credit expansion", (U8
Stat, 52, sec. U3O
Security for advances to member banks, - Section 13 of the
Federal Reserve Act was amended so as to authorize the use of farm
loan bonds, issued by Federal land banks for certain purposes under
section 21 of the Farm Loan Act, as security for advances by Federal
Reserve Banks to member baiks for periods not exceeding 15 days,
(I48 Stat, U6, see, 28.)
Change in Reserve requirements, - Section 19 of the Federal Reserve Ac£ was amended so as to authorize the Federal Reserve Board, upon
the affirmative vote of not less than five of its members and with the
approval of the President, to declare that an emergency exists by reason
of credit expansion and during such emergency to increase or decrease
the reserve balances required to be maintained against demand or time deposits by member banks, (U8 Stat# 5U> sec, U6,)
Authority to President to regulate the weight of gold, This Act eliminated the words "twenty-five and eight- tenths grains"
appearing in the Act of March lii, 1900 and authorized the President
by proclamation to fix the weight of the gold dollar in grains ninetenths fine at such amounts as he finds necessary from hxs investigations to stabilize domestic prices or to protect our foreign commerce
against adverse effect of depreciated foreign currencies. The weight
of gold when so fixed by the President was to be the standard of
value, maintained at parity with this value by the Secretary of the
Treasury, The weight of gold could not be fixed so as to reduce i t s
weight at that time by more than 50 per centum* (U8 Stat* 51 > sec, lj.3,)
Issuance of United States notes authorized, - This Act
authorized the P r e s i d e n t i f the agreements authorized in t h i s section
proved inadequate or for other reasons, to direct the Secretary of
the Treasury to issue United States notes, as provided in Act of
February 25> 1862, not to exceed the aggregate amount of $3*000,000,000,
This paragraph also provided that all such notes and all coins and
currency (which included Ptederal Reserve notes and circulating notes
of Federal Reserve Banks and national banking associations) shall be
legal tender for a l l debts public and private. The provisions of this
paragraph were made retroactive to include a l l outstanding coins and
currency as well as coins and currency coined or issued after the
date of t h i s Act, (1|8 Stat. 5 l , sec. 1*3•)
Acceptance of silver as payment of foreign indebtedness, This Act authorized the President to accept silver from any foreign
government in payment of any indebtedness due within six months after
the date of this Act, The aggregate amount of silver so accepted
could not exceed $200,000,000 and the price of such silver not to
exceed 50 cents an ounce. The Secretary of the Treasury was authorized
to issue silver certificates in such denominations as he deemed
advisable to the total number of dollars for irchich such silver was
acceptable in payment of debts. These silver certificates were to
be used to pay any obligation of the United States, Any such
certificates were redeemable in standard silver dollars, (U8 Stat. $1,
sec. U5#)
ACT OF MY 20, X933
Exceptions to limitation on indebtedness of a national bank# Section 5202 of the Revised Statutes, made a part of section 13 of the
Federal Reserve Act and limiting, with certain exceptions, the total
indebtedness of a national bank, was amended to exempt from such limitation all liabilities incurred on account of loans made to banks or
agents in charge of their properties with the express approval of the
Comptroller of the Currency under paragraph (9) of section 5200 of the
Revised Statutes. (U8 Stat, 73*)
-1*2-
Obligations of one obligor. - Section 5200 of the Revised
Statutes, limiting the total obligations to any national bank of any
person, etc., was amended by adding a new exception to such limitation, i.e., obligations representing loans to banks, or agents in
charge of the properties thereof, approved by the Comptroller of the
Currency. (1*8 Stat. 72.)
JOINT RESOLUTION OF JUNE 5, 1933 Discontinuance of gold payments, - Eecause of the existing
emergency and the desire to stabilize the value of money, this Joint
Resolution repealed any provision of any law authorizing obligations
to be discharged by payment in gold or a particular kind of coin
or currency. After the passage of this Act any obligation would be
discharged upon payment in coin or currency which at the time of
payment was legal tender for public or private debts. The term
"coin or currency" included Federal Reserve notes and circulating
notes of Federal Reserve Banks and National banking associations.
(1*8 Stat. 112)
ACT OF JUNE 13, 1933
Redemption of bank notes. - This Act provided for the redemption by the United States Treasurer, and destruction by the
Comptroller of the Currency, of any national bank notes, Federal
Reserve Bank notes, or Federal Reserve notes presented to the
Treasurer for redemption and incapable of identification as to the
bank of issue or through which issued. Provision was made for
charging such redeemed national bank and Federal Reserve Bank notes
against redemption deposits, and charging such redeemed Federal Reserve notes against the twelve Federal Reserve Banks in certain proportions and ultimately against the gold-redemption fund of such
Federal Reserve Banks. (1*8 Stat. 127»)
ACT OF JIME 16, 1933
(Banking Act of 1933)
Insurance of deposits. - This Act added section 12B to the
Federal Reserve Act which pr~cvided for the insurance of bank deposits.
For this purpose i t established a new agency, the Federal Deposit Insurance Corporation, with three directors. The Comptroller of the
Currency was made an ex-officio director; and the section provided
for two other directors appointed by the President> and confirmed by
the Senate, for six-year terms• The section provided that "one of the
appointive members shall be chairman of the board of directors".
The Secretary of the Treasury was directed to subscribe
for $1^0,000,000 of stock in the corporation and the Reserve banks
were required to pur chase stock in the corporation in an amount equal
to one-half their surplus, such stock purchase by the Reserve banks
amounting to about |139*OOO,000* The Treasury stock was to bear 6
per cent dividends, but the Reserve bank stock was given no voting
rights and excluded from a l l dividends.
The section provided for a Temporary Insurance Fund which
would operate from January 1, 193h until July 1, 193U> and a permanent plan of deposit insurance that was to operate on and after
July 1, 193U*
The Temporary Fund required each insured baik to pay to the
Federal Deposit Insurance Corporation an amount equal to one-half of
1 per cent of i t s t o t a l deposits, and the bank was liable for an additional call of the same amount if required by the Fund, but i t had
no further l i a b i l i t y . Any surplus remaining in the Fund was to be
returned to the insured banks upon the liquidation of the Temporary
Fund. Insurance of the deposits of any one depositor was limited
to ft2,5>00 under the Temporary Fund. Under the permanent plan specified in the section each insured bank was to subscribe for stock in
the Federal Deposit Insurance Corporation to an amount equal to onehalf of 1 per cent of i t s deposits. This stock was to bear 6 per
cent dividends, but the insured banks were subject to assessment on
the stock whenever the permanent insurance fund was impaired by a
certain amount. The insurance of any one depositor under the permanent plan was to be 100 per cent up to not exceeding ^10,000, 75
per cent for amounts exceeding $10,000 but not exceeding $j?0,000,
and 50 per cent for amounts exceeding $50,000.
All member banks were required to have their deposits* insured under both the Temporary and the permanent plans. Nonmember
banks were to be admitted to the Temporary Fund if approved by the
Federal Deposit Insurance Corporation and to the permanent plan
until July 1, 1936 if so approved, but after that date no nonmember
bank could have i t s deposits insured. (U8 Stat. 168-180 sec. 12B)
Control of Federal Reserve bank credit by Federal Reserve
Board. - vSection h of ~the Federal Reserve Act which provided that the
Board of directors of each Federal Reserve bank "shall administer the
affairs of said bank fairly and impartially and without discrimination
in favor of or against any member bank or banks and shall, subject to
the provisions of law and the orders of the Federal Reserve Board*
extend to each member bank such discounts, advancements, and accommodations as may be safely and reasonably made with due regard for the
claims and demands of other member banks11 was amended by changing
"shall extend" to "may extend" and aading the words "the maintenance
of sound credit conditions, and the accommodation of commerce,
industry, and agriculture." The amendment further provided that each
Federal Reserve Bank shall keep itself informed of the general character
and amount of the loans and investments of its member banks with a view
to ascertaining whether undue use is being made of bank credit for any
purpose inconsistent with sound credit conditions, and is to give
consideration to such information in determining whether to make advances to such member banks. Undue use of bank credit must be reported to the Federal Reserve Board by the chairman of the Federal Reserve Bank, and the Board may suspend a member bank from the use of
the credit facilities of the bystem if, in its judgment, the bank
is making such undue use of bank credit. (U8 Stat. 163, sec#3(a).)
Voting by groups or chains in elections of Federal Reserve
Bank directors. - Section hof^the Federal Reserve Act was amended to
provide that when two or more member banks are affiliated with the same
holding company affiliate only one of such banks, which may be designated
by such affiliate, may participate in the nomination or election of
Federal Reserve Bank directors. (!$ Stat. 163, sec. 3(b).)
Distribution of earnings of federal Reserve Banks. - Section 7 of the Federal Reserve Act was amefrted to provide that all net
earnings of a Federal Reserve Bank, after payment of expenses and
dividend claims, shall be paid into the surplus fund of the bank.
Prior to this Act the Federal Reserve B a nks were required to pay all
their net earnings above dividend requirements into surplus until
such surplus amounted to 100 per cent of the subscribed capital, and
thereafter 10 per cent of the earnings would go %o surplus and the
remaining 90 per cent would be paid to the Government as a franchise
tax. As a matter of practical operation the repeal of the franchise
tax provision made little difference in the disposition of the banks1
earnings, in view of the fact that the investment of $139>QQO,OOO of
their surplus in the stock of the Federal Deposit Insurance Corporation,
as required by this Act, reduced the surplus to a point where it would
have taken a considerable number of years to bring that surplus up to
100 per cent of the subscribed capital. During that period the Federal
Reserve Banks would not in any case have to pay franchise tax# The law
provides that in case of liquidation, the surplus of the Reserve Banks,
after the payment of all debts, dividends, and the par value of the
stock shall become the property of the Uaited btates* (1*8 Stat.
163-U, sec. U.)
Branches of national banks, - Section $1$$ of the Revised
Statutes was amended so as to permit national banks to establish branches
at any point within the State of location if the local law authorized
State banks to do so, and subject to the restrictions as to locations imposed by such law on State banks. To establish branches beyond the headoffice city or town, however, a national bank was required to have an unimpaired capital stock of at least $500,000; but a smaller capital stock was
permitted where the population of the State of location, and the cities
therein, was below specified numbers, §>100,00Q capital stock being the
minimum. It was also provided that the aggregate capital of a national
bank and its branches should not be less than the aggregate minimum required by law for the establishment of an equal number of banks in the
locations of such bank and its branches. (I48 Stat. 189-190, sec. 23*)
Branches of State member banks. - Section 9 of the Federal
Reserve Act was amended so as to provide that nothing therein contained
shall prevent State member banks from establishing braiches either in
the United States or elsewhere upon the same terms and conditions as
those applicable to the establishment of branches by national banks.
(U8 Stat. 161*, sec. 5(b).)
Membership of mutual savings banks and other banking institutions without capital stock. - Section 9 of the Federal Reserve
Act was amended so as to make eligible for membership in the Federal
Reserve System mutual savings banks having no capital stock and other
banking institutions the capital of which consists of time deposits
which are segregated from other deposits and regarded as capital stock
for purposes of taxation and dividends# (J48 Stat. 16U, sec. £(c).)
Dealings in stock and investment securities by national banks. Section 5136 of the Revised Statutes was amended so as to provide, in
effect, that after one year from the passage of this Act, dealings in
investment securities by national banks, with certain limited exceptions,
should be restricted to the purchase and sale of such securities, without
recourse, solely upon the order and for the account of customers, except
that a bank might purchase for its own account investment securities under
limitations and restrictions prescribed by regulations of the Comptroller
of the Currency. National banks were prohibited from purchasing stock of
other corporations except as permitted by law. (I48 Stat. 18U-185, sec.
16.)
Dealings in stocks and investment securities by State member banks, - Section 9 of the Federal Reserve Act was amended so as to
provide that State member banks shall be subject to the same limitations
and conditions as national banks with respect to the purchase, sale,
underwriting, and holding of investment securities and stock.
(U8 Stat. 16$, sec. 5(c).)
-1*6-
Stock certificates of national banks, -Section 5139 of the
Revised Statutes was amended to" provide that no stock certificate of
a national bank should represent the stock of any other corporation
except a corporation engaged solely in holding the premises of such
bank; and the ownership, sale, etc*, of any such certificate was
prohibited from being conditioned upon the ownership, sale, e t c ,
of the stock of any other corporation except a member bank. (U8 Stat,
186, sec. 18.)
Divorce of stock of abate member bank from stock of other
corporations, - Section 9 of the Federal Reserve Act was amended
so as to provide that, after 1 year from the passage of the banking
Act of 1933* no certificate of stock of a dtate member bank shall
represent the stock of any other corporation, except a member bank
or a corporation existing when the provision took effect engaged
solely in holding the bank premises of such abate member baakj nor
shall the ownership or transfer of the stock certificate of such a
bank be conditioned upon the ownership or transfer of a certificate
of stock of another corporation except a member bank* (U8 Stat, 165,
sec, 5(c)O
Election of directors; holding company affiliates, etc, Section JpHJU of the Revised Statutes was amended to provide for cumulative voting for directors of national banks. Provision was also made
relating to the voting of shares of stock held in trust. National bank
shares controlled by holding company affiliates of such banks were prohibited from being voted unless a voting permit was obtained from the
Federal Reserve" Board, which was authorized to grant such permits after
considering the financial condition of the holding company, the general
character of its management and the probable effect of granting such a
permit upon the affairs of any such bank. In this connection, provision
was made relating to (l) the examination of holding company affiliates,
(2) the subjection of officers, employees, e t c , of hojding company
affiliates to the provisions of section 5209 of the Revised statutes,
and (3) the divorcement of any securities company from any such holding
company affiliate. The Board was authorized to revoke voting permits
for violations of lawj and, in the Board1s discretion, the franchise of
a national bank might be forfeited should the voting permit of its holding company affiliate be revoked. (I48 Stat, 186-188, sec, 19,)
Right of an affiliate of a State member bank to vote stock
held by it in such bank,' - Section 9 of the Federal Reserve Act was amended
so as to require that each State member bank affiliated with a holding
company affiliate obtain from such affiliate, within a period prescribed
by the Federal Reserve Board, an agreement that the affiliate shall be subject to the same conditions and limitations with respect to voting
stock in the bank, obtaining a voting permit from the Board, etc., as
are applicable in the case of holding company affiliates of national
banksj and the penalty for failure so to do was made forfeiture of
4*7-
the membership of the
the Board revokes the
the membership of any
forfeited* (U8 Stat*
State bank in the Federal Reserve System. If
voting permit of any holding company affiliate
State member bank affiliated with i t may be
l6£, sec* 5(c)«.)
Capital requirements of national banks* •» Section 5138 of the
Revised Statutes, prescribing the capital requirements for the organization of national banks, was amended by eliminating the provision permitting such banks to organize with a capital of $25,000 if located in
a place not exceeding 3,000 people, (I48 Stat* 185, sec* 17 (a)*)
Capital requirements of State member banks# - Section $> of the
Federal Reserve Act was amended so as to eliminate the provision of law
under which a State bank was permitted to become a member of the Federal
Reserve System with a capital equal to only 60 per cent of the amount
required for the organization of a national bank in the place in which
it is situated. The capital of State member banks thereafter admitted
to the System, therefore, is required in all cases to be equal to that
required of national banks located in places of like size, except that
the Act contained a proviso which permitted a State bank, organized when
that proviso became effective, with a capital of not less than $25>OOO
and located in a place of not more than 3,003 inhabitants, to become a
member of the System, and which also permitted a State bank, which was
located in such a place and increased its capital to $25,000 vhile entitled to the insurance benefits of the Act, to become a member* (!±8 Stat*
185, sec. 17(b)«)
Loans by member banks on stock or bond collateral» - Section
ll(m) of the Federal Reserve Act (an obsolete provision which had expired
by its terms on December 31, 1920) was replaced by a new provision providing that, upon the affirmative vote of six members, the Federal Reserve
Board may fix the percentage of individual bank capital and surplus in
each Federal Reserve district which may be represented by loans secured by
stock or bond collateral made by member banks in such district* No such
loan could be made by a member bank to any person in an amount in excess
of 10 per cent of its unimpaired capital and surplus,, Such percentages,
which may be changed from time to time upon 10 days* notice, are to be
fixed with a view to preventing the undue use of bank loans for the
speculative carrying of securities* The Federal Reserve JBoard may direct
any member bank to refrain from increasing such loans, for one year or
less, under penalty of suspension of rediscount privileges* (1|8 Stat*
167, sec* 7*)
Federal Open Market Committeeft - Section 12A of the Federal
Reserve Act was added, creating a Federal Open Market Committee consisting of 12 members, one being appointed by each Federal Reserve
Bank* Their meetings, held at least four times a year, could be attended
by the members of the Federal Reserve Board* No Federal Reserve Bank
could engage in the open market operations except in accordance with
regulations of the Federal Reserve Board, which would be transmitted to
the Committee and to the Federal Reserve Banks* Open Market operations
-U8-
were required to be governed with a view to accommc&tdng commerce and
business and with regard to their bearing on the general credit situation* If a Federal Reserve Bank decided not to participate in
open market operations recommended and approved as provided in this
section, it was to notify the Committee and the Federal Reserve Board•
(U8 Stat. 168, sec. 8.)
Loans on member banks1 collateral notes* - Section 13 of the
Federal Reserve Act was amended so as to increase the maximum maturity
of advances to member banks on their promissory notes secured by paper
eligible for rediscount or for purchase by Federal Reserve Banks from
15 to 90 days. The maximum maturity of 15 days on advances on member
banks * notes secured by Government bonds or obligations of Federal
intermediate credit banks was not changed. If a member bank, while
indebted to a Federal Reserve Bank on such a 13-day or 90-day collateral
note and despite a warning of the Federal Reserve Bank or the Federal
Reserve Board, increases its outstanding collateral leans or loans to
securities dealers for the purpose of purchasing or carrying stocks
or investment securities (except obligations of the United states),
its note will become immediately due and payable and the member bank
will become ineligible to borrow on such a 15>-day or 90-day note for
a period determined by the Federal Reserve Board. (U8 3tat. 180, sec. 9.)
Farm loan bonds as security for member banks> promissory
notes. - Section 13 of the Federal Reserve Act was further amended by the
omission of the authority contained in the act of May 12, 1933* permitting the use of farm loan bonds, issued by Federal land banks for
certain purposes under section 21 of the Farm Loan Act, as security for
advances by Federal Reserve Banks to member banks, (1^8 Stat. 180, sec. 9#)
Foreign transactions of Federal Reserve Banks. - Section Ik of
the Federal Reserve Act was amended to provide that all relationships and
transactions by Federal Reserve Banks with foreign bankers shall be subject
to special supervision and regulation by the Federal Reserve Boardj that
negotiations with foreign bankers may not be conducted without the
permission of the Federal Reserve Boardj that the Federal Reserve Board
may be represented in any such negotiations; and that a full report of
all such negotiations must be made to the Federal Reserve Board in
writing. (U8 Stat, 181, sec. 10.)
Member banks as mediums in making loans on collateral. Section 19 of the Federal Reserve Act was amended so as to forbid a
member bank to act as the medium or agent of any nonbanking corporation,
partnership, or individual in making loans on the security of stocks,
bonds, and other investment securities to brokers or dealers in such
securities, and a fine was provided for violation. (i|8 Stat. 181, sec.
().)
-U9-
Interest on deposits of member banks, - Section 19 of the
Federal Reserve Act was amended so as to provide that no member bank
shall pay interest on any demand deposit, except in accordance with
then existing contracts; but this prohibition was not applied to a
deposit which is payable only at an office of the bank located in a
foreign country. Exceptions also were made for deposits made by
mutual savings banks and deposits of public funds made by any State,
county, municipality, or school district or other subdivision, with
respect to which payment of interest is required under State law.
The federal Reserve Board was directed to limit the rate of interest
to be paid by member baiks on time deposits. No member bank may pay
any time deposit before its maturity, or waive a retirement of
notice before payment of a savings deposit except when such requirement is waived as to all savings deposits subject thereto, (U8 Stat.
181, sec. ll(b).)
Loans by member banks to executive officers, - Section 22 of
the Federal Reserve Act was amended by adding subsection (g) forbidding
a member bank to loan to its executive officers and forbidding them
to borrow from the bankj but loans of this kind theretofore made could
be renewed or extended not more than 2 years from June 16, 1933. An
executive officer of a bank who borrows from any other bank is also
required to make a written report thereof to the chairmai of the board
of directors of fhis bank. Violation of this provision was made a misdemeanor, subject to fine or imprisonment, (U6 Stat, 182, sec, 12.)
Loans to or investments in stock of affiliates, - Section 23A
was added to the Federal Reserve Act, providing that no member bank
could make any loan or extension of credit to, or purchase securities
under repurchase agreements from, any of its affiliates, or invest in the
stock or obligations of such affiliates, or accept such stock or obligations as security for advances, if the aggregate amount thereof, in the
case of any one affiliate, exceeds 10 per cent of the capital stock
and surplus of the member bank, or if, in the case of all such affiliates, the aggregate amount thereof exceeds 20 per cent of the
capital stock and surplus ,of such member bank. Each loan or extension of credit to an affiliate must be secured by collateral, in the
form of stocks, bonds, debentures, or other such obligations, having
a market value of at least 20 per cent more than the amount of the
loan or extension of credit or at least 10 per cent more than the
amount thereof if secured by State or municipal obligations. Loans
or extensions of credit secured by obligations of the United states,
Federal intermediate credit banks, Federal land banks, Federal home
loan banks, the Honie Owners1 Loan Corporation, or paper eligible for
rediscount by Federal Reserve Banks were excepted from the requirement as to marginal collateral. The provisions of this section do
not apply to certain limited classes of affiliates. (U8 Stat, 183*
sec. 13.)
-50-
Limitation on investment in bank premises. - Section 2\\k
was added to the Federal Reserve Act, providing that no national bank,
without the approval of the Comptroller of the Currency, and no State
member bank, without the approval of the Federal Reserve Board, may
invest in bank premises, or in stock or obligations of, or make loans
to or upon the security of the stock of, any corporation holding i t s
bank premises, in an aggregate sum exceeding the amount of the bank's
capital stock# (.'4.8 Stat. 184, s$c, 140
Consolidation of national banks, - Consolidations were permitted toTe~St ate -wide rather than limited to the county or town*
Provision was also made governing in more complete detail the statutory transfer of rights and interests of constituent banks t o the consolidated i n s t i t u t i o n (US Stat, 190, see* 2U.)
Limitation on obligations of one obligor, - Section 5200 of
the Revised Statutes, providing the limitations on the t o t a l obligations
of one obligor to a national bank, was amended so that the obligations
of a corporation to any such bank, after June 16, 1933> should include a l l obligations of i t s subsidiaries* (U8 Stat. 191* sec, 26*)
Relationships between member banks and securities dealers, Section 20 of the Banking Act 0^1933 provided that, after one year
from the date of enactment, no member bank shall be affiliated with
a securities corporation in the manner described in the Act, Violations
subject member banks to a penalty of '#1,000 a day, in the discretion
of the Federal Reserve Board, and if the violations are contined for 6
months after warning from the Federal Reserve Board, the banks'
franchises may be forfeited, if national banks, or their memberdiip
in the Federal Reserve System may be forfeited, if State banks. (JU8 Stat.
188, sec. 20.)
Receipt of deposits by securities companies and other
institutions, - Section 21 of the Banking Act of 1933 prohibited any
person, firm, corporation, e t c . , engaged in the business of issuing,
underwriting, selling or distributing securities to engage at the same
time in the business of receiving deposits, but excepted banks or
other financial institutions dealing in investment securities to the
extent permitted by section 5136 of the Revised Statutes, The section
also prohibited any person, firm, corporation, e t c . , from engaging
in the business of receiving deposits unless incorporated and authorized
to engage in such business by the laws of the United States or any
State or permitted by a State to engage in such business and subject
to examination and regulation by such authority. (U8 Stat. 189, sec. 21)
Removal of bank directors or officers from office. - Section 30 of the Banking Act of 1933 provided a procedure for the removal of a director or officer of a member bank who continues to
violate the law or continues unsafe or unsound practices in conducting the business of the bank with which he is connected, after being
warned by the Comptroller of the Currency (as to a national bank) or
the Federal Reserve agent of his district (as to a 6tate member bank)
to discontinue such violations or such practices, (U8 Stat. 193* sec.30.)
Relations of member banks with securities companies* - Section 32 of the Banking Act of 1933 provided that, after January 1, 193U*,
no officer or director of a member bank may be an officer, director or.manager
of an organization engaged primarily in t)ie securities business ana
correspondent relationships between member banks and securities organizations were prohibited,- except when authorized by a permit therefor issued by the Federal Reserve Board* The Federal Reserve Board could
issue such a permit if not incompatible with the public interest, and
could revoke such permit if the public interest required* (U8 Stat.
sec. 32*)
Interlocking directorates. - The Clayton Act was amended by
adding section bA, to provide that after January 1, 193U> no officer,
director, or employee of any bank organized or operating under the
laws of the United States may be an officer, director, or employee of
a corporation (other than a mutual savings bank) or member of a partnership which made loans on stocks or bonds except to its own subsidiaries. The provision was subject to the generl authority of the
Federal Reserve Board to issue permits permitting a limited number of
interlocking relations under the Clayton Act. (U8 Stat. 19k> sec. H*
-52-
ACT OF JANUARY 30, 1934
(Gold Reserve Act of 1934)
Transfer of gold of Federal Reserve Banks to the United
States.* -• This Act vested in the United States ail right, title,
and interest and every claim of the Federal Reserve Board, the
Federal Reserve Banks, and the Federal Reserve agents to all gold
coin and bullion* In payment for this gold the Act established
credits in the Treasury in equivalent amounts in dollars, these
credits being payable in gold certificates• Gold in the possession of the Federal Reserve Board; the Federal Reserve Banks,
and Federal Reserve agents was required to be held in custody for
the United States and delivered upon order of the Secretary of the
Treasury* (48 Stat* 337, sec* 2(a)*)
Amendments relating to Federal Reserve notes• - Section 16
of the Federal Reserve Act was amended so as to make Federal Reserve
notes redeemable only in lawful moneyj to eliminate the authority
for the use of gold (but not gold certificates) as collateral for
Federal Reserve notesj to require that reserves against Federal
Reserve notes be maintained in gold certificates instead of in gold
and that reserves against deposits of Federal Reserve Banks be
maintained in gold certificates or lawful money instead of in gold
or lawful money; to require the redemption fund of each Federal
Reserve Bank maintained on deposit at the Treasury of the United
States to be in gold certificates instead of in goldj to make
deposits of Federal Reserve Banks and Federal Reserve agents with
the Treasurer of the United States repayable in gold certificates
only and not in gold coin; and to make other corresponding amendments
in other provisions of section l6 # (48 Stat* 337-340, sec* 2(b)*)
Regulations Governing Use of Gold, ~ The Secretary of the
Treasury was authorized to prescribe regulations governing th& use
of gold for industrial, professional or artistic purposes, by the
Federal Reserve Banks for the purpose of settling international
balances, and other purposes. (43 Stat, 337, sec* 3#)
Withdrawal of Gold Coin From Circulation, Redemption* ~
All gold coins were withdrawn from circulation by the provisions
of this Act and, together with all other United States gold, formed
into bars* Thereafter, no currency of the United States was redeemable in gold. Provisions were made that the reserve for U* S f notes
and for Treasury notes of 1890, and the security for gold certificates
would be maintained in gold bullion equal to dollar amounts required
by law* (48 Stat* 337, sees* 4 ~6»)
-53-
Effect of Devaluation of Dollar* ~ Provisions ?/ere made
that in the event the weight of the gold dollar was reduced, the
resulting increase in value of the gold held in reserve would be
covered into the Treasury as a miscellaneous receipt; in event of
a decrease in the value of gold held in reserve* the compensation
would be made by transfers of gold bullion from the general fund*
The Secretary of the Treasury was authorized to purchase or sell
gold and deal in foreign exchange as he deemed it advantageous
to the public interest and to stabilise the exchange rate of the
dollar. (43 Stat. 337, sees. 7~10(a).)
Establishment of Stabilization Fund* ~ A stabilization fund
of $2,000,000,000 was established which would be available for
expenditure for any purpose in connection with carrying out the
provisions of this Act. Such expenditures were under the direct
control of the President and the Secretary of the Treasury. A two
year expiration date was established for the termination of the Fund,
but the President could extend the date an additional year by
recognizing the continuance of the emergency* (48 Stat* 337, sec*
10(b)*)
Authority of President to fix Weight of Gold Dollar* ~
Section 43 of the Act of May 12, 1933 was amended by providing that
the President could not fix the weight of the gold dollar at more
than 60 per centum of its weight as estaolished at the time of that
Act* This specific authority would terminate at the end of two
years, but the President could extend such period for an additional
year* (48 Stat* 337, sec* 12*) [By Presidential Proclamation of
January 31, 1934 [2072] the weight of gold was fixed at 15 5/21
grains of gold nine tenths fine.]
Issuance of Silver Certificates, Etc* ~ Section 43 of the
Act of May 12, 1933 was also amended by providing, among other
things, that the President, in addition to the authority to provide
for unlimited coinage of silver at a fiy.ed ratio, was authorized
to issue silver certificates in lieu of silver dollars, to issue
silver certificates against any silver reserve in the Treasury,
and to prescribe different terms, conditions and seigniorage charges,
at his discretion, for the coinage of silver of foreign production
than for the coinage of silver produced in the United States. The
Act also provided that the silver certificates so issued would have
all the legal tender characteristics of existing silver certificates
in circulation. The President was authorized, in addition to the
other powers, to reduce the weight of the standard silver dollar in
the same percentage that he reduced the weight of the gold dollar,
(48 Stat. 337, sec. 12.)
Issue of Gold Certificates Authorized. ~ The Secretary of the
Treasury was authorized to issue gold certificates against any gold
held by the Treasurer, except the gold fund held as a reserve for any
United States notes and Treasury notes of 1890* The amount of gold
certificates issued could not exceed the value of the gold so held
against gold certificates* (48 Stat* 337, sec* 14*)
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ACT OF JANUARY 31, 1934
(Federal Farm Mortgage Corporation Act)
Security for 15~day advances by Federal Reserve Banks* Section 13 of the Federal Reserve Act was amended so as to authorize
Federal Farm Mortgage Corporation bonds issued under this Act to be
used as security for advances by Federal Reserve Banks to their member
banks for periods not exceeding 15 days, (43 Stat* 348* sec* l6(a)«)
Obligations eligible for purchase by Federal Reserve Banks* ~
Section 14 of the Federal Reserve Act was amended so as to authorize
Federal Reserve Banks to buy and sell bonds of the Federal Farm Mortgage
Corporation having maturities from date of purchase of not exceeding
6 months* (48 Stat•.348, sec* l6(b)#)
ACT OF MARCH 6, 1934
United States obligations as security for Federal Reserve
notes* ~ Under section 16 of the Federal Reserve Act the authority
of the Federal Reserve Board to permit the use of direct obligations
of the United States as collateral security for Federal Reserve notes,
which would otherwise have expired on March 3, 1934* was extended until
March 3* 1935* or until the expiration of such additional period not
exceeding 2 years as the President might prescribe* (48 Stat. 398.)
ACT OF APRIL 27, 1934
Security for 15*-day advances by Federal Reserve Banks* ~
Section 13 of the Federal Reserve Act was amended so as to authorize
bonds issued under the provisions of section 4(c) of the Home Owners
Loan Act of 1933 to be used as security for advances by Federal Reserve
Banks to their member banks for periods not exceeding 15 days. (48
Statt,646, sec* 7(a).)
Obligations eligible for purchase by Federal Reserve Banks* ~
Section 14 of the Federal Reserve Act was amended so as to authorize
Federal Reserve Banks to buy and sell bonds issued under the provisions
of section 4(c) of the Home Owners Loan Act of 1933 having maturities
from date of purchase of not exceeding 6 months* (48 Stat* 646, sec*
7(b).)
ACT OF JUNE 6, 1934
(Securities Exchange Act of 1934)
Margin requirements. — This Act, in addition to providing
for the regulation of national securities exchanges, placed certain
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regulatory powers in the Federal Reserve Board, Section 7 of such
Act directed the Federal Reserve Board, for the purpose of preventing the
fexce'-ssive u^§ of credit for the purchase or carrying of securities , to regulate the amount of credit extended or maintained by
brokers, dealers, and members of national securities exchanges, on
any security (other than an "exempted security") registered on a
national securities exchange* Members, brokers, and dealers v/ere
forbidden by the law to extend or maintain credit without collateral
or on collateral other than registered or exempted securities except
in accordance with the rules or regulations which the Federal Reserve
Board might prescribe to permit such extension or maintenance of credit
in certain cases, The Act also authorized the Federal Reserve Board to
regulate the extension or maintenance of credit for the purpose of
purchasing or carrying registered securities by persons other than
members, brokers or dealers• (48 Stat, 886, sec. 7.)
Brokers * borrowings• - Members, brokers and dealers were
forbidden to borrow on registered, nonexempted securities in the ordinary course of business except (1) from a member bank, (2) from a
nonmember bank having filed with the Federal Reserve Board a specified agreement, or (3) in accordance with such rules or regulations
as the Federal Reserve Board may prescribe to permit loans between
members, brokers, and dealers, or to meet emergencies* The agreement
specified for nonmember banks from which members, brokers, or dealers
might borrow, must be an undertaking to comply with all provisions of
the Securities Exchange Act of 1934> the Federal Reserve Actj and the
Banking Act of 1933* which are applicable to member banks and which
relate to the use of credit to finance transactions in securities, and
with rules or regulations prescribed pursuant to such provisions, (48
StaU 888, sec# 8(a),)
ACT OF JUNE 16, 1934
Capital requirements for membership in the Federal Reserve
System, — Section 9 of the Federal Reserve Act was amended so as to provide
that, for the purposes of membership of a State bank applying for membership in the Federal Reserve System, the terms "capital" and "capital
stock" shall include the amount of outstanding capital notes and debentures
legally issued by the applying bank and purchased by the Reconstruction
Finance Corporation, (48 Stat. 971, sec, 2«)
Insurance of bank deposits, ~» Section 12B of the Federal
Reserve Act was amended so as to extend for a period of 1 year after
June 30, 1934j the temporary plan for insurance of bank deposits and
so as to increase from &2,500 to $5,000 the amount of the deposits of
any depositor in one bank which were insured under the temporary plan
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(except deposits of mutual savings banks in certain circumstances*)
The section also was amended to extend for an additional year, i*e«
from July 1, 1936 to July 1, 1937, the period during which nonmember
banks re re permitted to have their deposits insured# The Act contained
cex^tain other miscellaneous amendments to section 12B with regard to
the insurance of bank deposits, (48 Stat# 9&9> sec* 1»)
ACT OF JUNE 19, 1934
Industrial advances by Federal Reserve Banks« - Section
13b was added to the Federal Reserve Act under which, in exceptional
circumstances and pursuant to authority granted by the Federal Reserve
Board, a Federal Reserve Bank may, on a reasonable and sound basis,
make loans to or purchase obligations of an established industrial or
commercial business unable to obtain requisite financial assistance
from the usual sources, for the purpose of providing such business
with working capital, and may make commitments with respect to such
loans or purchases, subject to a limitation of 5 years upon the
maturity of any such obligation or commitment• Federal Reserve Banks
were also authorized by this Act to acquire such working capital
obligations of such businesses from banks or financing institutions
by discount or purchase, to make loans on the security of such obligations, and to make commitments with respect to such discounts,
purchases, or loans# Under the law each such financing institution
was required to obligate itself to the Federal Reserve Bank for at
least 20 per cent of any loss sustained upon any such obligation or,
in lieu thereof, furnish at least 20 per cent of the working capital
advanced to such established industrial or commercial business*
The law established in each Federal Reserve district an industrial advisory committee consisting of not less than 3 nor more
than 5 members actively engaged in some industrial pursuit and ap~
pointed by the Federal Reserve Bank subject to the approval of the
Federal Reserve Boardj and each application for a loan, advance,
purchase, discount, or commitment under authority of section 13b
must be submitted to the appropriate committee which, after consideration of the application, transmits it to the Federal Reserve
Bank with its recommendation*
In order to enable the Federal Reserve Banks to make the
industrial advances described, the Secretary of the Treasury was
authorized by the law to pay to each Federal Reserve Bank a sum
equal to an amount not in excess of the par value of its holdings
of stock in the Federal Deposit Insurance Corporation, upon agreement by the Federal Reserve Bank to hold such stock unencumbered
and to pay to the United States all proceeds thereof. In addition,
each Federal Reserve Bank was required to agree that if the proceeds of such stock in any calendar year does not aggregate 2 per
cent of the total payment made to it by the Secretary, it will pay
to the United States such further amount, if any, up to 2 per cent
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of such total payment as should be covered by the net earnings of
the bank for the year, derived from the use of the sum so paid by
the Secretary,
The aggregate amount of discounts, purchases, loans, advances, and commitments of the Federal Reserve Banks outstanding
under the authority of section 13b at any one time may not exceed
the surplus of the banks as of July 1, 1934* plus all amounts paid
to the banks by the Secretary of the Treasury as above described.
(4,8 Stat, 1105> sec. !•)
Exceptions to limitation on indebtedness of a national
bank, - Section 5202 of the Revised Statutes, made a part of section 13 of the Federal Reserve Act and limiting, with certain exceptions,
the total indebtedness of a national bank, was amended by providing
that liabilities incurred under the provisions of section 13b of the
Federal Reserve Act should be exempt from such limitation, (48 Stat,
1105> sec, 2.)
ACT OF JUNE 19, 1934
(Silver Purchase Act of 1934)
policy Declaration, ~ It is hereby declared to be the policy
of the United States that the proportion of silver to gold in the
monetary stocks of the United States should be increased with the
ultimate objective of having and maintaining ^ne-*fourth of the
monetary value of such stocks in silver, (48 Stat, 1178, sec, 2,)
Purchase and Sale of Silver by Secretary of Treasury, ~*
Whenever the proportion of the silver was less than one-fourth of
the value of the monetary stocks, the Secretary of the Treasury was
authorized to purchase silver upon complying with certain conditions,
If the value of silver stocks exceed one-fourth of the value of the
monetary stocks, the Secretary of the Treasury was authorized to sell
any silver at reasonable rates, (48 Stat, 1178, sees, 3> 4t)
Issuance of Silver Certificates against Silver Purchased, The Secretary of the Treasury was directed to issue and place into
circulation silver certificates not leas than the cost of all silver
purchased under this Act, All silver certificates were declared to
be legal tender and were redeemable upon demand in standard silver
dollars• (48 Stat, 1178, sec, 5t)
Regulation of transactions in silver, ~ This Act authorized
the Secretary of the Treasury, with;the President's approval, to
investigate, regulate, or prohibit the acquisition, importation*
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exportation, etc., of silver* (48 Stat, 1178, sec* 6,)
Delivery of silver to Treasury, ~ This Act authorized
the President to require the delivery to the United States mints
of all silver to be coined into standard silver dollars or added
to the monetary stock, and paid for in standard silver dollars or
any other coin or currency of the United States, (48 Stat, 1178,
sec, 7,)
ACT OF JUNE 27 , 1934
(National Housing Act)
Applicability of restrictions on real estate loans to
loans under the Housing Act, ~ Section 24 of the Federal Reserve
Act was amended so as to provide that a loan made by a national
bank secured by real estate and insured under the provisions of
title II of the National Housing Act shall not be subject to the
restriction of that section as to the amount of the loan in relation
bo the actual value of the real estate or to the limitation of 5
years upon the term of a real estate loan. It also provided that
loans made to finance the construction of residential or farm
buildings with maturities of not more than 6 months, whether or not
secured by a lien on real estate, shall not be considered loans
secured by real estate within the meaning of section 24> but that
no national bank shall invest in or be liable on any such loans
in excess of 50 per cent of its paid-in and unimpaired capital•
(48 Stat. 1263, sec, 505.)
Eligibility for rediscount of construction loans» ~ Sec~
tion 24 of the Federal Reserve Act was also amended so as to make
notes representing loans to finance the construction of residential
or farm buildings eligible for rediscount at Federal Reserve Banks
for member banks within the terms of the applicable provisions of
the Federal Reserve Act relating to rediscounts, if.accompanied by
a valid and binding agreement to advance the full amount of the loan
upon the completion of the building, entered into by a person ac-«
ceptable to the discounting Federal Reserve Bank, (48 Stat, 1263, sec* 5O5#)
JOINT RESOLUTION OF JUNE 14> 1935
Loans by member banks to executive officers, ~ Section
22(g) of the Federal Reserve Act was amended to provide that loans made
to executive officers prior to June 16, 1933> raay be renewed or
extended for not more than 5 years from such last-mentioned date
where the board of directors of the member bank shall have satisfied
themselves that it is in the best interest of the bank and that the
officers indebted have made reasonable efforts to reduce their obligations, these findings to be evidenced by resolutions of the board
of directors, (49 Stat, 375>)
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JOINT RESOLUTION OF JUNE 28, 1935
Extension of time for temporary insurance of bank deposits* Section 12B of the Federal Reserve Act was amended so as to provide
for the extension from July 1, 1935* to August 31* 1935* of the
insurance of bank deposits under the Temporary Federal Deposit Insurance
Fund, (k9 Stat. 1*35.)
ACT OF AUGUST 23, 1935
(Banking Act of 1935)
Federal deposit insurance, - Section 12B of the Federal Reserve
Act relating to insurance"!)? bank~deposits by the Federal Deposit Insurance Corporation was completely revised* At the time this act was
passed, bank deposits were insured under the provisions of a temporary
plan of insurance and, although the law had contained provisions for a
permanent plan of insurance, this had not come into effect. This Act
set up a new permanent plan of insurance, effective immediately,
superseding the existing temporary plan* The supervisory powers of
the Federal Deposit Insurance Corporation were increased. Only a
few of the most important provisions of this section as revised are
noted here. (h9 Stat* 68U-7O3.)
Maximum insurance. - In lieu of the previous provisions of
the permanent plan of deposit insurance, under which there would have
been insured 100 per cent of deposits up to $10,000, 75 per cent of
deposits between $10,000 and $50,000, and 50 per cent of deposits
above $50,000, the Act provided that *>f>,000 shall be the maximum
amount insured for one depositor, conforming in this respect to the
amount of deposits insured under the temporal^ plan of insurance
which existed at the time this Act was passed* (k9 Stat. 69k, subsection (1).) Under the amended law deposits of trust funds were insured to the extent of $5^000 for each trust estate in addition to
the insurance of other deposits owed the trust beneficiary* (k9
Stat. 690, subsection (h)(9)»)
Assessments. - In lieu of the assessments aggregating not*:
more than 1 per cent of insured deposits to which banks insured under
the temporary insurance plan were subject, and of the requirement
that banks which were to be insured under the permanent plan purchase
stock in the Federal Deposit Insurance Corporation and then be liable
for unlimited assessments, insured banks under the plan set up in the
Act were subjected to an annual assessment of one-twelfth of 1 per
cent of their deposits payable semiannually. (k9 Stat* 688, subsection (h)(l)«) It was provided that a separate insurance fund for
mutual savings banks might be established by the Corporation and for
such separate fund a lower rate of assessment might be provided. (k9
Stat, 688 and 69k, subsections (h)(l) and (1)(1),)
Payment of interest on deposits, etc, - The Federal Deposit
Insurance Corporation was directed to prohibit by regulation the
"payment of interest on demand deposits in insured nonmember banks/*
For that purpose the directors were authorized to define the term
"demand deoositstfj but such exceptions had to be made to the prohibition as had been made for member banks. The Corporation directors
also were required to !flimit by regulation the rates of interest or
dividends which" might be paid "by insured nonmember banks on time
and savings deposits," The directors were required to define "time
and savings deposits in an insured nonmember bank" and "prescribe
different rates for such payment on time and savings deposits having
different maturities, or subject to different conditions respecting
withdrawal or repayment, or subject to different conditions by reason
of different locations, or according to the varying discount rates of
member benks in the several Federal Reserve districts." The regulations must prohibit the payment of any time deposit before maturity,
except upon conditions prescribed by the directors, and prohibit the
waiving of any requirement of notice before payment of a savings deposit except as to all savings deposits having the same requirement,
A penalty of $100, recoverable by the Corporation, was provided for
any violation, ([$ otat# 702, subsection (v)(8),)
Insurance of nonmember banks, - Any nonmember bank of the
Federal Reserve System was authorized, under certain conditions, to
become an insured bank. (h9 Stat. 687, subsection (f)(2).) The insured status of a member bank terminates when it ceases to be a member bank; but for 2 years thereafter the bank remains liable for
assessments and retains the insurance on insured deposits held by it
when it ceased to be a member bank, less subsequent withdrawals,
(i.{9 Stat, 691, subsection (i)(l),) In lieu of the former provisions
which would have terminated the insurance of all nonmember banks on
July 1, 1937, it was provided that no State bank which during the
calendar year 19lil or any succeeding calendar year had average deposits of ftl,000,000 or more should be an insured bank or have any
part of its deposits insured after July 1 following the calendar year
in. TA/hich it had such deposits, unless such bank was a member of the
Federal Reserve Systemj but the restriction was made inapplicable to
a savings bank, mutual savings bank, Morris Plan bank, or trust company doing no commercial banking business, or to a bank located in
Hawaii, Alaska, Puerto Rico, or the Virgin Islands, (U9 btat, 703,
subsection (y)(l)#)
Capital requirements of national banks; surplus, - Section 5138
of the Revised Statutes, relating to the capital requirements for the
organization of national banks, was amended so as to require such banks,
as a condition precedent to beginning business, to have a paid-in
surplus equal to 20 per cent of their capital. Provision was made whereby
the Comptroller of the Currency was authorized to waive such surplus
requirement in the case of a State bank converting into a national bank;
but any such converting bank could not declare a dividend until such
surplus was acquired* There was also added a provision relating to the
retirement of preferred shares by converting State banks9 (k9* Stat*
709-710, sec. 309.)
Requirements for admission to Federal Reserve System, - A
new paragraph was added to section 9 of the Federal Reserve Act so t h a t ,
in order to facilitate the admission to membership of any State bank
which was required to become a member bank in order to be an insured
bank, the Board of Governors of the Federal Reserve System might waive
in whole or in part the requirements of section 9 relating to the
admission of such bank to membership. If such a bank were admitted
with capital less than that required for the organization of a national
bank in the same place and i t s capital and surplus fwere not, in the
Board's judgment, adequate in relation to the bank s l i a b i l i t i e s to
depositors and other creditors, the Board might require such bank to
increase i t s capital and surplus to such amount as the Board might deem
necessary within such period as the Board might deem reasonable; but
no such bank should be required to increase i t s capital beyond that r e quired for the organization of a national bank in the same place.
Separation of member bank shares from those of other corporations, - Section $139 of the Revised Statutes, providing that the
stock certificates of national banks should not "represent the stock11
of any other corporation
except a corporation "engaged solely in holding the bank premises11, e t c , , was changed so that any such certificate
should not "bear any statement purporting to represent the stocks" of
any other corporation, except a member bank or a corporation "engaged
on June 16, 193U> in holding the bank premises"; and the ownership,
transfer, e t c , of any such certificate was prohibited from being conditioned upon the ownership, transfer, e t c , of stock of any corporation, except a member bank or a corporation "engaged on June 16, 193h9
in holding the bank premises". The foregoing provisions do not prohibit
the ownership, transfer, e t c , of the stock of any other corporation
being conditioned upon the ownership, transfer, e t c , of a member bank
stock certificate, The provisions of section 9 of the Federal Reserve
Act regarding the stock certificates of State member banks was also
amended so as to provide for the separation of the stock of such banks
from the stock of other corporations* (1±9 Stat* 710, s e c 310,)
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Federal Reserve Board changed in name and reorganized, - The
name of the Federal Reserve Board
was changed to "Board of Governors
of the Federal Reserve System11 and the Board was reorganized to consist
of seven members with the Secretary of the Treasury and the Comptroller
of the Currency eliminated* The terms were fixed at fourteen years
with one expiring every two years* (k9 5tat* 70U* sec, 203.)
Advances to member banks* - Section 10(b) of the Federal Reserve Act which, prior to i t s expiration on March 3> 1935* authorized
any Federal Reserve Bank, under rules and regulations prescribed by the
Board of Governors of the Federal Reserve system, to make advances to
any member bank on i t s time or demand notes secured to the satisfaction
of such Federal Reserve Bank, was reenacted as permanent law and amenaed
in certain respects. The requirements that such advances be made only
"in exceptional and exigent circumstances" and when the member bank
could not obtain adequate credit accommodations under other provisions of
the Federal Reserve Act were eliminated; and the requirement that ©mch
note must bear interest at a rate not less than 1 per cent per annum
hi^ner than the highest discount rate in effect at such Federal Reserve Bank on the date of such note was changed to a requirement that
the rate of interest must be not less than one-half per cent per
annum higher* A provision was added which requires the notes of the
member bank to have maturities of not more than k months* (k9 Stat*
705, sec* 20lu)
Regulations relating to investment securities* - Paragraph
"Seventh" of section 5136 of the Revised Statutes was amended by eliminating the prohibition against a national bank purchasing and holding
more than 10 per cent of a particular issue of investment securities,
but the total obligations of one obligor which mi$it be purchased and
held by any such bank was reduced from 15 per cent of the bank*s paidin and unimpaired capital and 25 per cent of i t s unimpaired surplus, to
10 per cent of each. This section was also amended to make i t clear
that national banks might purchase and sell stocks for the accounts of
their customers but not for their own accounts. A further amendment
included within the group of securities exempt from the restrictions
of such section, obligations insured under section £07 of the National
Housing Act if the debentures to be issued in payment of such insured
obligations were guaranteed as to principal and interest by the United
States. (k9 Stat. 709, sec. 3080
Limitation on loans by member banks on Government obligations. Section ll^mj of the Federal Reserve Act was amended to place State
member banks on a parity with national banks in lending on the security
of bonds or notes of the United States issued since April 2k9 1911}
certificates of indebtedness of the United States, Treasury b i l l s of
the United States, or obligations guaranteed as to principal and
interest by the United States, by changing the limitation on loans to
one individual on such security, from 10 per cent of the bank's unimpaired capital and surplus to 25 per cent thereof, as provided for
national banks in section 5200 of the Revised Statutes. (k9 Stat.
713, sec* 321.)
Open market operations. - Section 12A of the Federal Reserve
Act was amen3e37 effective March 1, 1936, so that instead of the
Federal Open Market Committee corusisting of one member from each Federal
Reserve d i s t r i c t , i t consists of the seven members of the Board of
Governors of the Federal Reserve System and five annually-elected
representatives of the Federal Reserve Banks. One of the five Reserve
Bank representatives i s elected by the directors of the Federal
Reserve Banks of Boston and New Yorkj one by the directors of the
Federal Reserve Banks of Philadelphia and Cleveland) one by the
directors of the Federal Reserve Banks of Chicago and bt. Louis;
one by the directors of the Federal Reserve Banks of Richmond,
Atlanta, and DaLlasj and one by the directors of the Federal Reserve
Banks of Minneapolis, Kansas City, and San Francisco. An alternate
for each representative i s elected in the same manner as the representative. The Committee i s required to "consider, adopt, and transmit to the several Federal Reserve Banks, regulations relating to the
open-market transactions of such banks." Not only were Federal Reserve Banks forbidden to engage in open market operations except
in accordance with such regulations, but they also were forbidden
to "decline to engage" in such operations except in accordance with
the direction of and regulations adopted by the Committee* (k9 otat.
705, sec. 205.)
Indorsement or other security sufficient for Reserve Bank
discounts for""individuals, - The third paragraph of section 13 of
the Federal Reserve Act was amended to require either indorsement
or other security, rather than both, for paper discounted by Federal
Reserve Banks for individuals or corporations unable to secure
adequate credit accommodations from other banks. (k9 Stat, 7ll*j
sec. 322,)
Purchase and sale of Government obligations and Government
guaranteed obligations, - Section lU(b) of the Federal Reserve AcF
was amended to provide that obligations of the United States and those
fully guaranteed as to principal and interest by the United States
may be bought and sold without regard to maturities, but only in the
open market, (U9 Stat, 706, sec, 206(a),)
Discount rates of Reserve Banks, - Section lli(d) of the
Federal Reserve Act which provided that Federal Reserve Banks may
from time to time establish discount rates, subject to review and
determination of the Board of Governors of the Federal Reserve System,
was amended to require that each such bank must "establish such rates every
Ik days, or oftener if deemed necessary by the Board," (1*9 Stat, 706,
sec, 206(b),)
Revserve requirements of member banks, - Section 19 of the
Federal Reserve Act was amended to permit the Board of Governors of
the Federal Reserve system to change the reserve requirements of
member banks "in order to prevent injurious credit expansion or contraction"; and to eliminate the necessity for first having a declaration, upon the affirmative vote of five Board members and the approval
of the President, that "an emergency exists by reason of credit expansion," Reserve requirements may be changed for member banks
located in Reserve and central Reserve cities, for member banks not
in Reserve or central Reserve cities, or for all member banks; but the
affirmative vote of not less than four Board members is required for
such a change, and the reserves required of a member bank as a result
of such a change may not be less than the requirements on the date of
enactment of this Act nor more than twice such requirements, (U9 Stat,
706, sec. 207•)
Definition by Board of Governors of various classes of deposits, The definitions of "demand deposits" and "time deposits" were stricken
from section 19 of the Federal Reserve Act and the Board of Governors
of the Federal Reserve System was authorized to define for the purposes
of the section the terms, "demand deposits", "gross demand deposits",
"deposits payable on demand", "time deposits", "savings deposits", and
-65-
"trust funds", to determine what i s to be deemed a payment of interest
and to prescribe regulations to effectuate the purposes of the section;
but the term "time deposits" continues to include "savings deposits"
for the purposes of the provisions regarding member bank reserve requirement s. (k9 Stat* 7lU, sec* 32U(a).)
Deduction of "amounts due from bmks" in computing reserve
requirements^^ Section^l9 of the "Federal Reserve Act was amended so
t h a t , for purposes of computing member bank reserves, amounts due from
other banks (except Federal Reserve Banks and foreign banks) and cash
items in process of collection payable immediately upon presentation
in the United States may be deducted from gross demand deposits rather
than merely from amounts due to other banks. (k9 Stat. 7lU, sec,
32U(b).)
Payment of deposits and interest thereon by member banks. Section 1^ of the Federal Reserve Act was amended to add to the exemptions
from the prohibition against the payment of interest by member banks on
demand deposits: (1) contracts existing when a bank joins the System,
and (2) deposits payable outside the States of the United States and
the District of Columbia (rather than merely those payable in foreign
countries) o The exemption of deposits made on behalf of any State
or subdivision thereof as to which interest was required by State law
and of deposits made by mutual savings banks, was terminated under
the amended law, 2 years after the date of the enactment of t h i s Actj
and during t h i s 2-year period there were added to those exemptions
deposits made by savings banks and deposits of t r u s t funds on which
interest was required by State law. So much of existing law as
required the payment of interest on funds deposited by the United
States or any territory or possession thereof as was inconsistent
with the provisions of section 19 was repealed. The provision authorizing
the Board, in limiting the rate of interest "which migjfit be paid by
member banks on time and savings deposits, to prescribe different rates
in different circumstances, was changed t o a provision that the Board
"shall prescribe different rates for such payment on time and savings
deposits having different maturities, or subject to different conditions respecting withdrawal or repayment, or subject to different conditions by reason of different locations, or according to the varying
discount rates of member banks in the several Federal Reserve d i s t r i c t s . "
The absolute prohibition against the payment of time deposits before
maturity was relaxed to permit such payments under conditions prescribed
by the Boardj and deposits payable only at offices of member banks
located outside the States of the United states and the District of
Columbia were exempted from a l l restrictions on payment before maturity
and a l l restrictions on interest rates. (i±9 Stat. 7lU> sec. 32U(c).)
Reserves required against Government deposits, - At the end
of section 19 of the Federal Reserve Act a new paragraph was added
requiring member banks to keep the same reserves against deposits of
the United States as against other deposits, thus repealing the contrary
provisions of the Liberty Bond Acts* (k9 Stat, 715, sec* 32U(d),)
Borrowings by executive officers of member banks; elimination of criminal penalty, - Section 22(g) forbidding executive officers
of member banks to borrow from their banks was amended by adding a
provision giving the Board of Governors of the Federal Reserve bystem power to remove such officers for violations, in lieu of the
provision subjecting such officers to fine or imprisonment. The
$10,000 fine on the bank was eliminated, Such loans as were outstanding on June 16, 1933, might, under the amended law, be extended
or renewed until June 16, 1938* if a finding by the bank directors
that such renewal was in the bank's interest and that the officer
had made reasonable effort to reduce his obligation was spread on
the bank's minute book* With the prior approval of a majority of
the bank's directors, loans not exceeding C>2,$00 from a member bank
to an executive officer were permitted. Borrowing by a partnership
in which one or more executive officers have individually or collectively a majority interest were specifically included within the
prohibition. It was made clear that executive officers may, for the
protection of the bank, indorse paper previously taken by it in good
faith or may incur indebtedness to the bank for the purpose of protecting the bank against loss or giving financial assistance to it.
The Board was given power to define terms used in the section and
prescribe regulations to effect its purposes, (U9 Stat, 716, sec,
326(c).)
Restrictions on loans to affiliates relaxed, - The exemptions from the limitations of section 23A of the Federal Reserve Act
on member banks' loans to affiliates and loans on and investments
in the securities of affiliates were broadened so as to include among
such exemptions (1) affiliates "engaged on June 16, 193UI!> in holding
the bank premises (the old law required them to be "solely" so engaged)
or in maintaining and operating properties acquired for banking purposes
prior to that datej (2) wholly owned subsidiaries of foreign banking
corporations organized under the Federal Reserve Act; (3) wholly owned
subsidiaries of similar corporations in which national banks were
authorized to invest under section 2$ of the Federal Reserve Actj
(U) affiliates engaged solely in holding obligations of, or fully
guaranteed as to principal and interest by, the United States (the
previous exemption applied only to affiliates holding such direct
obligations)^ (5) affiliates which became such through a bona fide
previous debtj and (6) affiliates which are such because their
Glares are held by the bank as fiduciary (except when the beneficiaries
are a majority of the bank's stockholders). The section also was
-67-
made inapplicable to affiliate indebtedness arising from the unpaid
balance due on assets purchased from the bank, and to loans secured
by, or extensions of credit against obligations of, or fully guaranteed, as to principal and interest by, the Uhited States* (JU9 Stat.
717, sec* 3270
Real estate loans by national banks. - Section 2k of the
Federal Reserve Act relating to real estate loans by national banks,
was amended to eliminate the requirement that the real estate upon
which such loans are made must be located in the bank's Federal
Reserve d i s t r i c t or within 100 miles of the place in which the bank
i s located. The requirement that the bank take the entire amount of
an obligation secured by real estate was retained as to such an
obligation purchased by the bank. The limitation to 50 per cent of
the actual value of the property was changed to 50 per cent of the
appraised valuej and in addition to retaining the exemption of mortgages
insured under t i t l e II of the National Housing Act from the 5-year
limitation on maturities and 50 per cent limitation on appraised
values, the amendment permits amortized loans to be made in amounts
not exceeding 60 per cent of the appraised value of the real estate
and for terms not longer than 10 years if installment payments are
sufficient to anortize at least 1*0 per cent of the principal within
10 years* The permissible aggregate of real estate loans of a national
bank was changed from 25 per cent of the bank's paid-in and unimpaired
capital and surplus or 50 per cent of i t s savings deposits, whichever
i s greater, to 100 per cent of i t s paid-in and unimpaired capital and
surplus or 60 per cent of i t s time and savings deposits, whichever
is greater. (k9 Stat, 706, sec. 208.)
Limitation on obligations of one obligor , - Section 5200 of
the Revised Statutes, prescribing the limitation on the obligations of
one person, e t c . , to a national bank, was amended so as to make Treasury
b i l l s and obligations fully guaranteed both as to principal and interest
by the United States, subject to the provisions of the exception from
the aforementioned limitation applicable to certificates of indebtedness of the United States. (1*9 Stat. 713, sec. 321(b).)
Industrial loans relieved of real estate restrictions. Section 2h of the Federal Reserve Act was amended to exempt from the
restrictions of that section on real estate loans, a l l "working
capital" loans to industry in which the Reconstruction Finance
Corporation or a Federal Reserve Bank participates or makes a commitment, or which i t has discounted, loaned upon, or purchased.
(k9 Stat. 717, sec. 328.)
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Interlocking directorates, - Certain provisions of sections 25 and 25(b) of the Federal Reserve Act regarding interlocking
relations between member banks and foreign banking corporations
organized under the Federal Reserve Act or in which national banks
were authorized to invest under section 25, were repealed*
(k9 Sbat. 717, sec. 329.)
"Accidential" holding company affiliates eliminated, - Section 2(c) of the Banking Act of 19J3 was amended t'o eliminate from
all the provisions regarding "holding company affiliates" (except
section 23A of the Federal Reserve Act, which deals with a member
bank's leans to such affiliates and investments in and loans on
the securities of such affiliates), any corporation all the stock
of which is owned by the United States or any organization which
is "determined by the Board of Governors of the Federal Reserve
System not to be engaged, directly pr indirectly, as a business
in holding the stock of, or managing or controlling banks, banking
associations, savings banks, or trust companies," (k9 Stat. 707,
sec. 301.)
Cumulative voting clarified; limited voting permits, - Section SlUj. of the Revised Statutes was further amended to make it clear
that holding company affiliates of national banks which had obtained
voting permits were entitled to the right of cumulative voting given
other shareholders of such banks by such section., and also to make it
clear that the Board might issue limited voting penalty (for special
purposes) and was not confined to the issuance of general voting
permits (for all purposes), (k9 Stat, 7 U > sec, 311(b).)
Interlocking relationships between member banks and segggjjie^ companies, - Section 32" of "the Banking Act of 1933 was
rewritten, effective January 1, 1936, to make the prohibitions
against interlocking relationships between member banks and securities companies extend to the employees of both such organizations
in addition to their officers and directors; and individuals engaged
in the securities business were subjected to the same prohibitions
as officers, directors, and employees of companies and members of
partnerships so engaged. Permission of the Board of Governors of
the Federal Reserve System for such interlocking relationships may
be given ffin limited classes of cases" and by "general regulations"
rather than by individual permit. Such relationships may be permitted when they "would not unduly influence the investment policies
of such member bank or the advice it gives its customers regarding
investments", rather than when they would be "not incompatible with
the public interest," The description of the securities businesses
in question was changed from those "engaged primarily in the business of purchasing, selling, or negotiating securities" to those
^primarily engaged in the issue, flotation, underwriting, public
sale, or distribution, at wholesale or retail, or through syndicate
participation, of stocks, bonds, or other similar securities," The
prohibition against correspondent relationships between member banks
and securities companies were eliminated^ (U9 Stat. 709 > sec. 307#)
Interlocking bank directorates» - Section 8 of the Clayton
Act relating to interlocking bank directorates were rewritten to
provide that !fno private banker or director, officer, or employee
of any member bank of the Federal Reserve System or any branch thereof shall be at the same time a director, officer, or employee of any
other bank, barking association, savings bank, or trust company organized under the National Bank Act or organised under laws of any
State or of the District of Columbia, or any branch thereof, except that the Board of Governors of the Federal Reserve system may
by regulation permit such service as a director, officer, or employee of not more than one other such institution or branch thereof," The authority of the Board to issue permits for interlocking
directorates in individual cases was repealed.
However, the prohibition was made inapplicable in the
case of (1) a bank of which more than 90 per cent of the stock is
owned by the United States or by any corporation of which the United
States owns more than 90 per cent of the stock; (2) a bank formally
in liquidation or receivership; (3) a corporation principally engaged
in foreign banking which has entered into an agreement with the Board
pursuant to section 25 of the Federal Reserve Act; (It) a bank of
which more than 50 per cent of the common stock is owned by persons
who own more than 50 per cent of the common stock of the member banks;
(5) a bank not located and having no branch in the same place where
the member bank or branch thereof is located, or in a place contiguous or adjacent thereto; (6) a bank not engaged in a class or classes
of business in which the member bank is engaged; and (7) a mutual
savings bank having no capital stock* Until February 1, 1939* the
amended section was not to affect the service of any director, officer, or employee of any member bank or branch thereof who was lawfully serving on the date the amendment was enacted*
Section 8 A of the Clayton Act, which had been added by the
Banking Act of 1933 and which restricted interlocking relationships
between banks organized or operating under Federal law and institutions "which t!make loans secured by stock or bond collateral11, was
repealed. (I4.9 Stat. 718, sec, 329•)
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JOHIT RESOLUTION OF APRIL 21, 1936
Loans by Federal Deposit Insurance Corporation upon assets
of injured banks, - Section 12B of the Federal Reserve Act was amended
to extend until July 1, 1938, the period in which the Federal Deposit
Insurance Corporation might make loans, under certain conditions, upon
the assets of an open or closed insured bank, purchase such assets, or
guarantee any other insured bank against loss by reason of its assuming
the liabilities and purchasing the assets of an insured bank. Such
action might be taken if in the judgment of the Corporation it would
reduce the risk or avert a threatened loss to the Corporation and
would facilitate a merger or consolidation of an insured bank with
another insured bank, or would facilitate the sale of the assets
of an insured bank to and assumption of its liabilities by another
insured bank, (k9 Stat. 1237, Ch. 2 U u )
ACT OF MARCH 1, 1937
United States obligations as security for Federal Reserve
notes, - Under section 16 of the Federal Reserve Act the authority
of the Board of Governors of the Federal Reserve System to permit the
use of direct obligations of the United States as collateral security
for Federal Reserve notes, which would have expired on March 3, 1937 >
was extended until June 30, 1939* (50 Stat. 23, Ch. 20,)
ACT OF FEBRUARY 3, 1938
National mortgage association obligations, - Section 5136
of the Revised Statutes was amended so as to include among the obligations excepted from the limitations relating to dealing in securities
by banks, obligations of national mortgage associations, (52 Stat, 26,
sec* 13#)
. i-
ACT OF APRIL 25, 1938
Loans to executive officers, - Section 22(g) of the Federal
Reserve Act was amended by striking out t!the nword "five" in the first
sentence thereof and inserting the word six in its place. Under
this amendment, loans made to an executive officer of a member bank
prior to June 16, 1933* might be renewed or extended for periods expiring not later than June 16, 1939* subject to the other conditions
stated in the law, (52 Stat, 223, Ch. 1730
JOINT RESOLUTION OF JUNE 16, 1938
Loans and purchases by Federal Deposit Insurance Corporation, Section 12B of' the Federal Reserve Act was amended so as to make
permanent the authority of the Federal Deposit Insurance Corporation to
make loans to, or purchase assets from insured banks in order to facilitate
mergers or consolidations and reduce or avert threatened losses to the
Corporation. (52 Stat. 767, Ch. 1*89.)
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ACT OF JUKE 20, 1939
Membership in Federal Reserve System of insured banks, Section 12B(y)(l) of the Federal Reserve Act was repealed. The effect
of this amendment was to remove the requirement that a l l State banks
having average deposits of $1,000,000 or more during the calendar year
19Ul or any succeeding calendar year must be members of the Federal
Reserve System in order to have their deposits insured by the Federal
Deposit Insurance Corporation. (53 Stat. 8U2.)
Loans to executive officers, - Section 22(g) of
Reserve Act was amended by extending for five years from
the period within which loans made to executive officers
banks prior to June 16, 1933* may be renewed or extended
other conditions named in the law. (53 Stat. 8ti2)
the Federal
June 16, 1939>
of member
subject to the
ACT OF JtUE 30, 1939
Obligations of the Ifaxted States as collateral for Federal Reserve notes. - Section 16 of the Federal Reserve Act was amended
so as to extend until June 30, 19l±l> the period during which direct
obligations of the United States may be used as collateral security
for Federal Reserve notes. (53 Sbat. 991)
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ACT OF JULY 6, 1939
Coinage and sale of silverc - This Act provided that any silver
submitted to any United States mint must be received for coinage if it
has been mined subsequent to July 1, 1939* from natural deposits in the
United States* The Director of the Mint shall deduct U5 per cent as
seigniorage and coin the balance into silver dollars to be delivered to
the ownerf The deducted U5 per cent shall be retained as bullion or
coined into silver dollars. (53 Stat. 998> sec* U.)
Expansion of Presidential power to investigate, regulate or
prohibit "transfers of credit". « Certain technical and qualifying
amendments were made to section 5(b) of the Trading With the Enemy Act
of October 6, 1917* as amended* This amendment was for the purpose of
clarifying the Presidents authority to regulate transactions and funds
or other property in which foreign countries or their nationals have
an interest,, (Pursuant to the authority given him by section 5(b) of
this Act, as amended, the President, having declared that a national
emergency existed on May 27> 19^1* by Executive Order 88U3 issued on
August 9> I9I4.I5 authorized the Board of Governors of the Federal
Reserve System to regulate consumer creditt) (5U btat, 179»)
ACT OF MARCH 28, 19Ul
National bank real estate loans secured by defense housing
insured mortgages» - Section 2U of the Federal Reserve Act was amended
so as to exempt defense housing insured mortgages from the limitations
of that section on the amounts and maturities of real estate loans
which may be made by national banks* (55 Stat. $5, 62.)
Foreign accounts in Federal Reserve Banks, - Section lU(e)
of the Federal Reserve Act was amended so as" to make it clear that
Federal Reserve Banks may open and maintain banking accounts for foreign
banks or bankers or for foreign governments without having to establish
accounts with such foreign banks, bankers, or governments, or to appoint
them as the corresoondents or agents of the Federal Reserve Banks.
(55 Stat. 1310
ACT OF JtME 30, 19l*l
Government obligations as collateral for Federal Reserve notes.
Section lE of the Federal Reserve Act was amended so that the authority
of the Board of Governors of the Federal Reserve «bystem to permit direct
obligations of the United States to be used as collateral for Federal
Reserve notes,, which would have expired on June 30, 19Ul> was extended
until June 30, 19^3. {% Stat. 395)
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ACT OF DECEMBER 18, 19Ul
Expansion of Presidential power to investigate, regulate or
prohibit "transfers of credit". Certain technical and clarifying
changes were made in the language of section 3>(b) of the Trading with
the Enemy Act of October 6, 1917* as amended. (55 Stat, 839)
ACT OF MARCH 27, 19h2
(Second War Powers Act)
Purchases of Government obligations by Reserve Banks directly
from United States. - Section lU(b) of the Federal Reserve Act was
amended so as to authorize the purchase or sale by the Federal Reserve
Banks either in the open market or directly from or to the United States,
of bonds, notes, or other obligations which are direct obligations of
the United States, or which are fully guaranteed by the United States
as to principal and interest, but limited the aggregate amount acquired
directly from the United States and held at any one time by the twelve
Reserve Banks to an amount not exceeding 5 billion dollars. (During
World War I and until 1935, Federal Reserve Banks had authority to make
purchases of Government securities directly from the Government, In 1935>
the purchase of Government securities was restricted to the open market.
This amendment again authorized the Federal Reserve Banks to purchase
securities directly from the Government instead of limiting such purchases to the open market, but limited such direct purchases to 5 billion
dollars*) December 31* 19Ui, or such earlier date as the President
or Congress by concurrent resolution may designate, was fixed as the
expiration date for this authority, (56 Stat. 180)
ACT OF JUNE 11,lgU2
Nonmember banks as depositaries of United States. - The provision
of section 15 of the Federal Reserve Act, which provides that Government
funds shall not be deposited in any bank not belonging to the Federal
Reserve System, was in effect amended by authorizing the Secretary of
the Treasury to designate any insured bank as a depositary of public
money and repealing all acts in conflict therewith, (56 Stat. 351, 356)
ACT OF JULY 7*
Membership of Federal Open Market Committee. - Section 12A of
the Federal Reserve Act was amended to provide for a regrouping of the
Federal Reserve Banks for the purpose of electing representative members
of the Federal Open Market Committee (which is composed of the members
of the Board of Governors and five representatives of the Federal Reserve
Banks), (56 Stat. 6ltf)
Reserves required of member banks» - Section 19 of the Federal
Reserve Act was amended so as to authorize the Board of Governors of the
Federal Reserve System to change the reserve requirements of member
banks in central reserve c i t i e s , within the limitations of the law,
without necessarily making a change in reserve requirements of member
banks in reserve cities % (56 Stat* 6U7)
Loans or dividends while reserves deficient» - Section V) of
the Federal Reserve* Act was amended by repealing the provision which
prohibits member banks from making new loans or paying dividends while
their reserves are deficient. (56 Stat* 61*7)
ACT OF
War loan deposit accounts. - Section 12B of the Federal Reserve Act was amended so as to make it unnecessary for insured banks,
until six months after the cessation of hostilities, to pay deposit
insurance assessments on balances to the credit of the United States
Treasury arising solely as a result of subscriptions for United States
securities issued under the Second Liberty Bond Act, as amended.
Section 19 of the Federal Reserve Act was also amended so as to exempt
member banks for the same period from the necessity of maintaining reserves with the Federal Reserve Banks against deposits payable to the
United States arising solely as a result of subscriptions for such
securities* (57 Stat* 65)
ACT OF APRIL 29, 19U3
Stabilization Fund, - The time within which the President may
exercise his powers relating to the Stabilization Fund under the Gold
Reserve Act of 193U* which would have expired on June 30, 19k3> was
extended until June 30, I9h$, and a new provision was added which, according to the report of the Committee on Coinage, Weights and Measures
of the House of Representatives '"will carry out the view expressed by
the Secretary of the Treasury that the stabilization Fund should not
be included in any international fund without the approval of the
Congress." (57 Stat, 68)
ACT OF M Y 25, 19U3
Government obligations as collateral for Federal Reserve notes•Section l6 of the Federal Reserve Act was amended so that the authority
of the Board of Governors of the Federal Revserve ^System to permit direct
obligations of the United States to be used as collateral for Federal
Reserve notes, which would have expired on June 30, 19143* was extended
until June 30, 19U5# (57 Stat, 65.)
-75-
ACT OF DEC1L1BER
Purchase of Government obligations directly from the United
States, -""The authority of the Federal Reserve Banks under section
nnpbj^of the Federal Reserve Act, to purchase United States obligations directly from the United States, whicn would have expired on
December 31, 19UU> was extended until December 31, 19U5* (58 Stat. 827.)
ACT OF JUNE 12, 1916
Reserves of Federal Reserve Banks. - Section 16 of the Federal
Reserve Act was amended so as to reduce the reserve requirements of
the Federal Reserve Banks from 35 per centum against its deposit
liabilities and kO per centum against its Federal Reserve notes in
actual circulation to a uniform amount of 25 per cent in gold certificates,.
Section ll(c) of the Federal Reserve Act was amended so as to reduce
correspondingly the graduated tax to be prescribed by the Board whenever
reserves against Federal Reserve notes fall below the statutory
limitation. ($9 Stat. 237.)
Government obligations as collateral for Federal Reserve notes* Section 16 of the Federal Reserve Act was amended so as to extend indefinitely the authority of the Board of Governors of the Federal Reserve System to permit direct obligations of the United States to be
used as collateral for Federal Reserve notes* (59 Stat* 237.)
Termination of authority to issue Federal Reserve Bank notes, All power and authority with respect to the issuance of Federal Reserve
Bank notes under section 18 of the Federal Reserve Act was terminated
on the date of enactment of this Act. (59 Stat. 237•)
Termination of authority to issue United States notes. - All
power and authority of the President and the ibecretary of the Treasury
under the Act of May 12, 1933 with respect to the issuance of United
States notes terminated on the date of enactment of this Act. (59 Stat. 237*)
Veterans* guaranteed real estate loans by national banks* Certain limitations contained in section 2U of the Federal Reserve
Act upon real estate loans by national banks were, in effect, set
aside by this Act insofar as they relate to loans to veterans guaranteed
under the Servicemen's Readjustment Act of 19hiu (59 Stat* 626*)
Purchase of Government obligations directly from the United
States* - The authority of the Federal Reserve Banks under section lU(b)
of the Federal Reserve Act, to purchase United States obligations
diz*ectly from the United States, which would have expired on December 31 *
U5 was extended until June 30, 19U6. (59 Stat. 658.)
-76-
ACT OF JUNE 29, 19l»6
Pur cha se^ of_ Government obli gat ion s directly from the
United States, "- The authority of the Federal Reserve Banks under
section Ili(b7 of the Federal Reserve Act to purchase United States
obligations directly from the United States, which would have expired on June 30, 19U6, was extended until March 31* 19h7•
(60 Stat. 3U5#)
ACT OF JULY 31, 19h6
Industrial use of silver held or owned by United States. The vSecretary of the Treasury was authorized to sell or lease for
manufacturing or industrial use to any person any silver owned by
the United States at not less than 90.5 cents per fine trey ounce.
The Secretary of the Treasury must maintain an amount of silver equal
to the value of a l l outstanding silver certificates issued by him under
t h i s arrangement• (60 Stat, 750)
Seigniorage changed» - The Mints were directed to deduct
30 per cent in stead"" of U5 per cent as seigniorage on silver mined
after July 1, 19U6. (60 Stat. 750.)
ACT OF AUGUST Ik, 19U6
National bank real estate loans secured by farm tenant^insured
mortgages. - Section 2k of the Federal Reserve Act was amended so as to
exempt loans for the purpose of enabling farm tenants to acquire farms
when such loans are insured under the Bankhead-Jones Farm Tenant Act,
from the limitations with respect to the amounts and maturities of
real estate loans which may be made by national banks. (60 Stat. 1O79»)
ACT OF APRIL 28, 19^7
Purchase of Government obligations directly from the United States,
The authority of the Federal Reserve Banks under section Hi(b) of the
Federal Reserve Act to purchase United States obligations directly from the
United States, which had expired on March 31, 19U7, was extended until
July 1, 1950• (61 Stat. $6
JOINT RESOLUTION OF AUGUST 8, l$kl
Consumer Credit. - The authority of the Board of Governors of the
Federal Reserve System to exercise regulatory control of consumer credit
pursuant to Executive Order No, 88U3 was continued for a temporary period,
but such control shall not be exercised, after November 1, 19^7, except
during the time of war beginning after the enactment of the joint
resolution or a national emergency subsequently declared by the President,
(60 Stat. 92l/)
-77-
ACT OF MAT 25,
.1!ational bank real estate loans in which Reconstruction Finance
Corporation participates« - Section 2U of the Federal Reserve Act was
amended so as to exemptfloans made to established industrial or commercial
businesses in "which the RFC cooperates or purchases a participation, from
the limitations with respect to the amounts and maturities of real
estate loans iwhich may be made by national banks. The purpose of this
amendment was to continue in effect a similar exception previously provided in the law which had been eliminated when the Reconstruction
Finance Corporation Act was completely revised* (62 Stat« 265#)
JOINT RESOLUTION OF AUGUST 16, 191*8
Consumer instalment credit. - The authority of the Board of
Governors~of the Federal Reserve System to regulate consumer credit,
in accordance with Executive Order No. 88U3> which had terminated on
November 1, 19h7> was extended for a period ending June 30, 19^9j
insofar as it relates to instalment credit. (62 Stat* 1291*)
Reserves of member banks, - Section 19 of the Federal Reserve
Act was amended to authorize the Board of Governors of the Federal
Reserve System to increase the reserves required to be maintained by
member banks, during a period ending June 30, 19k9> to a maximum of
7-1/2 per cent against time deposits, and to not more than 30 per cent
for central reserve city banks, 2U per cent for reserve city banks,
and 18 per cent for other member banks, against demand deposits,
(62 Stat. 1291t)
ACT OF JUNE 29, 19U9
Dealings in international bank obligations» - Section 5136 of the
Reviwsed Statutes of the United States was amended so as to remove r e s t r i c t i o n s upon national banks and btate member banks with respect to
dealing in and underwriting obligations issued by the International Bank
for Reconstruction and Development, subject to the limitation that a
bank*s holding of such obligations shall not exceed 10 per cent of i t s
capital and surplus, (63 Stat# 298•)
ACT OF JULY 1$, I9h9
(Housing Act of 19U9)
Dealings in housing obligation s» - Section 5136 of the Revised
Statutes of the United States was amended so as to remove r e s t r i c t i o n s
upon national banks and State member banks with respect to dealing in,
underwriting, and purchasing for t h e i r own accounts certain obligations
-78-
of local public agencies and public housing agencies secured by
agreements with Federal Housing authorities* Section 5200 of the
Revised Statutes was also amended to provide that the limitations
upon loans by a national bank to any one borrower shall not apply
to similar obligatiais of such agencies. (63 *>tat. U39»)
ACT OF 0CT0B2R 2$, 19h9
National bank real estate loans on long-term leaseholds* Section 2k of the Federal Reserve Act* relating to real estate loans
by national banks, was amended to permit such banks to make loans
on certain types of long-term leaseholds under rules and regulations
prescribed by the Comptroller of the Currency, and also to permit
them to finance the construction of military rental housing under
Title VIII of the National Housing Act. (63 Sbat. 906.)
ACT OF APRIL 20, 1950
(Housing Act of 1950)
National bank real estate loans for low cost housing* Section 2k of the Federal Reserve Act was amended so as to exempt
loans for low cost homes which are insured under the National Housing
Act from the limitations with respect to the amounts and maturities
of real estate loans which may be made by national banks* (Pub* Law 1*75 >
8lst Cong.)
ACT OP JUNE 30, 1950
Purchase of Government obligations directly from the United
States. - The authority of the Federal Reserve Banks under section lU(b)
of the Federal Reserve Act to purchase United states obligations directly
from the United States which would have expired on June 30, 1950, was
extended until June 30, 1952. (Pub. Law 589, 8lst Cong.)
ACT OF AUGUST17, 1950
Conversion of national banks. - National banking associations
were authorized to convert into, and to merge or consolidate with,
State banks. (Pub. Law 706, 8lst Cong.)
Reductions in capital or surplus of converting or merging banks.
Section 12B of the Federal Reserve Act was amended to provide that when
an insured baik converts into, or consolidates or merges with, an
insured State bank, the prior written consent of the appropriate Federal
supervisory banking agency must be obtained if the capital stock or
surplus of the resulting bank will be less than that of the converting
bank or less than the aggregate capital stock or surplus, respectively,
of the consolidating or merging banks. (Pub# Law 706, 8lst Cong.)
-79-
ACT OF SEPTEMBER 8, 1950
(Defense Production Actof1950
Guarantees of Defense Production Loans» ~ This Act provided
authority for guarantees of defense production loans by the Military
Departments and certain other procurement agencies of the Government
designated by the President• Pursuant thereto, the President by
Executive-Order 10161 of September 9, 1950, authorized the Federal
Reserve Banks to act as fiscal agents on behalf of the guaranteeing
agencies under the suprevision of the Board of Governors of the
Federal Reserve System, and delegated to the Board authority to
prescribe regulations, fix rates and fees, and prescribe forms and
procedures to be followed in connection with such guarantees•
(Pub* Law 774* 81st Cong., sec. 301)
Voluntary credit restraint. ~ This Act authorized the
President to encourage financial institutions to enter into voluntary
agreements and programs to restrain credit, which will further the
objectives of the Act. No action under such an agreement or program
shall be construed to be within the prohibitions of the antitrust
laws. By Executive Order 10l6l of September 9, 1950, the President
delegated to the Board of Governors his authority with respect to
financing under this section of the Act* (Pub Law 77-4, 81st Cong,,
sec. 708)
Consumer credit control -» This Act authorized the Board b£
Governors to exercise, until June 30, 1951, consumer credit controls
in accordance with and to carry out the provisions of Executive Order
8843 of August 9, 1941. (Pub. Law 774* 81st Cong., sec. 601)
Real estate credit control. -» This Act authorized the
President to prescribe regulations with respect to the kinds of real
estate construction credit which may be extended in order to prevent
or reduce excessive or untimely use of or fluctuations in such credit.
In carrying out this provision, the President was authorized to utilize
the Federal Reserve System and, pursuant thereto, by Executive Order
No. 10161 of September 9, 1950, designated the Board of Governors as
the administrative agency. (Pub. Law 774* 81st. Cong#, sec. 602)
ACT OF SEPTEMBER 21, 1950
(Federal Deposit Insurance Corporation Act)
By this Act the law pertaining to the insurance of bank
deposits, which was originally section 12B of the Federal Reserve Act,
was withdrawn and made the Federal Deposit Insurance Act. This Act
modified the insurance program in two principal ways* it increased
the deposit insurance coverage from 15,000 to $10,000 and it reduced
the net cost of deposit insurance to the insured banks. It also
simplified the manner in which the assessment liability is computed.
In addition to these major features, the Act provided for a number of
minor and technical changes in deposit insurance law. (Pub. Law 797,
81st. Cong.)
@FedFRASER