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72
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S. 4115
CONGRESS
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IN TH E SENATE OE TH E U N ITED STATES
M arch 14 (calendar day, M arch 1.7), 1932
Mr. G lass introduced the following bill; which was read twice and referred
to the Committee on Banking and Currency
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A BILL
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To provide for the safer and more effective use of the assets of
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Federal reserve banks and of national banking associations,
to regulate interbank control, to prevent the undue diver
sion of funds into speculative operations, and for other
purposes.
1
B e it enacted b y the S en a te and H o u s e o f R ep resen ta -
2
tives o f the U n ited S tates o f A m e r ic a in C on g ress assem bled
$
That the short title of this Act shall be the “ Banking Act
4
of 1 9 3 2 .”
-II lo
5
,
c 'T M ' l U 'd l i
Sec . 2. As used in this Act—
6
(a) The terms “ bank,” “ national bank,” “ national
7
banking association,” “ member bank,” “ board,” “ district,”
8
and “ reserve bank ” shall have the meanings assigned to
9
them in section
1
of the Federal Beserve Act, as amended.
\
3
2
1
(b) The term “ affiliate ” includes a trust company,
1
bank or member bank or more than 5 0 per centum of the
2
a finance company, securities compaity, discount or accept-
2
number of shares voted for the election of directors of such
3
ance company, investment trust, or other similar institution,
3
bank at the preceding annual meeting, or controls in any
4
or a corporation—
4
manner the election of a majority of the directors of such
bank; or
.
5
(1 ) Of which a national bank or member bank, directly
5
6
or indirectly, owns or controls either a majority of the
6
( 5 ) For the benefit of whose shareholders or members
7
voting shares or more than 5 0 per centum of the number
7
all or substantially all the capital stock of a national bank
8
of shares voted for the election of its directors, trustees, or
8
or member bank is held by trustees.
9
other managing officers at the preceding annual meeting,
9
10
or controls in any manner the election of a majority of its
10
“ Eighth ” of section 4 of the Federal Reserve Act, as
11
directors, trustees, or other managing officers; or
11
amended, is amended by inserting before the period at the
Se c .
The
3.
fourth
paragraph
after
paragraph
12
( 2 ) Of which control is held, directly or indirectly,
12
end thereof a comma and the following: “ but only if
13
through stock ownership or in any other manner, by the
13
such discounts, advancements, and accommodations are in-
14
shareholders of a national bank or member bank who own
14
tended for tlie accommodation of commerce, industry, and
15
or control either a majority of the shares of such bank or
15
agriculture.
16
more than 5 0 per centum of the number of shares voted
10
regulations further defining and regulating the use of the
17
for the election of directors of such bank at the preceding
17
credit facilities of the Federal reserve system within the
18
annual meeting, or by trustees for the benefit of the share-
18
limitations of this Act.
19
holders of any such bank; or
19
to member banks for the purpose of making or carrying
The Federal Reserve Board may prescribe
Such facilities shall not be extended
20
(3 ) Of which either a majority of the members of its
20
loans covering investments, or facilitating the carrying of,
21
executive committee or a majorit}^ of its directors, trustees,
21
or trading in, stocks, bonds, or other investment securities
22
or other managing officers are directors of a national bank or
22
other than obligations of the Government of the United
23
member bank; or
23
States.
Each
Federal reserve bank
shall keep
itself
24
(4 ) Which owns or controls, directly or indirectly,
24
informed of the loan and investment practices of its mcmbei
25
either a majority of the shares of capital stock of a national
25
banks and the uses made hy them of the ciedit facilities of
4
5
1
the Federal reserve system.
The chairman of each Fed-
2
era! reserve bank\ shall report to the Federal Keserve Board
3
1
r‘After all necessary expenses of a Federal reserve bank
2
shall have been paid or provided for, and provision shall
any undue, unauthorized, or improper use of such credit
3
have been made, when necessary, for restoring the surplus
4
facilities, together with his recommendation for remedial
4
of the bank to its position as of December 31, 1931, the
5
action in the matter.
5
stockholders shall be entitled to receive an annual dividend
6
in its discretion, suspend for not more than one vear from
6
of
7
the use of the credit facilities of the Federal reserve system
7
shall be cumulative.
8
any member bank making undue, unauthorized, or improper
8
have been fully met, the net earnings, beginning with the net
9
use of such facilities.”
9
earnings for the year ending December 31, 1932, shall be
The Federal Reserve Board may,
6
per centum on the paid-in capital stock, which dividend
After the aforesaid dividend claims
10
Sec . 4. The twenty-fifth paragraph of section 4 of the
10
paid to the Federal Liquidating Corporation provided for in
11
Federal Reserve Act, as amended, is amended by inserting
11
section
12
before the period at the end thereof a colon and the follow-
12
ration for carrying out the puiposes of such section.”
13
ing: “
That no such vote shall be cast by or on
13
14
behalf of any member bank, if a majority of its stock shall
14
amended, is further amended by inserting between the fifth
15
be held or owned by any affiliate, or other corporation,
15
and sixth paragraphs thereof the following new paragraph:
16
which is in fact one of a chain, or of a jointly controlled
10
17
group of banks, controlled by an individual, or if its stock
17
under authority of this section shall make and furnish to
18
is in the hands of a voting trust, or if in any other way such
18
the president of the bank, for transmission by him to the
19
bank is prevented from acting subject to the uncontrolled
19
Federal Reserve Board, not less than three reports during
20
decision of the general body of stockholders of such bank
20
each year.
21
locally resident in the town or city in which such bank is
21
Federal Reserve Board may prescribe, shall be verified by
22
established.”
22
the oath or affirmation of the president or such other officer
23
as may be designated by the board of directors of such
24
affiliate to verify such reports, and shall cover the condition
23
24
P r o v id e d ,
Sec . 5. The first paragraph of section 7 of the Federal
Reserve Act, as amended, is amended to read as follows:
12B
of this Act and shall be used by the said corpo-
Se c . 6 .
“
Section 9 of the Federal Reserve Act, as
Each affiliate of a bank admitted to membership
Such reports shall be in such form as the
6
7
.
1
bers appointed by the President of the United States, by
2
and with the advice and consent of the Senate.
3
ing the six appointive members of the Federal Reserve
4
Board, not more than one of whom shall be selected from
as the corresponding report of the member bank, except
5
any one Federal reserve district, the President shall have
that the Federal Reserve Board may, in its discretion, extend
6
due regard to a fair representation of the financial, agricul-
7
tural, industrial, and commercial interests, and geographical
1
of such affiliate on dates identical with those fixed by the
2
Federal Reserve Board for reports of the condition of the
3
member bank.
4
transmitted to the Federal Reserve Board at the same time
5
'6
7
Each such report of an affiliate shall he
such time for good cause shown.
Each such report shall
In select-
g
exhibit in detail and under appropriate heads, the holdings
8
divisions of the country, and at least two of such members
9
of the affiliate in question, their cost and present value, the
9
shall be persons of tested banking experience.
10
expenses of operation for the preceding year, and the balance
10
members of .the Federal Reserve Board appointed by the
11
sheet of the enterprise.
It shall be the duty of the president
11
President and confirmed as aforesaid shall devote their entire
12
of such member bank to satisfy himself as to the correctness
12
time to the business of the Federal Reserve Board and shall
1 3
of the report before transmitting the same to the Federal
13
each receive an annual salary of $ 1 2 , 0 0 0 , payable monthly,
14
Reserve Board.
Any affiliate which fails to make and
14
together with actual necessaiy traveling expenses, and the
15
furnish any report required of it under this section, and
15
Comptroller of the Currency, as ex officio member of the
10
any member bank whose president fails to transmit, as
16
Federal Reserve Board, shall, in addition to the salary now
17
required
17
paid him as Comptroller of the Currency, receive the sum
IS
shall be subject to a penalty of
18
of $ 7 , 0 0 0 annually for his services as a member of said
19
which such failure continues.”
19
board.”
20
by
this section, any such report furnished to him,
S e c . 7.
$100
for each day during
(a) The first paragraph of section
10
of
21
Federal Reserve Act, as amended, is amended to read as
22
follows:
^
23
“A Federal Reserve Board is hereby created which
24
shall consist of seven members, including the Comptroller of
25
the Currency, who shall be a member ex officio, and six mem-
(b) The second paragraph of section
20
the
-
10
The six
of the Fed-
21
eral Reserve Act, as amended, is amended to read as follows:
22
“ The Comptroller of the Currency shall be ineligible
23
during the time he is in office and for two years thereafter
24
to hold any office, position, or employment in any member
25
bank.
The appointive members of the Federal Reserve
8.
9
1
Board shall be ineligible during the time they are in office
1
bank, banking institution, or trust company; and before
2
and for two years thereafter to hold any office, position, or
2
entering upon his duties as a member of the Federal Reserve
3
employment in any member bank, except that this restric-
3
Board he shall certify under oath that he has complied
4
tion shall not apply to a member who has served the full
4
with this requirement and such certification shall be filed
5
term for which he was appointed.
Upon the expiration of
5
with the secretary of the board.
6
the term of any member of the Federal Reserve Board in
. 6
shall occur, other than by expiration of term, among the
7
office when this paragraph as amended takes effect, the
7
six members of the Federal Reserve Board appointed by
8
President shall fix the term of the successor to such member
8
the President, as above provided, a successor shall be
9
at not to exceed twelve years, as designated by the President
9
appointed by the President, with the advice and consent
10
at the time of nomination, but in such manner as to provide
10
of the Senate, to fill such vacancy, and when appointed
11
for the expiration of the term of not more than one member
11
he shall hold office for the unexpired term of the member
12
in any two-year period, and thereafter each member shall
12
whose place he is selected to fill.”
Id
hold office for a term of twelve years.
13
Sec. 8. Subsection (m) of section 11 of the Federal
14
thus appointed, one shall be designated by the President as
14
Reserve Act, as amended, is amended to read as follows:
governor and one as vice governor of the Federal Reserve
15
“ (m) Upon the affirmative vote of not less than six of
1^
Board.
The governor of the Federal Reserve Board, sub-
10
its members the Federal Reserve Board shall have power
17
ject to its supervision, shall be its active executive officer.
17
to fix from time to time for any member bank the percentage
18
Each member of the Federal Reserve Board shall within
18
of the capital and surplus of such bank which may be repre-
fifteen days after notice of appointment make and subscribe
19
sented by loans protected by collateral security.
to the oath of office.”
20
centage so fixed by the Federal Reserve Board shall be sub-
(c) The fourth paragraph of section 10 of the Federal
21
ject to change from time to time upon ten days’ notice, and it
Reserve Act, as amended, is amended to read as follows:
22
shall be the duty of the board to establish such percent-
member of the Federal Reserve Board shall be an
23
ages with a view to preventing the undue use of bank
24
officer or director of any bank, banking institution, trust
24
loans for the speculative carrying of securities. The Federal
2°
company, or Federal reserve bank or hold stock in any
25
Reserve Board shall have power to direct any member bank
1r
°
2®
^
22
%
“ No
Of the six persons
Whenever a vacancy
Any per-
10
11
1
to refrain from further increase of its security loans for
1
drafts, bills of exchange or acceptances, eligible for redis-
2
arty period up to one year.
Any violation of this subsection
2
count at Federal reserve banks, or by bonds or other obliga-
3
may be penalized by suspension of all rediscount privileges
3
tions eligible for investment by savings banks in the State
4
at Federal reserve banks."
4
in which the association or member bank making the loan is
5
located.
5
Sec. 9. No national banking association and no mem-
A loan to a director, officer, clerk, or other em-
6
ber bank shall (1) make any loan or any extension of credit .
6
ployee of any such affiliate shall be deemed a loan to the
7
to any affiliate organized and existing for the purpose of buy-
7
affiliate to the extent that the proceeds of such loan arc
8
ing and selling stocks, bonds, real estate, or real-estate mort-
8
transferred to the affiliate.
9
gages, or for the purpose of holding title to any such prop-
9
Sec. 10. The Federal Reserve Act, as amended, is
10
erty, or (2) invest any of its funds in the capital stock,
10
amended b}^ inserting between sections 12 and 13 thereof
11
bonds, or other obligations of any such affiliate, or (3) accept
11
the following new sections:
12
the capital stock, bonds, or other obligations of any such
12
“ Sec. 12A. (a) There is hereby created a Federal
13
affiliate as collateral security to protect loans made to any
13
Open Market Committee (hereinafter referred to as the
14
person, partnership, or corporation, if the aggregate amount
14
“ committee ” ), which shall consist of the governor of the
15
of such loans, extensions of credit, investments, and aceept-
15
Federal Reserve Board and as many additional members
16
ances of collateral security in the case of any such affiliate,
1(5
as there are Federal reserve districts.
17
will exceed 10 per centum of the outstanding capital stock
17
bank by its board of directors shall annually select from
18
and surplus of such national banking association or member
18
among the officers of the said bank one member of said
19
bank.
19
committee.
Each Federal reserve
The meetings of said committee shall be held
20
Each loan made to an affiliate within the foregoing
20
at Washington, District of Columbia, at least four times
21
limitations shall be secured by stocks or bonds listed on a
21
each year.
22
stock exchange which have an ascertained market value at
22
upon the call of the Federal Reserve Board, either upon the
23
the time of making the loan of at least 20 per centum more
23
motion of the board or at the request of any three members
24
than the amount of such loan, or shall be secured by notes,
24
of the committee.
Additional meetings may be held elsewhere
In the absence or inability of the gov-
13
12
1
ernor of the Federal Reserve Board to act at such meetings
1
“ (d) The conclusions and recommendations of the
2
the board shall designate the vice governor or some other
2
committee when approved by the Federal Reserve Board
3
member of the hoard to act in place of the governor.
3
shall be submitted to each Federal reserve bank for de-
4
“ (b) No Federal reserve bank shall engage in open
4
termination whether it will participate in any purchases or
5
market operations described in section 14 of this Act except
5
sales recommended.
6
after approval and authorization by the committee.
The
6
decide not to participate in the open market operations
7
committee shall discuss, adopt, and transmit to the several
7
so recommended, it shall file with the chairman of the com-
8
Federal reserve hanks resolutions relating to all matters
8
mittee within thirty days a notice of its decision.
9
affecting the open market transactions of such banks and to
9
“ Sec. 12B. (a) There is hereby created a Federal
10
all matters affecting the relations of the Federal reserve
10
Liquidating Corporation (hereinafter referred to as the
11
system with foreign central or other banks.
Every such
11
‘ corporation’ ), whose duty it shall be to purchase, hold,
12
resolution shall be reported within three days to the Federal
12
and liquidate as hereinafter provided, the assets of banks
13
Reserve Board and shall be subject to its approval.
The
13
which have been ordered closed by the Comptroller of the
14
board shall annually include in its report to the Speaker
f4
Currency or by vote of their directors, and the assets of
15
of the House of Representatives a review of the decisions
1*"'
member banks which have been ordered closed by the
16
of the committee for the preceding year and an explanation
10
appropriate State authorities.
17
of the reasons for such decisions and the results thereof, so
1 ‘
16
far as they may be ascertained.
l*
bers of the Federal Open Market Committee created by
If any Federal reserve bank shall
“ (b) The Comptroller of the Currency and the mem-
19
“ (c) The time, character, and volume of purchases
^9
section 12A of this Act shall constitute the directors of
20
and sales in the open market shall be governed with a
29
the corporation.
21
view to accommodating commerce and business and with
21
be the chairman of the board of directors of the corporation.
22
regard to their bearing upon the general credit situation of
22
“ (c) The capital stock of the corporation shall be
23
the country.
Such purchases and sales shall include all
2°
divided into shares of $100 each.
24
paper described in section 14 of this Act as eligible for
2'1
the corporation shall be of two classes, class A and class
25
open market operations.
2^
B.
The Comptroller of the Currency shall
Certificates of stock of
Class A stock shall be held by member banks only and
14
1
shall he entitled to prior payment of dividends out of net
2
earnings, to the extent of 30 per centum of such net
3
earnings in any one year, after payment of all expenses
4
of the corporation, but such stock shall have no vote at
5
meetings of stockholders.
6
Federal reserve banks only and shall not lie entitled to
7
the payment of dividends.
8
shall subscribe to shares of class B stock in the corpora-
9
tion to an amount equal to one-fourth of the surplus of
10
such bank on December 31,1931, and its subscriptions shall
11
be accompanied by a certified check payable to the Comp-
12
troller of the Currency in an amount equal to one-half of
13
1 per centum of such subscription.
14
subscription shall be subject to call from time to time by
15
the board of directors upon ninety days’ notice and annual
16
subscriptions to such stock shall be made by each such bank
17
in an amount equal to one-fourtli of the annual increase
18
of such surplus.
Class B stock shall be held by
Every Federal reserve bank
The remainder of such
19
“ (d) Every member bank shall subscribe to the class
20
A capital stock of the corporation in an amount equal to
21
one-half of 1 per centum of its total net outstanding time
22
and demand deposits on the last call date in the yeai 19al
23
One-half of such subscription shall be paid in full within
24
ninety days after receipt of notice from the chairman of
25
the board of directors of the corporation; and the remainder
1
of such subscription shall be subject to call from time to
2
time by the board of directors of the corporation.
o
“ (c ) The amount of the outstanding class A stock of
4
the corporation held by member banks shall be annually
5
adjusted as hereinafter provided as member banks increase
6
their time and demand deposits or as additional
7
come members, and such stock may be decreased m amount
8
as member banks reduce their time and demand deposits or
9
cease to lie members.
banks
be-
Shares of the capital stock of the
10
corporation owned by member banks shall not be transferred
11
or hypothecated. When a member bank increases its lime
12
and demand deposits, it shall at the beginning of each calen-
13
dar year subscribe for an additional amount of capital stock
14
of the corporation equal to one-half of 1 per centum of such
15
increase in deposits.
16
tional stock shall be paid for at the time of the subscription
17
therefor and the balance shall he subject to call by the boaid
18
of directors of the corporation.
19
in the corporation at any time after the organization theieof
20
shall be required to subscribe for an amount of class A capital
21
stock equal to one-half of 1 per centum of the time and
22
demand deposits of the applicant bank, paying therefor its
23
par value plus one-half of 1 per centum a month from the
24
period of the last dividend on the class A stock of the cor-
25
poration.
One-half of the amount of such addi-
A bank applying for stock
When the capital stock of the corporation shall
16
X have been increased, either on account of the increase of the
2
time and demand deposits of member banks or on account
3
of the increase in the number of member banks, the hoard
4
. of directors of the corporation shall cause to be executed a
5
certificate to the Comptroller of the Currency showing the
6
increase in capital stock of the corporation, the amount paid
7
in, and by whom paid.
3
time and demand deposits it shall surrender, not later than
9
the 1st day of January thereafter, a proportionate amount
10
of its holdings in the capital stock of the corporation, and
11
when a member bank voluntarily liquidates it shall surrender
12
all its holdings of the capital stock of the corporation and be
13
released from its stock subscription not previously called.
14
The shares so surrendered shall be canceled and the mem-
15
ber bank shall receive in payment therefor, under regula-
10
tions to be prescribed by the Federal Eeserve Board, a sum
17
equal to its cash-paid subscriptions on the shares surrendered
18
and its proportionate share of earnings not to exceed one-half
19
of 1 per centum a month, from the period of the last divi-
20
dend on such stock, but not above the book value of such
21
earnings, less any liability of such member bank to the
22
corporation.
When a member bank reduces its
23
“ (f) If any member bank shall be declared insolvent,
24
the stock held by it in the corporation shall be canceled,
25
without impairment of the liability of such bank, and all
17
1
cash-paid subscriptions on such stock, with its proportionate
2
share of earnings not to exceed one-half of 1 per centum
3
per month from the period of last dividend on such stock
4
but not above the book value of such earnings, shall be first
5
applied to all debts of the insolvent bank to the corpora-
6
tion, and the balance, if any, shall be paid to the receiver
7
of the insolvent bank.
8
corporation is reduced, either on account of a reduction in
9
time and demand deposits of any member bank or on account .
Whenever the capital stock of the
10
of the liquidation or insolvency of such bnnk, the board
11
of directors shall cause to be executed a certificate to the
12
Comptroller of the Currency showing such reduction of
13
capital stock and the amount repaid to such hank.
14
“ (g) When the minimum amount of class A and class
15
B capital stock required by this Act shall have been sub-
16
scribed and paid for by such banks, the Comptroller shall
17
designate five reserve banks to execute a certificate of organi-
18
zation, and thereupon the banks so designated shall, under
19
their seals, make an organization certificate which shall
20
specifically state the name of the corporation and the city
21
and State in which the corporation is to he located, the
22
amount of capital stock and the number of shares into
23
which the same is divided, the name and place of doing
24
business of each bank executing such certificate and of all
S. 4115
■2
18
19
1
banks which have subscribed to the capital stock of such
1
“ Fifth. To appoint by its board of directors such offi-
2
corporation, the number of shares subscribed by each such
2
cers and employees as are not otherwise provided for in this
3
bank, and the fact that the certificate is made to enable the
8
section, to define their duties, require bonds of them and
4
banks executing the same and all banks which have sub-
4
fix the penalty thereof, and to dismiss at pleasure such
5
scribed or may thereafter subscribe to such capital stock to
5
officers or employees.
6
avail themselves of the advantages of this section.
6
“ Sixth. To prescribe by its board of directors, by-laws
7
not inconsistent with law, regulating the manner in which
7
“ (h) Such organization certificate shall be acknowl-
8
edged before a judge of a court of record or a notary public
8
its general business may be conducted, and the privileges
9
and shall, together with the acknowledgment thereof au-
9
granted to it by law may be exercised and enjoyed.
10
thenticated by the seal of such court or notary public, be
10
“ Seventh. To exercise by its board of directors, or duly
11
transmitted to the Comptroller of the Currency, who shall
11
authorized officers or agents, all powers specifically granted
12
file, record, and carefully preserve the same in his office.
12
by the provisions of this section and such incidental powers
13
“ (i) Upon the filing of such certificate with the
13
as shall be necessary to carry out the powers so granted.
14
Comptroller of the Currency as aforesaid, the said corpora^
14
“ (j) The board of directors shall administer the af-
15
tion shall become a body corporate and as such shall have
15
fairs of the corporation fairly and impartially and without
16
power—
16
discrimination in favor of or against any member bank or
*
4
17
“ First. To adopt and use a corporate seal.
17
banks and shall, subject to the provisions of law and the
18
“ Second. To have succession for a period of twenty
18
orders of the Federal Eeserve Board, extend to each bank
19
years from its organization unless it is sooner dissolved by
19
which is ordered closed by the Comptroller of the Currency,
20
an Act of Congress, or unless its franchise becomes forfeited
20
or by vote of its directors, and to each member bank which is
21
by some violation of law.
21
ordered closed by the appropriate State authorities, such
22
“ Third. To make contracts.
22
accommodations as may be safely and reasonably made with
23
“ Fourth. To sue and be sued, complain and defend,
23
due regard for the claims and demands of other member
24
banks.
24
in any court of law or equity.
20
]
“ (k) Whenever any national bank shall, he declared
1
assets of insolvent or closed banks or in securities of the
2
insolvent or placed in the hands of a receiver it shall be
2
Government of the United States.
3
the duty of the Comptroller of the Currency to appoint a
4
valuation committee of three members which shall include
4
the assets of banks in the hands of receivers on the date of
5
the receiver of such bank, a member to be named by the
5
its organization, hut on the same conditions and terms as are
6
hoard of directors of such bank, and a person to be chosen
6
applicable in the case of assets of banks which may fail or
7
by the receiver and the member named by the board of
7
be closed after such date.
8
directors.
The receiver shall he chairman of the commit-
8
be construed to prevent the corporation from making loans
9
tee, and the committee shall at once proceed to make a pre-
9
to banks ordered closed by the Comptroller of the Currency
“ (1) The corporation may, in its discretion, purchase
Nothing herein contained shall
10
liminary valuation of the assets of the hank.
Thereupon
10
or by vote of their directors, or to member hanks ordered
11
the receiver shall notify the Comptroller of the Currency
11
closed by the appropriate State authorities, or from entering
12
of the valuation agreed upon and the Comptroller shall make
12
into negotiations to secure the reopening of such hanks.
13
a formal tender of such assets to the corporation which
13
“ (m) Member banks organized under the law of any
14
may purchase the same in whole or in part as its board of
State which are now or may hereafter become insolvent or
15
directors may determine. It shall he the duty of the cor-
15 suspended shall be entitled to offer their assets for sale to
16
poration to proceed to realize as rapidly as possible, having
Hi
the corporation upon receiving permission in accordance with
17
due regard to the conditionof credit in the district in which
17
law from the banking superintendent or commissionei of
18
such bank is located, the assets so purchased, and if the
IS
the State, under the same conditions as are applicable to the
19
amount realized from such assets exceeds the sum paid
19
gale of assets of insolvent or suspended banks under the law
20
therefor, the corporation shall make an additional payment
20
of the State in which such member bank is located.
21
to the receiver of the bank equal to the amount of such
21
“ (n) For a period of not to exceed two years after
22
excess, if any, after deducting a liquidation fee of 6 per
22
this section takes effect the corporation is authorized to pur-
23
centum of the sum thus realized. Money belonging to the
23
chase and for a period of five years thereafter to hold and
24
corporation over and above such funds as may be required
21
liquidate the assets of closed State banks, to make loans to
25
for current operating expenses shall be kept invested in the
25
such banks and to enter into negotiations to secure the re-
23
22
1
opening of such banks under the same terms and conditions
1
of its capital, its notes, debentures, bonds, or other such obli-
2
as are applicable in the case of national banks and member
2
gations, to be redeemable at the option of the corporation
3
banks; except that (1) no such purchase or loan shall be
3
before maturity in such manner as may be stipulated in
4
made and no such negotiations shall be entered into unless
4
such obligations, and to bear such rate or rates of interest,
5
it is permitted under the laws of the State in which such
5
and to mature at such time or times as may be determined
6
State bank is located, and (2) the amount realized upon the
6
by the corporation:
7
sale of the assets of any such State bank in excess of the
7
on a discount basis short-term obligations payable at maturity
8
amount paid for such assets by the corporation shall, after
8
without interest.
9
deducting the amount of the liquidation fee authorized to be
9
such obligations of the corporation may be secured by assets
10
charged by the corporation under paragraph (k), be paid
10
of the corporation in such manner as shall be prescribed
11
into the Treasury of the United States as miscellaneous
11
by its board of directors.
12
receipts.
For the purpose of carrying out the provisions of
12
for sale at such price or prices as the corporation
13
this paragraph, there is hereby authorized to be appropriated
13
determine.
14
the sum of $200,000,000, which shall be paid by the Secre-
14
empowered to dispose of any promissory note of any receiver
15
tary of the Treasury to the corporation in such amounts and
15
evidencing loans made by the corporation, and to pledge
16
at such times as the board of directors thereof may require.
16
such receivers’ notes and any of the corporation’s assets as
17
The sums so paid to the corporation shall be used exclusively
17
collateral security to the corporation’s promissory notes,
18
for such purposes.
As used in this paragraph the term
18
under such terms and conditions as may be agreed upon
19
4State bank ’ shall include any savings bank, trust com-
19
by the corporation, provided that the obligations so incurred,
20
pany, or other banking institution, authorized to accept
20
together with all other outstanding obligations of the corpo-
21
deposits, organized under the laws of any State, and which
21
ration, shall not he in excess of four times the amount of its
22
is not a member of the Federal reserve system.
22
capital.
Provided,
That the corporation may sell
The notes, debentures, bonds and other
Such obligations may be offered
ma^y
The corporation is further authorized and
23
“ (o) The corporation is authorized and empowered
23
“ (p) All notes, debentures, bonds, or other such obliga-
24
to issue and to have outstanding at any one time in an
24
tions issued by the corporation shall be exempt, both as to
25
amount aggregating not more than four times the amount
25
principal and interest, from all taxation (except estate and
r
24
25
1
inheritance taxes) now or hereafter imposed by the United
L
2
States, bv any Territory, dependency, or possession thereof,
2
Federal Reserve A ct, as amended, is amended to read as
3
or by any State, county, municipality, or local taxing author-
3
follow s:
4
ity.
The corporation, including its franchise, its capital,
4
“ A n y Federal reserve bank may make advances to its
5
reserves, and surplus, and its income, shall be exempt from
5
member banks on their promissory notes for a period of not
0
all taxation now or hereafter imposed by the United States,
exceeding fifteen days at rates to be established by such Fed-
7
by any Territory, dependency, or possession thereof, or by
6
/
7
8
any State, county, municipality, or local taxing authority,
8
least 1 per centum higher than the rediscount rate then in
9
except that any real propert}^ of the corporation shall be
9
force at such reserve bank, subject to the review and deter-
10
subject to State, Territorial, county, municipal, or local tax-
10
mination of the Federal Reserve Board, provided such prom-
11
ation to the same extent according to its value as other real
11
issory notes are secured by such notes, drafts, bills of
12
property is taxed.
12
exchange, or bankers’ acceptances as are eligible for redis-
“ (q) In order that the corporation may be supplied with
13
count or for purchase by Federal reserve banks under the
such forms of notes, debentures, bonds, or other such obliga
14
provisions of this A ct, or by the deposit or pledge of bonds
tions as it ma}r need for issuance under this A ct, the Secre-
15
oi* notes of the United States.
10
tary of the Treasury is authorized to prepare such forms as
10
which any such advance has been made shall, during the
17
shall be suitable and approved by the corporation, to be held
17
life or continuance of such advance, and despite an official
18
in the Treasury subject to delivery, upon order of the corpo-
18
warning of the reserve bank of the district or of the Federal
19
ration.
The engraved plates, dies, bed pieces, and other
19
Reserve Board to the contrary, increase its outstanding
20
material executed in connection therewith shall remain in the
20
loans made upon collateral security, or made to the mem-
21
custod}^ of the Secretary of the Treasury.
The corporation
21
bers of any organized stock exchange, investment house,
22
shall reimburse the Secretary of the Treasury for any
22
or dealer in securities, upon any obligation, note, or bill,
23
expenses incurred in the preparation, custody, and delivery
23
secured
24
of such notes, debentures, bonds, or other obligations.”
2!
an d/or carrying investment securities
3 3
14
Se c . 11. The seventh paragraph of section 13 of the
eral reserve bank, which rates shall in all cases be at
or
unsecured,
for
the
If any member bank to
purpose
of
purchasing
(except obligations
26
27
1
of the United States)
such advance shall be immediately
1
bank shall conduct negotiations of any kind with the officers
2
due and payable, and such member bank shall be ineligible
2
or representatives of any foreign bank or banker without
3
as a borrower at the reserve bank of the district upon fifteen-
3
first obtaining the permission of the Federal Eeserve Board.
4.
day paper for such period as the Federal Eeserve Board
4
The Federal Eeserve Board shall have the right, in its dis-
5
shall determine.
The Federal Eeserve Board shall have
5
cretion, to be represented in any conference or negotiations
0
power from time to time in its discretion by unanimous vote
6
by such representative or representatives as the board may
7
designate.
V
7
of its members to suspend the provisions of this paragraph
A full report of all conferences or negotiations,
g
in whole or in part, whenever in its opinion the public
8
and all understandings or agreements arrived at or trans-
9
interest shall call for such action.
Each such suspension
9
actions agreed upon, and all other material facts appertain-
IQ
shall be for a period of ninety days and may be renewed
10
ing to such conferences or negotiations, shall be filed with the
Xi
for one additional period of ninety days upon unanimous vote
11
Federal Eeserve Board in writing and signed b}^ all repre-
12
of the members of the board.”
12
sentatives of the Federal reserve bank attending such confer-
13
Se c . 1 2 . Section 14 of the Federal Eeserve A ct, as
13
ences or negotiations regardless of whether or not the Fed-
14
amended, is amended by adding at the end thereof the
14
eral Eeserve Board shall be represented at such conferences
15
following new paragraph:
15
or negotiations.”
l(j
Se c . 13. Section 19 of the Federal Eeserve A ct, as
Subject to the powers conveyed to and be-
10
17
stowed upon the Federal Open Market Committee by sec-
17
18
tion 1 2 A
of this A ct, the Federal Eeserve Board shall
18
19
exercise special supervision and control over all relation-
19
ing of this A ct shall comprise all deposits payable within
20
ships and transactions of any kind entered into by any Fed-
20
thirty days, and ‘ time deposits 9 shall comprise all deposits
21
eral reserve bank with any foreign bank or banker, or with
21
payable after thirty days, all savings accounts and certifi-
22
any group of foreign banks or bankers, and all such rela-
22
cates of deposit which are subject to not less than thirty days’
2S
tionships and transactions shall be subject to such regula-
23
notice before payment, and all postal-savings deposits.
24
tions, conditions, and limitations as the board may prescribe.
24
“ (b) E very bank, banking association, or trust com-
25
A o officer or other representative of any Federal reserve
25
pany which is or which becomes a member of any Federal
“ (g )
amended, is amended to read as follows:
“ S e c . 19.
(a)
‘ Demand deposits 9 within the mean-
29
28
1
reserve bank shall establish and maintain reserve balances
1
its corporate charter it may, upon the affirmative vote of
2
with its Federal reserve bank as follow s:
2
five members of the Federal Reserve Board, hold and
3
“ (1 ) If not in a reserve or central reserve city as now
3
maintain the reserve balances specified in paragraph
4
or hereafter defined, it shall hold and maintain with the
4
hereof.
5
Federal reserve bank of its district an actual net balance
5
6
equal to not less than 7 per centum of the aggregate amount
6
defined it shall hold and maintain with the Federal reserve
7
of its demand and time deposits: Provided, That the said
7
bank of its district an actual net balance equal to not less
8
net balance maintained against time deposits shall be 3 per
8
than 13 per centum of the aggregate amount of its demand
9
centum during the calendar year 1932, and shall be increased
9
and time deposits: Provided, That the said net balance
10
at the rate of four-fifths of 1 per centum on the 1st day of
10
hereinbefore required to.be maintained against time deposits
11
January in each calendar year thereafter until it shall
11
shall be 3 per centum during the calendar year 1932, and
12
equal 7 per centum as hereinbefore prescribed.
12
shall be increased at the rate of 2 per centum on the 1st
“ (3 )
(1 )
If in a central reserve city as now or hereafter
13
“ ( 2) If in a reserve city as now or hereafter defined
13
day of January in each calendar year thereafter until it
14
it shall hold and maintain with the Federal reserve bank
14
shall equal 13 per centum as hereinbefore prescribed: Pro-
15
of its district an actual net balance equal to not less than 10
15
vided further, That if located in the outlying districts of
10
per centum of the aggregate amount of its demand and time
10
a central reserve city or in territory added to such a city by
17
deposits: Provided, That the said net balance hereinbefore
17
the extension of its corporate charter it may, upon the
18
required to be maintained against time deposits shall be 3
18
affirmative vote of five members of the Federal Reserve
19
per centum during the calendar year 1932, and shall be
19
Board, hold and maintain the reserve balances specified
20
increased at the rate of 1-f- per centum on the 1st day of
20
in paragraphs (1 ) and (2 ) hereof.
2'
January in each calendar year thereafter until it shall equal
21
22
10 per centum as hereinbefore prescribed: Provided further,
22
State bank or trust company which is not a member bank a
23
That if located in the outlying districts of a reserve city
23
sum in excess of 10 per centum of its own paid-up capital
21
or in territory added to such a city by the extension of
24
and surplus.
“ (c)
No member bank shall keep on deposit with any
No member bank shall act as the medium or
30
31
1
agent of a nonmember bank in applying for or receiving dis-
1
time make any new loans or shall pay any dividends unless
2
counts from a Federal reserve bank under the provisions of
2
and until the total balance required by law is fully restored.
3
this A ct except by permission of the Federal Reserve Board.
3
“ (f) No member bank shall sell or transfer to another
4
member bank, or to a nonmember bank, private banking
4
“ (d)
No member bank shall act as the medium or
5
agent
of any
nonbanking
corporation
or
individual
in
5
house, or banker, any balance standing to its credit upon
6
making loans protected by collateral security; and no mem-
6
the books of the Federal reserve bank of its district in excess
7
ber bank shall make loans or discount paper for any
7
of the balances required by this section unless the Federal
8
corporation or individual if the proceeds of such trans-
8
Reserve Board shall have first authorized by general order
9
action are to be used directly or indirectly for the purpose
9
the making of such sales or transfers within such district
10
of making loans protected by collateral security in favor
10
or between such district and another Federal reserve dis-
11
of any investment banker, broker, member of any stock
11
trict, but no such sale or transfer shall be made by any such
12
exchange, or any dealer in securities.
E very violation of
12
bank without first charging and reserving a fee to be fixed
13
this provision by any member bank shall be punishable by
13
by the Federal Reserve Board on the basis of the rate of
14
a fine of not less than $100 per day during the continuance
14
discount then charged upon ninety-day paper by the Federal
15
of such violation, but it shall be a good defense that the
15
reserve bank of the district in which the bank making such
10
borrower at the time of obtaining such loan or discount from
16
sale or transfer is located.
17
a member bank made a sworn statement that the proceeds
17
“ (g ) The Federal Reserve Board shall have power to
18
of the transaction would not be used for such purpose.
18
The required balance carried by a member bank
19
suspend all dealings in reserve balances for such period
\
as it may deem best. In estimating the reserve balances
20
with a Federal reserve bank may under the regulations, and
20
required by this A ct, the net difference of amounts due to
21
subject to such penalties as may be prescribed by the Fed-
21
and from other banks shall be taken as the basis for ascer-
22
eral Reserve Board, be checked against and withdrawn by
22
taining the deposits against which required balances with
23
such member bank for the purpose of meeting existing
23
Federal reserve banks shall be determined; and the liability
24
liabilities: Provided , however, That no bank shall at any
24
created by every repurchase or other similar agreement
19
“ (e)
32
1
entered into by a member bank shall be added to such net
2
difference
3
paragraph.
4
“ (h)
as
ascertained
under
the
provisions
of
this
National banks, or banks organized under local
5
laws, located in Alaska or in a dependency or insular
6
possession or any part of the United States outside the
7
continental United States may remain nonmember banks
8
and shall in that event maintain reserves and com ply with
9
all the conditions now provided by law regulating them ; or
10
said banks may, with the consent of the board, become
11
member banks of any one of the reserve districts and shall
12
in that event take stock, maintain reserves, and be subject
13
to all the other provisions of this A c t.”
14
15
Se c . 14. Section 24 of the Federal Reserve A ct, as
amended, is amended to read as follow s:
10
“ S e c . 24. A n y national banking association may make
17
loans secured by first lien upon improved real estate, includ-
18
ing improved farm land, situated within its Federal reserve
19
district or within a radius of one hundred miles of the place
20
in which such bank is located, irrespective of district lines.
21
A loan secured by real estate within the meaning of this
22
section shall be in the form of an obligation or obligations
23
secured by mortgage, trust deed, or other such instrument
24
upon real estate when the entire amount of such obligation
25
or obligations is made or is sold to such association.
The
33
1
amount of any such loan shall not exceed 50 per centum
2
of the actual value of the real estate offered for security,
3
but no such loan upon such security shall be made for a
4
longer term than five years.
5
revised by the Comptroller of the Currency at the time
6
of each examination of the bank making the loan and he
7
shall have power to order changes therein and to require
8
the adjustment of loans to such revised valuations.
9
such bank may make such loans in an aggregate sum, in-
10
eluding in such aggregate any such loans on which it
11
is liable as indorser or guarantor or otherwise, equal to
12
15 per centum of the amount of the capital stock of such
13
association actually paid in and unimpaired and 15 per
1-1
centum of its unimpaired surplus fund, or to one-half of
15
its time deposits, at the election of the association, subject
16
to the general limitation contained in section 5200 of the
17
Revised Statutes.
18
cured loans whose eventual safety depends upon the value
19
of real estate shall be counted for the purposes of this section
20
as real-estate loans.
21
moneys deposited therein as time deposits to the loans herein
22
authorized and the balance of such time deposits shall be
23
invested in property and securities in which savings banks may
24
invest under the law of the State where such national bank
io
S. 4115
3
Such valuations shall be
Any
Investments in bank premises and unse-
Every such bank may apply the
35
34
1
is situated, or where there is no such law relating to invest-
1
two years from such date, to comply fully with the provisions
2
ments by savings banks, in such property and securities as
2
of this section, and every national banking association here-
3
may be specified by the Comptroller of the Currency:
3
after organized and every State bank or trust company
4
Provided, That every member bank shall be required to
4
hereafter becoming a member of the Federal reserve system
5
report its investments in, or holdings of, any such property
5
shall comply with the provisions of this section from the date
6
of its organization or admission to membership, as the case
7
may be.”
*
6
and securities at an aggregate valuation which shall not
7
exceed the aggregate market value thereof at the time such
8
reports to the Comptroller or to the Federal Eeserve Board
8
S e c . 15. Paragraph “ Seventh ” of section 5136 of
9
are made: Provided further, That the reserve against time
9
the Revised Statutes, as amended, is amended to read as
10
deposits required by section 19 of this A ct shall be counted
10
11
as a corresponding part of such investments.
A ll the prop-
11
“ Seventh. To exercise by its board of directors or
12
erty of any insolvent national bank acquired under this
12
duly authorized officers or agents, subject to law, all such
13
section shall be applied by the receiver thereof in the first
13
incidental powers as shall be necessary to carry on the busi-
14
place ratably and proportionately to the payment in full
14
ness of banking; by discounting and negotiating promissorv
I f'
of its time deposits.
15
notes, drafts, bills of exchange, and other evidences of debt;
10
heretofore to receive time deposits and to pay interest on
16
by receiving deposits; by buying and selling exchange, coin,
17
the same, but the rate of interest which such banks may pay
17
and bullion; by loaning money on personal security; and
18
upon such time deposits or other deposits shall not exceed
18
by obtaining, issuing, and circulating notes according to
19
the maximum rate authorized by law to be paid upon such
19
the provisions of this title; and generally by engaging in all
20
deposits by State banks or trust companies organized under
20
forms of banking business and undertaking all types of
21
the
21
banking transactions that may, by the laws of the State
22
association is located.
22
in which such bank is situated, be permitted to banks of
laws
of the
•
&
Such banks may continue hereafter as
State
wherein
such
national
banking
v
7
follows:
23
“ Every national banking association and every mem-
23
deposit and discount organized and incorporated under the
24
ber bank which is in existence at the date this section as
. 24
laws of such State, except in so far as they may be for-
25
amended takes effect shall be required, within a period of
25
bidden by the provisions of the National Bank A ct, as
36
37
1
amended, the Federal Reserve A ct, as amended, or any
2
other laws of the United States.
3
chasing and selling investment securities shall hereafter
4
he limited to purchasing and selling such securities without
5
recourse, solely upon the order, and for the account of,
6
customers, and in no case for its own account, and no such
7
association shall underwrite any issue of securities; except
8
that any such association may purchase and hold for its
9
own account investment securities to such an amount and
10
of such kind as may be by regulation prescribed by the
11
Comptroller of the Currency, but in no event shall the
12
total amount of such investment securities of any one obligor
13
or maker held by such association exceed 10 per centum of
14
the total amount of such issue outstanding, nor shall the total
15
amount ofthe securities so purchased and held for its own
16
account at any time exceed 15 per centum of the amount
17
of the capital stock of such association actually paid ih
18
and unimpaired and 25 per centum of its unimpaired sur-
19
plus fund.
20
permitted by law, nothing herein contained shall authorize
21
the purchase or holding of any shares of stock of any corpo-
The business of pur-
E xcept as hereinafter provided or otherwise
22
ration by any such association.
23
tained as to the purchasing and selling of investment securi-
24
ties shall not apply to obligations of the United States, or ■
25
general obligations of any State or of any political subdivi-
The limitations herein con-
1
sion thereof, or obligations issued under authority of the
2
Federal Farm Loan A c t: Provided , That in carrying on
3
the business commonly known as the safe deposit business
4
no such association shall invest in the capital stock of a
5
corporation organized under the law of any State to conduct
6
a safe deposit business in an amount in excess of 15 per
7
centum of the capital stock of such association actually
8
paid in and unimpaired and 15 per centum of its unimpaired
9
surplus.”
10
11
S e c . 16. Section 5138 of the Revised Statutes, as
amended, is amended to read as follow s:
12
“ Se c . 5138. A fter this section as amended takes effect,
13
no national banking association shall be organized with a
T!
less capital than $100,000, except that such associations
U>
with a capital of not less than $50,000 may be organized
10
in any place the population of which does not exceed six
17
thousand inhabitants, and except that such associations
18
formed for the purpose of succeeding to the business of an
19
existing bank may, in the discretion of the Comptroller of
20
the Currency, be organized with a less capital than $50,000,
21
but in no event less than $25,000.
22
shall be organized in a city the population of which exceeds
23
fifty thousand persons with a capital of less than $200,000,
24
except that in the outlying districts of such a city where the
25
State laws permit the organization of State banks with a
No
such association
39
38
1
capital of $100,000 or less, national banking associations
1
prior holder of such shares, and no change shall be made
2
now organized or hereafter organized may, with the approval
2
in the articles of association by which the rights, remedies,
3
of the Comptroller of the Currency, have a capital of not
3
or security of the existing creditors of the association shall
4
less than $100,000 .”
4
be impaired.”
5
6
Se c . 17. Section 5319 of the Eevised Statutes, as
amended, is amended to read as follows:
5
Se c . 18. From and after January 1, 1933, no director,
6
officer, or employee of any national bank or member bank
7
“ Se c . 5139. After this section as amended takes ef-
7
shall be
8
feet, the capital stock of each association shall be divided
8
or corporation engaged primarily in the business of pur-
9
into shares of $100 each and be deemed personal property
9
chasing, selling, or negotiating securities, or
10 .rand
transferable
vnii ilur<
rr” .t. on the
••* books
•••-•• ■of the
■ association in such
10
ployee of any such unincorporated association or corpora-
11
manner as may be prescribed in the by-laws or articles of
11
tion, or of any individual or partnership engaged in such
12
association; and any such association which has certificates
12
business, or (c)
13
of stock outstanding on the date this section as amended
13
poration organized for any purpose whatsoever which shall
14
takes effect which do not com ply with the provisions of
14
make loans secured by collateral to any corporation other
lf>
this section as amended shall, within two years after such
lb
than its own subsidiaries, or to any individual, association
16
date, issue new certificates in compliance with such pro-
16
or partnership; and no national bank or member bank shall
17
visions.
N o certificate representing the stock of any such
17
perform the functions of a correspondent bank on behalf
18
association shall represent the stock of any other corporation,
16
of any such individual, partnership, unincorporated asso-
19
nor shall the ownership, sale, or transfer of any certificate
19
ciation or corporation; and no such individual, partnership,
20
representing the stock of any such association be condi-
20
unincorporated association or corporation shall perform the
21
tioned in any manner whatsoever upon the ownership,
21
functions of a correspondent for any national bank or mem-
22
sale, or transfer of a certificate representing the stock of any
22
ber bank or hold on deposit any funds on behalf of any
23
other corporation.
Every person becoming a shareholder
23
national bank or member bank.
24
by transfer as permitted by this section shall in propor-
24
25
tion to his shares succeed to all the rights and liabilities of the
25
(a)
an officer of any unincorporated association
(b)
an em-
a director, officer, or employee of a cor-
Se c . 19. Section 5144 of the Eevised Statutes, as
amended, is amended to read as follow s:
40
41
1
" Sec . 5144. In all elections of directors and in de-
2
ciding all questions at meetings of shareholders, each share-
2
withholdsuch permit as the public interest may require but
8
holder shall be entitled to one vote on each share of stock
3
no such permit shall be granted except upon the following
4
actualfy owned by him as the result of bona fide purchase,
4
conditions:
5
gift, or inheritance and no shareholder who shall become
5
(a) Every such affiliate, association, corporation, or
6
such through nominal transfer, or ownership on behalf
6
partnership shall, at the time of making the application
7
of another, shall cast such vote.
7
for such permit, enter into an agreement with the Comp-
8
tion, or partnership which is the owner of more than
per
8
troller of the Currency (1 ) to receive at such periodical
0
centum of the stock of any such national bank and no officer,
9
intervals as shall be prescribed by the Comptroller, on dates
10
director, or employee of such corporation, association, or part-
10
identical with those fixed for the examination of national
11
nership, shall cast a ballot in such elections or meetings either
11
banks, examiners representing and acting for the Comp-
12
on shares of stock owned by the corporation or by such offi-
12
troller who shall make an examination of its financial
13
cer, director, or employee.
Shareholders may vote by proxies
13
condition with the same degree of care as in the case of
14
duly authorized in writing; but no officer, clerk, teller, or
14
an examination of a national bank, such examination to
15
bookkeeper of such bank shall act as proxy; and no share-
15
be at the expense of the affiliate, corporation, association,
16
holder whose liability is past due and unpaid shall be allowed
16
or partnership so examined; (2 ) that the report of the exam-
17
to vote.”
17
iner shall set forth all the facts ascertained by the examina-
Ho corporation, associa10
J Federal Eeserve Board may, in
its discretion, grant or
18
Sec . 20. Notwithstanding the provisions of section
18
tion and shall include a statement of the name, location,
19
5144 of the Bevised Statutes, as amended by this Act, any
19
capital, surplus, and undivided profits of each bank in which
20
affiliate, or any association, corporation, or partnership other
20
the applicant owns stock, the number of shares so owned,
21
than an affiliate, which owns or controls shares of stock in
21
the par and book value of such shares, the number of
22
any national bank may make application to the Federal
22
shares of bank stock acquired and sold since the last exam-
23
Eeserve Board for a voting permit entitling it to cast one
23
ination, and other assets of such affiliate, corporation, asso-
24
vote at all elections of directors of such national bank on
24
ciation, or partnership (including under separate headings
25
each share of stock actually owned or controlled by it.
25
obligations of the United States, and the value and nature
The
42
43
1
of other securities owned) ; and (3) that the Comptroller
1
stocks held or owned by such affiliate, association, corpora-
2
may examine each national bank owned or controlled by
2
tion, or partnership (but sums advanced during the years
3
such affiliate, association, corporation, or partnership, both
3
1931 and 1932 for the replacement of capital in banks
4
individually and in conjunction with others so owned or
4
owned by such affiliate, association, corporation, or partner-
5
controlled, and may require publication periodically of indi-
5
ship, or for losses incurred or charge-offs made by it during
6
vidual or consolidated statements of condition of such bank;
6
those years, may be counted, up to
(b) Every such affiliate, association, corporation, or
7
aggregate par value of bank stocks held or owned by it, as a
8
partnership shall hold free of any lien or claim thereon
8
part of such assets) ; and (2 ) shall reinvest in assets other
9
obligations of the United States in an amount equal to
10
9
than bank stock all net earnings over and above
10
per centum of the total of capital stock owned by it in any
10
per annum on the book value of its own shares outstanding
11
national bank and shall agree ( 1 ) that in the event of failure
11
until such assets shall equal the outstanding par value of bank
12
of any national hank in which it shall hold stock the stock-
12
shares owned by it: P r o v i d e d , That from and after January
13
holders’ liability accruing on account of such stock shall
13
1
14
be a first hen upon the obligations so held, and (2 ) that
14
vided for shall be increased by not less than
lh
any deficiency in such obligations due to their use in meeting
15
per annum, but at no time shall the assets held to meet any
Ifi
claims under ( 1 ) above shall be made up within ninety
16
future stockholders’ liability be less than the total assets held
17
days after such deficiency occurs;
17
by such affiliate, association, corporation, or partnership on
January 1, 1932;
7
/
10
per centum of the
6
per centum
, 1935, the 25 per centum requirement hereinbefore pro2
per centum
15
(c) Every such affiliate, association, corporation, or
18
19
partnership ( 1 ) shall possess at the time of the issuance of
19
(d) Every officer and employee of such affiliate, asso-
20
such voting permit, and shall continue to possess during the
20
elation, corporation, or partnership shall be subject to the
21
fife of such permit, free and clear of any lien, pledge, or
21
same penalties for false statement as are applicable at the
22
hypothecation of any nature, assets other than bank stock
22
time of making such statement to the officers and employees
23
which, together with the amount of the obligations of the
23
of national banks; and
24
United States hereinbefore required to be held, shall not be
24
(e) Every such affiliate, association, corporation, or
25
less than 25 per centum of the aggregate par value of bank
25
partnership shall, at the time of application for such voting
l
45
44
1
permit, ( 1 ) file a statement with the Comptroller of the
2
Currency that it does not own, control, or have any interest
3
in, or is not participating in the management or direction of,
4
any affiliate formed for the purpose of, or engaged in, the
5
issue, flotation, underwriting, public sale, or distribution
6
at wholesale or retail or through syndicate participation of
7
stocks, bonds, debentures, notes, or other securities of any
8
sort, and that during the period that the permit remains
9
in force it will not acquire any ownership, control, or
10
interest in any such affiliate or participate in the management
11
or direction thereof, or (2 ) agree that if at the time of
12
filing the application for such permit it owns, controls,
13
or has an interest in, or is participating in the management
14
or direction of, any such affiliate, it will, within two years
15
after the filing of such application, divest itself of its owner-
10
ship, control, and interest in such affiliate and will cease
17
participating in the management or direction thereof, and
18
will not thereafter, during the period that the permit remains
13
in force, acquire any further ownership, control, or interest
20
in any such affiliate or participate in the management or
21
direction thereof, and (3) agree that thenceforth it will
22
declare dividends only out of actual net earnings as indi-
23
cated by the last preceding examination made by the
24
Comptroller.
^
1
The Federal Beserve Board may, in its discretion,
2
revoke any such voting permit after giving sixty days'
3
notice by registered mail of its intention to the affiliate,
4
association, corporation, or partnership.
5
Federal Beserve Board shall have revoked any such
6
voting permit, no national bank whose stock is owned in
7
whole or in part by the affiliate, association, corporation, or
8
partnership whose permit is so revoked shall receive depos-
9
its of United States moneys, nor shall any such national *
10
bank pay any further dividend to such affiliate, association,
11
corporation, or partnership upon any shares of such bank
12
owned or controlled by such affiliate, association, corpora-
13
tion, or partnership.
V
14
15
*
Whenever the
Sec . 2 1 . Paragraph (c) of section 5155 of the Bevised
Statutes, as amended, is amended to read as follows:
16
“ (c) A national banking association may, with the
17
approval of the Federal Beserve Board, after the date this
18
paragraph as amended takes effect, establish and operate
19
new branches within the limits of the city, town, or village,
20
or at any point within the State in which said association is
21
situated, if such establishment and operation are at the time
22
permitted to State banks by the law of the State in question:
23
P r o v id e d ,
24
association to a State boundary line, the ordinary and usual
25
business of such association is found to extend into an
j
.
That, if by reason of the proximity of such an
47
46
j
adjacent State, the Federal Reserve Board may permit the
1
trict where the bank is located, or at a rate of
2
establishment of a branch or branches by such association
2
in excess of the discount rate of the Federal reserve bank in
3
in an adjacent State but not beyond a distance of fifty miles
3
the Federal reserve district where the hank is located, which-
4
from the seat of the parent bank.
4
ever may be the greater, and no more, except that where by
5
establish a branch outside of the city, town, or village in
5
the laws of any State a different rate is limited for hanks of
6
which it is situated unless it has a paid-in and unimpaired
6
issue organized under State laws, the rate so limited shall be
7
capital stock of not less than $500,000.
The aggregate
7
allowed for associations organized or existing in any such
&
capital of every national banking association and its branches
8
State under this title.
9
shall at no time he less than the aggregate minimum capital
9
of the State, or Territory, or District, the bank may take,
10
required by law for the establishment of an equal number
10
receive, reserve, or charge a rate not exceeding 7 per centum,
11
of national banking associations situated in the various places
11
or
12
where such association and its branches are situated/
12
reserve hank in the Federal reserve district where the bank
and 3 of the Act entitled “An Act
13
is located, whichever may be the greater, and such interest
14
to provide for the consolidation of national banking associa-
14
may be taken in advance, reckoning the days for which the
15
tions,” approved November 7, 1918, as amended, are
15
note, bill, or other evidence of debt has to run.”
16
amended by striking out the words “ county, city, town, or
16
Sec . 24. No national banking association or member
17
village ” wherever they occur in each such section, and
17
bank shall promise or pay to its depositors as a considera-
18
inserting in lieu thereof the words “ State, county, city,
18
tion for the maintenance of deposit balances or accounts a
19
town, or village/’
19
rate of interest in excess of one-half the rate of interest spec-
20
ified in section 5197 of the Revised Statutes, as amended,
21
and whenever such depositors are bankers who maintain
22
balances with other banks, no such association or member
13
20
21
22
Sec . 2 2 . Sections
1
No such association shall
Sec . 23. The first two sentences of section 5197 of the
Revised Statutes are amended to read as follows:
“Any association may take, receive, reserve, and
1
1
per centum
When no rate is fixed by the laws
per centum in excess of the discount rate of the Federal
23
charge on any loan or discount made, or upon any notes,
23
bank shall promise or pay for the maintenance with it of
24
bills of exchange, or other evidences of debt, interest at
24
such bankers’ balances a rate of interest in excess of the
25
the rate allowed by the laws of the State, Territory, or Dis-
25
current rate of discount of the Federal reserve bank of the
48
1
district in which the depositary bank is located, or in excess
2
of
3
smaller.
2 -J-
per centum per annum, whichever rate shall be the
4
Sec . 25. (a) The second sentence of the first para-
5
graph of section 5200 of the Revised Statutes, as amended,
6
is amended by inserting before the period at the end thereof
7
the following: “ and shall include in the case of obligations
8
of a corporation all obligations of all subsidiaries thereof.”
9
(b) Paragraph (8 ) of section 5200 of the Revised
10
Statutes, as amended, is amended by inserting before the
11
period at the end thereof a colon and the following: “ P r o -
1 2
v id e d ,
13
stock exchange or similar organization, or of any finance
14
company, securities company, investment trust, or other
15
similar institution, or of any affiliate, shall be entitled to the
10
benefits of the foregoing exceptions, but such obligations
17
shall in every case be subject to the limitations of
18
centum hereinbefore set forth in this section; except that the
19
total obligations of an affiliate shall in no case exceed the
20
said
21
stock of said affiliate actually paid in and unimpaired, which-
22
ever may he the smaller.”
That no obligation of a broker or member of any
10
10
per
per centum limitations, or the amount of the capital
23
(c) Section 5200 of the Revised Statutes, as amended,
24
is further amended by adding at the end thereof the follow-
25
ing new paragraphs:
49
1
“ The aggregate amount of the obligations (including
2
repurchase agreements) of all the affiliates of a national
3
banking association shall not at any time exceed
4
centum of the capital stock of such association actually paid
5
in and unimpaired and
6
surplus fund: P r o v i d e d , That loans collaterald by Govern-
7
ment bonds, or by bonds issued by the State in which such
8
bank is situated, or issued by any political subdivision of
9
such State, shall not be included within the foregoing limi-
10
10
per
per centum of its unimpaired
10
tations if actually owned by the borrower from such bank.
11
“ Within three years after this section as amended takes
12
effect, every affiliate shall be capitalized through the sale of
13
its own stock, which shall be paid for in full in cash upon
14
the same terms and conditions as provided in section 5140
15
of the Revised Statutes, as amended, in the case of national
16
bank stock; and no national bank shall establish or capitalize
17
an affiliate through cash or stock dividend declarations made
18
from its surplus or from undivided profits.
19
at any time during such three-year period hold, or lend upon,
20
more than
21
of the parent institution.”
22
10
No affiliate shall
per centum of the shares of the capital stock
Sec . 26. Nothing in section 5200 of the Revised Stat-
23
utes, as amended, shall be construed to permit a member
24
bank to lend to any individual or corporation upon collateral
S. 4115-----4
51
,
®ac
such report shall exhibit in
good cause shown.
'
•
neads the holdings oi tl
detail - 1 »”* * .pprov»l. b«d ■
50
t
1
security an amount in excess of
10
per centum of its capital
..
2
stock actually paid in and unimpaired and
3
of its unimpaired surplus fund, or an amount in excess of
4
the percentage of such capital and surplus fund as shall
10
per centum
.sw. i»
3
penses ef operation tar Lli
4
from time to time be designated by the Federal Reserve
6
Board in accordance with subsection (m) of section 13 of
7
the Federal Reserve Act, as amended, whichever is the
8
smaller.
It
J-t .Mil be lb. * > * »f tl,e > " '
,. f himself as to the correctness
dent of such association to satisfy lnmselt a
the same to the Comptroller.
ol tb. repo,, before transimthng
■
1
,
'
„
Th, reports «« i f
n a tio n
9
Sec . 27. Section 5211 of the Revised Statutes, as
10
amended, is amended by adding at the end thereof the fol-
11
lowing new paragraph:
12
“ Each affiliate of a national banking association shall
,,
15
than three reports during each year, in such form
16
as the Comptroller may prescribe, verified by the oath or
„
17
affirmation of the president or such other officer as may he
18
designated by the board of directors of such affiliate to
19
verify such reports, covering the condition of such affiliate
be transmitted to the Comptroller at the same time as the
24
corresponding report of the association; except that the
25
Comptroller may, in his discretion, extend such time for
Jr
obtain a full and complete knowledge of the con
^
she association .tab wbiob it is —
■
i
ri furnish any report required
which fails to make and furnish a y
1’
.
,
and any association whose president
it under this section, and anj a
• i i T this section any such report
fails to transmit as required by this section y
,otnished ta bins, -
‘
I
“
“
91
bo sobi... ta.a
«' * “ »
dap da,tag -Mob snob iailure cntinnas: I V - * *
Tba. every —
—
*
pYceeding
0r banks to an amount exceed g
5
“ “ ^ e
per centum of the
f
capital and surplus of its parent bonk shall publish its
rv
t a date and in a manner to be prescribed by
Each such report of an affiliate shall
23
80,“ " ‘B ””
t0
,,
’
...
of the association.
OTd'ti0,,S “
,o
transmission by him to the Comptroller of the Currency.
shall duiing such year require the reports of the condition
b»let *»'* —
whenever in his judgment the same are necessary m
14
21
?
,2
make and furnish to the president of the association, for
on dates identical with those for which the Comptroller
—
condition reporter Tb. C M P - * *
• l reports
renorts wi
with respect
to any such .affiha
to call for special
v
13
20
1
, enteipnse.
oheet of. the
r
5
.t XTT-* *■ —
^
2S
annually, and «v.ry
i • v -hall he so indebted to
'ta" “
53
1
an amount in excess of
per centum of the capital and
1
ing association or affiliate which shall not within one
2
surplus of its parent bank shall he required to publish its
2
hundred and twenty days after notification of the recom
3
portfolio in at least one daily newspaper issued in the place
3
mendations or suggestions of the Comptroller, based on said
4
where such bank is located within ten days after receiving
4
examination, have complied with the same to his satisfac
5
notice therefor from the Comptroller, but such publication
5
tion.
6
shall not be considered as a substitute for the annual pub-
6
given to the bank or affiliate.”
7
lication hereinbefore required.”
10
♦
Ninety days’ notice prior to such publicity shall be
7
Sec . 29. Whenever, in the opinion of the Comp
8
Sec . 28. The first paragraph of section 5240 of the
8
troller of the Currency, any director or officer of a national
9
Revised Statutes, as amended, is amended by inserting before
9
bank, or of a bank or trust company doing business in the
10
the period at the end thereof a colon and the following proviso:
10
District of Columbia, or whenever, in the opinion of a Fed
11
“ P r o v id e d , That during the period of three years after this
11
eral reserve agent, any director or officer of a member hank
12
section as amended takes effect, in making the examination
12
of his district (other than a national bank) shall have per
13
of any national bank or of any other member bank, the
13
sistently violated any law relating to such bank or trust
14
examiner shall include an examination of the affairs of all
14
company or shall have continued unsafe or unsound prac
15
affiliates of such bank, and in the event of the refusal to give
lo
tices in conducting the business of such bank or trust com
16
any information required in the course of the examination
16
pany, the Comptroller or the Federal reserve agent, as the
17
of any such affiliate, or in the event of the refusal to permit
17
case may be, shall certify the facts to the governor of the
*
f
18
such examination, all the rights, privileges, and franchises
18
Federal Reserve Board.
19
of the bank shall be thereby forfeited, if a national bank,
19
Federal Reserve Board shall serve notice upon such director
20
and if a bank or trust company organized under the law of
20
or officer to appear before a committee consisting of the
21
any State, membership in the Federal reserve bank of its
21
governor, the Comptroller of the Currency, and the Federal
22
district shall be forfeited and no notice of the termination of
22
reserve agent of the district in which such bank or trust
23
such membership shall be required.
The Comptroller of the
23
company is located to show cause why he should not be
24
Currency shall have power, and he is hereby authorized, to
24
removed from office.
25
publish the report of his examination of any national bank
25
finds that such director or officer has persistently violated any
Thereupon the governor of the
If upon such hearing the committee
54
1
such provision or has been responsible for the continuance
2
of any such unsafe and unsound practices the committee
3
may, in its discretion, by a majority vote order that lie lie
4.
removed from office.
5
served upon such director or officer and upon the bank or
6
trust company of which he is a director or officer.
7
such director or officer upon whom any such order has been
8
served as herein provided and who thereafter participates
9
in any manner in the management of such bank or trust
10
company shall be fined not more than $5,000 or imprisoned
11
not more than five years, or both.
12
A copy of each such order shall be
Any
S e c . BO. The right to alter, amend, or repeal this
13
Act is hereby7 expressly reserved.
14
paragraph, or part of this Act shall for any reason be
15
adjudged by any court of competent jurisdiction to be invalid,
16
such judgment shall not affect, impair, or invalidate the
17
remainder of this Act, but shall be confined in its operation
18
to the clause, sentence, paragraph, or part thereof directly
19
involved in the controversy in which such judgment shall
20
have been rendered.
If any clause, sentence,
2d c o n g r e s s \
1st Session J
ci A 1 1 C
Q • nt 1 l U
A B IL L
To provide for the safer and more effective use
of the assets of Federal reserve banks and
of national banking associations, to regu
late interbank control, to prevent the undue
diversion of funds into speculative opera
tions, and for other purposes.
By Mr.
G lass
Mabch 14 (calendar day, Mabch 17 ), 1932
Head twice and referred to the Committee on
Banking and Currency
t
•i
•> *< j
| r
;
»
!i
! <*'-
. . . r . rfp
/'
\
Calendar No. 6 0 4
72d CONGRESS
2d S e s s i o n
.V'.H'i.
Mr.
S.
r
4
4
1
2
IN THE SENATE OF THE U N ITED STATES
yy~)U'."Ai'■
•
.•>*> \\JV3)
Hn • h\>*. 'AlVnvKn
u1
.". »\
April 18,1932
G lass
<) .
introduced the following bill; which was read twice and referred
to the Committee on Banking and Currency
April 18,1932
Reported by Mr.
J anuary 10
G lass,
without amendment
(calendar day, J anuary 12), 1933
•
Ordered reprinted
[Showing existing law in roman, new matter in italics, and matter omitted in present law
in line type]
A B IL L
To provide for the safer and more effective use of the assets of
Federal reserve banks and of national banking associations,
to regulate interbank control, to prevent the undue diver
sion of funds into speculative operations, and for other
purposes.
1
B e it enacted b y the S en a te and H o u s e o f B ep resen ta -
2
tives o f the U n ited S tates o f A m e r ic a in C o n g ress assem bled ,
3
That the short title of this Act shall be the “ Banking Act
4
of 1932.”
5
6
Sec. 2. As used in this Act and in any provision of
law amended by this Act—
2
national bank/’ “ national
1
o r other person s exercising sim ilar fu n ction s are directors
2
banking association/’ “ member bank/’ “ board/’ “ district/’
2
o f a m em ber bank.
3
and “ reserve bank ” shall have the meanings assigned to
3
4
them in section 1 of the Federal Reserve Act, as amended.
4
a n y corporation, business trust, association, or other sim ilar
5
(b ) E x cep t where otherwise specifically provided, the
5
organization —
6
term “ affiliate ” shall include any corporation, business trust,
6
(1 )
7
association, or other similar organization—
1
(a) The terms “ bank/’
3
“
*
8
(1 )
O f which a member bank, directly or indirectly,
/
ow n s
or
controls,
d irectly
shall include
or
indirectly,
7
either a m a jo r ity o f the shares o f capital stock o f a m em ber
8
bank o r m ore than 5 0 p er centum o f the n u m ber o f shares
9
voted
owns or controls either a m ajority o f the voting shares or
10
m ore than 50 per centum o f the number o f shares voted fo r
19
preced in g election, o r controls in a n y m a n n er
11
the election o f its directors, trustees, or other persons exer-
11
o f a m a jo r ity o f the directors o f such b a n k ; o r
12
cising similar functions
preceding election, or con-
12
13
trols in any m anner the election o f a m ajority o f its directors,
18
all or substantially all the capital stock o f a m em ber bank
14
trustees, or other persons exercising similar functions; or
14
is held b y trustees.
(2 )
fo r
(2 )
the
election
of
directors
of
such
bank
at
the
the election
F o r the benefit o f w hose shareholders o r m em bers
O f which control is held, directly or indirectly,
15
Sec . 3 . (a) The fourth paragraph after “ Eighth ”
16
through stock ownership or in any other manner, by the
16
of section 4 of the Federal Reserve Act, as amended, is
17
shareholders o f a member bank who own or control either
17
amended to read as follows:
18
a m ajority o f the shares o f such bank or m ore than 5 0 p e r
19
centum o f the number o f shares voted fo r the election o f
15
**
“ Said board
o f directors
shall administer the affairs
of said bank fairly and impartially and without discrimina-
20
tion in favor of or against member bank or banks and shah
21
m ay,
22
the Federal Reserve Board, extend to each member bank
O f which either a m ajority o f the members o f its
23
such discounts, advancements, and accommodations as may
executive committee or a m ajority o f its directors, trustees,
24
be safely and reasonably made with due regard for the
20
directors o f such bank
21
trustees fo r the benefit
22
bank; or
23
(3 )
24
18
19
♦
W h ic h
”
9
at the
*
( c ) T h e term “ holding c o m p a n y affiliate
at thepreceding election,
o f the
or
by
shareholders o f any such
subject to the provisions of law and the orders of
4
5
1
claims and demands of other member banks,
the m ainte-
1
terminate such suspension or m ay renew it from time to
2
nance o f sou n d credit conditions, and the accom m odation o f
2
time.”
3
com m erce, in d u stry, and agriculture.
T he F ed era l R eserve
3
(b) The paragraph of section 4 of the Federal Reserve
4
B o a r d m a y 'prescribe regulations fu rth er defining within the
4
Act, as amended, which commences with the words “ The
5
limitations o f this A c t the conditions u n d er which discounts,
5
Federal Reserve Board shall classify ” is amended by insert-
6
advancem ents,
to
6
ing before the period at the end thereof a colon and the
7
m em ber
keep
7
following:
8
itself in form ed o f the general character and am ount o f the
8
member banks within the same F ed era l reserve district are
9
loans and investm ents o f its m em ber banks with a v iew
9
affiliated with the same holding com pany affiliate, participa-
10
tion by such member banks in any such nomination or
11
election shall be confined to one of such banks, which m ay
1^
be designated fo r
13
affiliate.”
and
banks.
accom m odations
E ach
F ed era l
m ay
reserve
be
extended
bank
shall
to
10
ascertaining w hether undue use is being m ade o f bank credit
11
fo r
12
real estate, o r com m odities, o r fo r a n y other p u rp o se in con -
13
sistent w ith the m aintenance o f sou nd credit con d ition s; and,
14
in determ ining w hether to gran t or refuse advances, redis-
the
speculative
ca rr y in g
of
or
trading
in
securities,
14
•
15
counts or other credit accom m odations, the F e d e r a l reserve
10
bank
17
chairm an o f the F e d e r a l reserve
18
F e d e r a l R e s e r v e B o a r d a n y such undue use o f bank credit
19
hy
20
W h e n e v e r , in the ju d gm en t o f the F e d e r a l R e se r v e B o a r d ,
21
a n y m em ber bank is m aking such undue use o f bank credit,
21
22
the board m a y , in its discretion, after reasonable notice and
*
23
an op p ortu n ity f o r a hearing, su spend such bank fr o m the use
24
o f the credit facilities o f the F e d e ra l reserve system and m a y
shall
any
give
m em ber
consideration
bank,
to
together
such
in form a tion .
The
bank shall rep ort to the
with
his
recom m endation.
That whenever any two or m ore
the purpose by such holding com pany
Sec. 4 . The first paragraph of section 7 of the Federal
r
15
'
11 P rovided,
j-
r
r
r
'
^
T
•*
/
rf*
»
.
Y ' r r 'j • *.
'■'O
h ' i ' l
Reserve Act, as amended, is amended, effective July 1,
\TV
•J
•
.”
*
* <■
T r
•»
7/•/*;! ! u ;
-
4
: ||
> a )?
f .
j
r
}.<i ! 0
fi
Of‘ *
-
i,'i
i
A \M\h\Vni
8
1932, to read as follows:
10
.
17
.
'
“After all necessary expenses of a Federal reserve bank
.•
TT
\
■
.
.
. %\
.
>
shall have
, ,V
18
■
19
x
\*
•
*.
• • •
•
•
V
•
,
,
•
.
^‘ '
• >
.V
*.
•' .
O
>v
been paid or provided for, the stockholders shall
'
■
...
01
],e entitled to receive an annual dividend of 6 per centum
,
....
. .
■
.
.
, ;
v . ...
j- r
on the paid-in capital stock, which dividend shall he cumula-
20
■ . ..., , ,
tive
•
.
. • ; • ,
'
.
■
•.
..
•..
£1
After the aforesaid dividend claims have been fully
•
Y
, I ,
.
A,
'
.
Yc.
81
met, the net earnings shall he paid to the United States as
.,
v
o'- V rA
0 c>*v-OP. (Y\
ir
23
franchise tax, exeept that the whole of such net earnings,
22
*
i h
•
\\
,
' ■ .•
,
. .v
q *^
24 melodmg those for the year ending December ZA-, 191-8, shah
■
. , \K
, . . . , . . n.
t
2o ^
hrto a surplus fund until it shah amount to 400 per
7
1
centum ef the subscribed eapital stoek el seek bank,- amt that
1
2
thereafter 49
eeetem el seek eet earnings shah be paid
2
shall obtain fr o m
3
iete the surplus into the surplus fund of the Federal reserve
3
banks and fu rn ish to the F e d e r a l reserve bank o f its district
4
bank.
4
and to the F e d e r a l R e se r v e B o a r d not less than three reports
5
du rin g each y e a r .
6
the F e d e r a l R e s e r v e B oard, m a y prescribe, shall be verified
7
by
8
officer as m a y be designated b y
9
such affiliate to v e r ify such reports,
fe e
All this lacks of being unanimous for the bankers is to include what will
undoubtedly be the next step in this process, namely, appointment of members
of the Federal Reserve Board by the bankers themselves rather than by the
President of the United States, with the advice and consent of the Senate.
I do not understand why the Senator did not go ahead and change the
following paragraph of the Federal reserve act so as to give all the past
proceeds from this tax to the bankers and to have then thrown in for good
measure any proceeds to be derived from the liquidation of any Federal reserve
bank in the future to these private bankers:
(1) The net earnings derived by the United States from Federal reserve
banks shall, in the discretion of the Secretary, be used to supplement the gold
reserve held against outstanding United States notes, or shall be applied to
the reduction of the outstanding bonded indebtedness of the United States
under regulations to be prescribed by the Secretary of the Treasury. (2)
Should a Federal reserve bank be dissolved or go into liquidation, any surplus
remaining, after the payment of all debts, dividend requirements as herein
before provided, and the par value of the stock, shall be paid to and become the
property of the United States and shall be similarly applied.
10
“ E a c h bank adm itted to m em bership un d er this section
each o f its affiliates other than m em ber
S u ch reports shall be in such fo r m
the oath o r affirmation o f the president or such
in fo rm a tio n
hereinafter
as
other
the board o f directors o f
p ro vid ed
and shall disclose the
fo r
as
of
dates
idcnti-
\
11
cal with those fixed, by the F ed era l R eserve Board, fo r
12
reports
13
E ach
of
the
such
condition
rep ort
of
of
an
the
affiliated
affiliate shall
m em ber
be
bank.
transm itted
as
5
Sec. 5. (a) Tke second paragraph of section 9 of the
14
herein p rovid ed
6
Federal Reserve Act, as amended, is amended by adding
15
report o f the affiliated m em ber bank, except that the F e d -
7
at the end thereof the following: “ P rovided, however, That
16
eral R e s e r v e B o a r d m a y , in its discretion, extend such time
8
nothing herein
a n y S tate m em ber
17
fo r good cause show n.
E a c h such rep ort shall contain such
9
hank from establishing and operating branches in the U n ited
IS
inform ation
ju dgm en t
10
States o r a n y d ep en d en cy or insular possession thereof or in
19
B oard
11
a n y foreig n cou n try, on the sam e term s and conditions and
20
between such affiliate and such bank and to enable the board
12
subject to the sam e limitations and restrictions as are appli-
21
to in fo r m itself as to the effect o f such
13
cable to the establishment o f branches b y national banks.”
22
affairs o f such bank.
( b) S ection 9 o f the F e d e r a l R e s e r v e A c t, as am ended,
23
be
U
15
shall
published
as
be
by
in
the
the
sam e
n ecessa ry
the
The
bank
to
time
as
of
the
the
disclose
F ed era l
fu lly
the
the
is further- a m ended b y adding at the end th ereof the follow in g
p a ra g r a p h s:
;
24
g o v ern its ow n condition reports,
R e se r v e
relations
relations u p on the
reports o f such
u n d er
corresp on din g
sam e
affiliates shall
conditions
X
16 n ew
V'"T ' "
contained shall p reven t
at
as
8
1
9
“ A n y such affiliated m em ber bank m a y be required, to
1
grap h ‘S even th 9 o f section 5 1 3 6 o f the R e v is e d Statutes, as
am ended.
2
obtain fr o m
as
2
3
in the opinion o f its F e d e r a l reserve bank or the F ed era l
3
4
Reserve. B o a r d m a y be n ecessa ry in ord er to obtain a full
4
the B a n k in g A c t o f 1 9 3 2 , no certificate representing the stock
5
and
affiliated
5
o f a n y State m em ber bank shall represent the stock o f a n y
6
m em ber bank.
S u ch additional reports shall be transmitted
6
other corporation, except a. m em ber bank, n o r shall the o w n er -
7
to the F e d e r a l reserve bank and the F e d e r a l R e se r v e B o a r d
7
ship,
8
and shall be in such fo rm
8
stock o f a n y such bank be conditioned in a n y m a n n er w h a t-
9
m a y prescribe.
9
soever upon the oivnership, sale, o r tra n sfer o f a certificate
10
any
com plete
“A n y
such
affiliate such, additional
know ledge
such
of
affiliated
the condition
of
reports
the
as the F e d e r a l R e se r v e B o a r d
m em ber
bank
which
fails
“ A f t e r three y ea r s fr o m
sale,
or
to
10
representing
m em ber bank.
tra n sfer
of
the stock o f
the date o f the enactment o f
any
any
certificate
other
representing
corporation ,
except
the
a
11
obtain fr o m
report
11
12
p rovid ed f o r b y the two precedin g p a ra gra p h s o f this section
12
13
shall be subject to a p en a lty o f $ 1 0 0 fo r each d a y d urin g
13
to
14
ivhich
the
14
p rovision s
of
15
F e d e r a l R e se r v e B o a r d , m a y be collected, b y suit o r other-
15
am ended.
W h e n e v e r the F e d e r a l R e s e r v e B o a r d shall have
16
w ise, b y the F e d e r a l reserve bank o f the district in which
16
revoked
17
such
this
17
affiliate, the F e d e r a l R e se r v e B o a r d m a y , in its discretion,
18
p a ra g ra p h a n d the tw o preced in g p a ra gra p h s o f this section,
18
req u ire a n y or all S tate m em ber banks affiliated with such
19
the term 1 affiliate
19
holding
20
as w ell as other affiliates.
20
F e d e r a l reserve bank and to fo r fe it all rights and p rivileges
such
any
o f its
fa ilu re
m em ber
affiliates
continues,
bank is located.
’
and
which,
For
fu rn ish
by
any
direction
the p u rp o ses
of
of
shall include holding co m p a n y affiliates
“ T h e holding co m p a n y affiliates o f all banks adm itted
m em bership
u n d er
section
the votin g
com p an y
this section
5144
of
p erm it o f
affiliate
shall
the
any
be
R e v is e d
such
to su rren d er
subject
to
the
Statutes,
as
holding
co m p a n y
their stock
in
the
21
“ S ta te m em ber banks shall be subject to the sam e lim ita-
21
o f m em bersh ip in the F e d e r a l reserve system as p r o vid e d in
22
tions a n d conditions with respect to the purchasing, selling,
22
this section.
23
u n d erw ritin g, and holding o f investm ent securities and stock
23
24
as are applicable in the case o f national banks u n d er p a ra -
24
“ In
banks,
connection
exam in ers
w ith
selected,
exam inations
or
a p p r o ve d
of
by
S tate
m em ber
the
F ed era l
11
10
1
R e s e r v e B o a r d shall m ake such exam inations o f the affairs
1
the President of the United States, by and with the advice
2
o f all affiliates o f such banks as shall be n ecessa ry to disclose
2
and consent of the Senate.
3
f u lly the relations betw een such
affiliates
3
members of the Federal Reserve Board, not more than one
4
and the effect o f such relations u p on the affairs o f such banks .
4
of whom shall be selected from any one Federal reserve
5
T h e expense o f exam ination o f affiliates o f a n y S ta te m em ber
5
district, the President shall have due regard to a fair repre-
6
sentation of the financial, agricultural, industrial, and com-
0
banks and
their
bank m a y , in the discretion o f the F e d e r a l R e s e r v e B o a r d ,
In selecting the six appointive
7
be assessed against such bank and, w h en so assessed, shall
7
mercial interests, and geographical divisions of the country,
8
be p a id b y such bank.
I n the event o f the refu sa l to give
8
an d at least tw o o f such m em bers shall be p erson s o f tested
a n y in form a tion requested in the course o f the exam ination
9
banking
3
exp erien ce.
The six members of the Federal
10
o f a n y such affiliate, or in the event o f the refu sa l to p erm it
10
Reserve Board appointed by the President and confirmed
11
such
to p a y
11
as aforesaid shall devote their entire time to the business of
1^
a n y expen se so assessed, the F e d e r a l R e s e r v e B o a r d m a y ,
12
the Federal Reserve Board and shall each receive an annual
banks
13
salary of $12,000, payable monthly, together with actual
14
affiliated w ith such affiliate to su rren d er their stock in the
14
necessary traveling expenses, and the Comptroller of the
15
F e d e r a l reserv e bank and to fo r fe it all rights and p rivileges
15
Currency, as ex officio member of the Federal Reserve
16
o f m em bership in the F e d e r a l reserve system , as provided,
16
Board, shall, in addition to the salary now paid him as
17
in this section .”
17
Comptroller of the Currency, receive the sum of $7,000
18
annually for his services as a member of said board.”
18
exam ination,
in its discretion,
or in
req u ire
the event
a n y or
of
the refu sa l
all S ta te m em ber
The Secretary of the Treasury eliminated from the Federal Keserve Board.
Sec . 6 . (a)The first paragraph of section 10 of the
<
»
i
19
(b) The second paragraph of section 10 of the Fed-
IQ
Federal Reserve Act, as amended, is amended to read as
20
eral Reserve Act, as amended, is amended to read as follows:
20
follows:
21
“ The Secretary el the Treasury and the The Comp-
oi
“A Federal Reserve Board is hereby created which shall
22
troller of the Currency shall be ineligible during the time
22
consist of eight seven members, including the Secretary of the
23
they are
23
Treasury and the Comptroller ol the Currency, who shall he
24
any office, position, or employment in any member bank.
24
members
25
The appointive members of the Federal Reserve Board
a m em ber
ex officio, and six members appointed by
he is
in office and for two years thereafter to hold
13
12
1
shall be ineligible during the time they are in office and
2
for two years thereafter to hold any office, position, or
3
employment in any member hank, except that this restric-
4
tion shall not apply to a member who has served the full
5
term for which he was appointed.
6
1
assign offiees in the Department of the Treasury for the
2
use of the Federal Reserve Board? Each member of the
3
Federal Reserve Board shall within fifteen days after notice
4
of appointment make and subscribe to the oath of office.
5
(c) The fourth paragraph of section 10 of the
appointed by the President one shah he designated by hie
6
Federal Reserve Act, as amended, is amended to read as
7
President to serve for twoy one for four, one for six,- one
7
follows:
8
for eighty- and the balance of the members for ten years,-
8
The first meeting of the Federal Reserve Board shall
9
and thereafter each member appointed shah serve for a
9
he held m Washington District of Columbia, as soon as may
10
term of ten years, unless sooner removed for eause by the
19
he after the passage of this Act; at a date to he fixed by fire
11
-President.
Upon the expiration of the term of any appoin-
11
Reserve Bank Organization Committee.- The Secretary of
12
tive member of the Federal Reserve Board in office when
12
the Treasury shah he ex ofiicio chairman of the -Federal
13
this paragraph as amended takes effect, the President shall
13
Reserve Board.
14
fix the term of the successor to such member at not to exceed
14
15
twelve years, as designated by the President at the time
15
trict o f C olu m bia.
16
of nomination, but in such manner as to provide for the
16
shall p resid e as ch a irm a n , and, in his absence , the vice g o v -
17
expiration of the term of not more than one appointive
17
e m o r shall preside.
18
member in any two-year period, and thereafter each appoin-
18
and the vice govern or, the hoard shall elect a m em ber to act
19
tive member shall hold office for a term of twelve years
19
as chairm an p ro tem pore.
20
from the expiration of the term of his predecessor.
Of the
29
serve Board shall be an officer or director of any bank, bank-
21
six persons thus appointed, one shall be designated by the
21
ing institution, trust company, or Federal reserve bank nor
22
President as governor and one as vice governor of the Fed-
22
or
23
era! Reserve Board.
23
pany; and before entering upon his duties as a member of
24
Board, subject to its supervision, shall be the
active
24
the Federal Reserve Board he shall certify under oath to the
25
executive officer.
The Secretary of the Treasury may
25
Secretary of the Treasury that he has complied with this
Of the sis members thus
The governor of the Federal Reserve
its
“
T h e prin cipal offices o f the hoard shall he in the D i s A t m eetings o f the hoard the g o v ern o r
In
the absence o f both
the g o v ern o r
No member of the Federal Re-
hold stock in any bank, banking institution, or trust com-
15
14
the
1
accordance w ith resolutions adopted b y
Whenever a vacancy shall occur,
2
a p p roved b y the F e d e r a l R e se r v e B o a r d as hereinafter p r o -
B
other than by expiration of term, among the six members
3
vided .
4
of the Federal Reserve Board appointed by the President as
4
to the several F e d e r a l reserve banks resolutions relating to
5
above provided, a successor shall he appointed by the
5
the open m arket transactions o f such banks and the relations
6
President,
6
o f the F e d e r a l reserve system w ith fo reig n central o r other
7
foreign banlcs.
the F e d e r a l R e se r v e B o a r d and be subject to its a p p rova l.
1
requirement
2
secreta ry o f the hoard.
and
such
hy and
certification
shall
he filed with
with the advice and consent of the Senate,
8
for the unexpired term of the member whose pkee he is
8
9
selected to hh
9
his p r e d e c e s s o r ”
the com m ittee and
T h e com m ittee shall consider, adopt,
“ (c)
and transm it
E v e r y such resolution shall be rep orted to
T h e time, character, and volu m e o f all purchases
10
Sec. 7. The Federal Reserve Act, as amended, is
10
and sales o f p a p er described in section 1 4
11
amended by inserting between sections 12 and 13 thereof
11
eligible fo r open m arket operations shall be govern ed w ith
12
the following new sections:
12
a v iew to
13
rega rd to their bearing u p on the general credit situation o f
the
14
the co u n try.
as
^5
E a c h F e d e r a l reserve
16
participate in open m arket operations recom m ended and a p -
one
17
p r o ve d as p rovid ed in p a ra gra ph
com -
18
ivith the chairm an o f the com m ittee w ithin
th irty d a y s
th ereof to
13
“Sec. 12A .
(a )
T h ere is h ereby
created
a F ed era l
o f this A c t as
accom m odating com m erce and business and with
14
O p en
15
com m ittee),
16
there are F e d e r a l reserve districts.
17
bank
18
m em ber
19
mittee shall be held at W a sh in g to n , D istric t o f
C olum bia,
19
notice o f its decision,
20
at least fo u r times each y ea r , u p on the call o f the g o v ern o r
20
F ed era l R eserve B oa rd .
21
of
any
21
22
three m em bers o f the com m ittee,
the discretion o f
22
L iq u id a tin g
23
the board, m a y be attended b y the m em bers o f the board.
23
c o r p o r a tio n ), w hose d u ty it shall be to purchase, hold, and
24
liquidate as h ereinafter p rovid ed , the assets o f national banks
25
which have been closed b y action o f the C om p troller o f the
24
25
M a rk et
by
w hich
its
of
C om m ittee
board
said
the F e d e r a l
“ (b)
shall
No
of
(h erein a fter
consist
directors
com m ittee.
R eseiw e
oj
as
shall
The
B oard
referred
m any
at
the
and, in
as
m em bers
a n n u a lly
m eetings
or
to
of
select
said
request
of
F e d e r a l reserve bank shall engage in open
m arket opera tions u n d er section 1 4
of
this A c t
except in
“ (d)
“ S
e c
I f a n y F e d e r a l reserve bank shall decide not to
. 12B.
(a)
(b )
h ereof,
and transm it a c o p y
it shall file
a
the
T h ere is h ereby created a F e d e r a l
C o r p o r a tio n
(h erein a fter
r efe r r e d
to
as
the
16
1
C u rren cy
2
S ta te m em ber banks which have been closed b y action o f the
3
a p p rop ria te S ta te authorities, or b y vote o f their directors.
4
,
u (b )
o r b y vote o f their directors, and the assets o f
The
m a nagem ent
of
the
corporation
shall
be
5
vested in a boa rd o f directors consisting o f five m em bers,
0
one o f w h om shall be the C om p tro ller o f the C u r r e n c y , one
7
a m em ber o f the F e d e r a l R e s e r v e B o a r d designated b y the
8
board f o r the p u rp ose, and three selected ann u a lly b y the
9
g o v ern o rs o f the tw elve F e d e r a l reserve banks u n d er such
10
p roced u re
11
B oard.
12
a n y additional com pensation f o r his services as such m em ber
13
as m a y
be prescribed
by
the F e d e r a l
R eserve
N o m em ber o f such board o f directors shall receive
“ ( c ) T h ere
is
h ereby
authorized
in
T rea su ry
to
be
.
a ppropria ted ,
14
out o f
15
priated,
10
im m ed ia tely available to the corporation as p a id -in su rplus
17
f o r the p u rp ose o f c a rr y in g out the p rovision s o f this section.
18
S u c h sum shall be in addition to the am ount o f capital stock
19
req u ired to be subscribed fo r b y F e d e r a l reserve banks and
20
m em ber banks as hereinafter p rovid ed .
21
a n y m on ey
the su m
11( d )
The
the
not otherw ise
o f $ 125 , 000 , 000 ,
capital
stock
the
shall
corporation
be
m ade
shall
be
22
d ivid ed into shares o f
23
the corpora tion shall be o f tw o classes, class A
24
C la ss A
25
shall be entitled to p a ym en t o f dividends out o f net earnings
$100
of
which
a ppro-
each.
Certificates o f stock o f
and class B .
stock shall be held b y m em ber banks o n ly and th ey
17
1
at the rate o f
2
pa id in b y them, which dividends shall be cum ulative, or to the
3
extent o f
4
w hichever am ount shall be the greater, but such stock shall
5
have
6
shall be held b y F e d e r a l reserve banks o n ly and shall not
7
be entitled
E very
F e d e ra l
8
reserve bank shall subscribe to shares o f class B
stock in
9
the corpora tion
30
no
6
p er centum p er annum on the capital stock
p er centum o f such net earnings in a n y one yea r,
vote at m eetings o f stockholders.
to
the p a ym en t
to an
of
dividends.
am ount
equal
.
to
.
C la ss
B
one-fourth
stock
of
•
the
t
10
su rplus o f such bank on J u l y l ,
11
shall be accompanied by a certified check payable to the
12
corporation in an am ount equal to on e-h a lf o f such su bscrip -
13
lion.
14
to call fr o m
15
ninety d a ys
16
The
‘ ( e)
rem aind er
o f such
time to time b y
1932 ,
and its subscriptions
subscription shall
be subject
the board o f directors
upon
notice.
E very
m em ber bank shall subscribe to the class
17
A
18
on e-fou rth o f
1
19
and
deposits
20
accordance with regulations o f the F e d e r a l lie s e r v e B o a r d
21
g ov ern in g
22
subscription shall be pa id in full w ithin n in ety d a ys after
22;
receipt o f notice fr o m the chairm an o f the board o f directors
24
o f the corporation, and the rem ainder o f such subscription
capital stock o f the corporation in an am ount equal to
dem and
p e r centum o f its total net outstanding time
on
the com putation
S. 4412------2
J u ly
1 , 1932 ,
o f reserves.
as
computed,
O n e-h a lf
in
o f such
18
19
1
silall be subject to call from time to time by the board of
1
p er centum, a month fr o m the period, o f the last d ivid en d on
2
directors o f the corporation.
a
the class A stock o f the corporation .
The amount o f the outstanding class A stock of
3
reduces its time and dem an d deposits it shall su rren der, not
4
the corporation held by member banks shall be annually
4
later than the
5
adjusted as hereinafter provided as o f the last preceding
5
am ount o f its holdings in the capital stock o f the corporation,
6
call date as member banks increase their time and demand
6
and w hen a m em ber bank volu n ta rily liquidates it shall su r-
7
deposits or as additional banks become members, and such
7
render all its holdings o f the capital stock o f the corporation
3
“ (f)
r>
1 st
W h e n a m em ber bank
d a y o f J a n u a r y thereafter, a, proportion a te
8
stock may be decreased in amount as member banks reduce
8
and be released fr o m
9
their time and demand deposits or cease to be members.
9
called.
10
Shares o f the capital stock o f the corporation owned by
10
the m em ber bank shall receive in p a ym en t therefor,
11
member banks shall not
hypothecated.
11
regulations to be prescribed b y the F e d e r a l R e se rv e B o a rd ,
12
W hen
and
demand
12
a, sum
13
deposits, it shall, at the beginning o f each calendar year,
13
su rren dered and its proportion ate share o f dividends not
14
subscribe fo r an additional amount o f capital stock o f the
^4
exceed one half o f
15
corporation equal to one-fourth o f 1 p er centum o f such
25
o f the last dividend on such stock, less a n y liability o f such
16
increase in deposits.
O ne-half o f the amount o f such addi-
2g
m em ber bank to the corporation .
1i
tional stock shall be paid fo r at the time o f the subscription
27
18
therefor and the balance shall be subject to call by the board
28
the stock held b y it in
19
o f directors o f the corporation.
A bank admitted to mem-
29
without im pairm en t o f the liability o f such bank,
20
bership in the F ed eral reserve system at any time after the
20
cash-paid subscriptions on such stock, w ith its proportion a te
21
organization o f the corporation shall be required to sub-
21
share o f dividends not to exceed one half o f
22
scribe fo r an amount o f class A
22
p e r m onth fr o m
23
one-fourth
demand
23
shall be first applied to all debts o f the insolvent bank or
24
deposits o f the applicant bank as of the date o f such ad-
24
the receiver thereof to the corporation , and the balance, if
2^
mission, p a yin g therefor its p a r value plus one-half o f 1
25
a n y, shall be p h id to the receiver o f the insolvent bank.
a
member
of
1
bank
p er
be transferred
increases
centum
of
its
or
time
capital stock equal to
the
time
and
The
equal
its stock subscription not p r ev io u sly
shares so su rren d ered
to its cash-paid
1
shall be canceled and.
subscriptions
on
under
the shares
p e r centum a, month, fr o m
to
the p eriod
“ ( g ) I f a n y m em ber bank shall be declared insolvent,
the corporation
shall
be
1
canceled,
and all
p er centum
the p eriod o f last d ivid en d on such stock
20
1
U p o n the dote o f enactment o f the B a n k in g A c t
1
b y the p rovision s o f this section and, such incidental p ow ers
the corporation shall becom e a b o d y corporate and,
2
as shall be n ecessa ry to c a r r y out the p o w ers so gran ted.
“ (K )
2
of
1.932,
3
as such
shall have p o w e r
4
“ F ir s t.
5
“ S econ d .
6
of
B
T o have succession until dissolved b y an A c t
C on gress.
“ T h ird .
8
“ F o u r th .
10
—
T o adopt and use a corporate seal.
7
9
21
To
in a n y court o f law or eq u ity, S tate or F e d e r a l.
board
of
directors
shall
adm inister
the
affairs o f the corp ora tion fa ir ly and im p a rtia lly and, w ithout
5
discrim ination in fa v o r o f or against a n y m em ber bank or
6
banks and m a y , subject to the p rovision s o f law, extend to
7
each national bank which is closed b y action o f the C o m p -
8
troiler o f the C u r r e n c y , or b y vote o f its directors, and, to
9
each S tate m em ber bank which
is closed b y
action of
the
T o a ppoint b y its board o f directors such offi-
10
a p p rop ria te S tate authorities, or b y vote o f its directors, such
11
cers and em p loyees as are not oth erw ise p rovid ed fo r in this
11
accom m odations
12
section,
com pensation,
12
with due reg a rd fo r the claim s and d em an ds o f other m e m -
IB
req u ire bonds o f them and fix the
p en a lty thereof, and to
13
ber banks.
14
dism iss at p leasure such officers
14
d eterm ine and p rescribe the m anner in which its obligations
15
this or
15
shall be in cu rred and its expenses allow ed and p a id .
10
corporation shall be entitled to the fr ee use o f the U n ited
17
S tates m ails in the sam e m a n n er as the execu tive d ep a rt-
18
merits o f the G o v er n m e n t.
19
sent o f a n y F e d e r a l reserve bank or o f a n y board, com m is-
20
sion,
21
o f the G o v er n m e n t, including a n y field, service th ereof, m a y
22
avail itself o f the use o f in form a tion , services, and facilities
23
th ereof in c a rr y in g out the p rovision s o f this section.
10
“ F ifth .
The
4
make contracts.
T o sue and be su ed , com plain and, defen d,
“ ( i)
to
any
appointm en t
define
other
and
their
A ct
duties,
shall
be
com pensation
fix
their
or em p loyees.
con stru ed
as an
N o th in g in
to
officer
p reven t
or
the
em p loyee
17
o f the corp ora tion o f a n y officer or em p loyee o f the United,
18
S ta tes in a n y board, com m ission, indep endent establishment,
19
or execu tive d epa rtm en t thereof.
20
“ S ix th .
T o p rescribe b y its board o f directors, b y -la w s
21
not inconsistent with law , regulatin g the m a n n er in
22
its gen era l business m a y
23
g ra n ted to it b y law m a y be exercised and en joyed .
be conducted,
and
which
the p rivileges
24
“ S e v e n th . T o exercise b y its board o f directors, or d u ly
25
a uthorized officers or agents, all p o w e r s specifically gran ted
24
25
as
be
sa fe ly
and
rea son ably
m ade
T h e board o f directors o f the corp ora tion shall
indep endent
“ (j)
m ay
T h e corp ora tion with the con -
establishment,
1V h en ever
any
The
or
m em ber
execu tive
bank
shall
departm en t
have
been
closed b y action o f its board, o f directors, cue C o m p tro ller o f
23
22
1
the C u r r e n c y , or the a p p rop ria te State au th ority, as the case
1
fu n d s o f the corporation m a y he deposited subject to check
2
m a y he, the receiver m a y tender the assets o f such hank to
2
in a n y F ed era l reserve hank or with the T r ea su re r o f the
3
the corporation wh ich m a y purchase the sam e, or m ake a loan
3
U n ited States.
4
on the secu rity thereof, in whole or in part, as in the d eter-
4
S e c re ta r y o f the T r e a s u r y , the corporation shall he a deposi
5
m ination o f its hoard o f directors the p ro m p t and, econom ical
ts
ta ry o f public m on eys, except receipts from
6
liquidation o f the assets o f such hank m a y req u ire, on the
6
such regulations as m a y he prescribed, b y the said S e c re ta r y,
7
basis o f such valuations as m a y he agreed, upon hy a valua-
7
and m a y also be employed, as a financial agent o f the G o v er n -
8
fion
8
m ent.
9
o f such hank, a m em ber to he nam ed b y the hoard o f direc-
9
ta r y o f public m on eys and financial agent o f the G overn m en t
com m ittee o f three mem hers consisting o f
the receiver
10
tors o f such
11
ceiver and the m em ber nam ed hy such hoard o f directors.
12
It
38
realize
14
condition
15
is
16
am ount realized, from
17
assets exceeds the sum
18
m ake
19
equal to the am ount o f such excess, if a n y, after deducting a
20
liquidation fee o f
21
a n y incom e d erived hy the corporation fr o m such assets shall
22
be the p r o p e r ty o f the corporation .
23
tion not otherw ise employed, shall he invested in securities
24
of
25
tem p o ra ry period s, in the discretion o f the hoard o f directors,
shall
he
as
located,
the
an
hank, and a person
the
d u ty
'rapidly
of
in
any
additional
8
G o v er n m e n t
the
corporation
as possible,
credit
u pon
of
the
to he chosen
havin g
district
in
to
due,
the re-
proceed
rega rd
which
assets so purchased,
hy
to
such
and
if
to
the
bank
the
net
the sale or other disposition o f such
paid therefor,
p a ym en t
to
the corporation shall
the receiver
of
the
bank
p er centum o f the su m thus rea lized ; but
of
the
U n ited
M o n e y o f the c o rp ora -
States,
except
that fo r
10
11
W h en
designated fo r
that, p u rp ose hy the
custom s, und er
I t shall p erfo rm all such reasonable duties as d eposi-
as m a y he requ ired o f it.
“ (k )
T h e corporation m a y , in its discretion, purchase
12
the assets o f hanks in the hands o f receivers on the date o f
13
its organization, hut on the sam e conditions and term s as a re
14
applicable in the case o f assets o f hanks which m a y fa il or
15
be closed after such, date.
16
he construed to p reven t the corporation fr o m
17
to national hanks closed hy action o f the C om p troller o f the
18
C u r r e n c y , or hy vote o f their directors, o r to S tate m em ber
19
hanks closed b y action o f the a p propria te State authorities,
20
or h y vote o f their directors, or from, entering into negotia
nt
tions to secure the reop en in g o f such hanks.
22
“ ( 1)
‘
N oth in g herein contained shall
m aking loans
d e c e iv e r s or liquidators o f m em ber hanks which
23
are n o w
24
shall he entitled to offer the assets o f such hanks fo r sale to
25
the corporation or as secu rity fo r
or m a y
hereafter becom e
insolvent
loans fro m
or suspended
the co rp o ra -
25
24
1
tion, u p on receiving perm ission fro m the a ppropriate State
1
corporation m a y sell on a discount basis short-term
2
a uthority in accordance frith express provision o f State late
2
turns
3
in the case o f S ta te m em ber banks, or fr o m the C om p troller
3
debentures, bonds, and other such obligations o f the co rp o ra -
4
o f the C u r r e n c y in the case o f national banks.
-
4
tion m a y
5
ceeds o f e v e r y such sale or loan shall be utilized fo r the same
5
m a n n er as shall be prescribed, b y its board, o f directors.
0
pu rp oses and in the sam e m an n er as other fu n d s
6
obligations m a y be offered, fo r sale at such price or prices
7
from the liquidation o f the assets o f such banks.
7
as the corporation m a y determ ine.
g
troller o f the C u r r e n c y m a y , in his discretion, p a y dividends
8
9
on p r o v e d
the
9
of
10
p rin cip a l and interest, fr o m all taxation
the
11
inheritance ta xes) n ow or hereafter im posed b y the United,
claim s at a n y
The pro
realized
The C om p-
time a fter the expiration
of
payable
‘Yn )
at
m a tu rity
be secured b y
without
interest.
The
obliganotes,
assets o f the corporation in such
Such
A l l notes, debentures, bonds, or other such obliga-
tions issued b y the corporation shall be exem pt, both as to
10
p eriod o f advertisem ent m ade pu rsu a n t to section
11
the R e v is e d
Statutes,
12
(1
om ptroller
of
any
12
States, b y a n y T e r r ito r y , d ep en d en cy, or possession thereof,
13
national bank b y reason o f a n y such p a ym en t fo r fa ilu re to
13
or b y a n y S tate, co u n ty, m u n icip a lity, or local taxing a u th or-
14
p aH dividends to a claimant whose chain is not proved at
14
ity.
the time o f any such paym ent.
15
reserves, and su rp lu s, and, its incom e, shall be exem p t fro m
10
all taxation n ow or hereafter im p osed b y the U n ited States,
10
“ (m )
17
to issue
13
am ount
The
the
and no
C u rren cy
corporation
liability
or
to
shall
the
5235
attach
receiver
to
of
•
is authorized and
empowered,
(e x cep t estate and
T h e corp oration , including its fran ch ise,
its capital,
one time in
an
17
b y a n y T e r r ito r y , d ep en d en cy, or possession thereof, or b y
the
its
18
cm y S tate, co u n ty, m u n icip a lity, or local taxing a u th ority,
19
capital and the am ount authorized to be a p p rop ria ted p u r -
19
except that a n y real p r o p e r ty o f the corp ora tion shall be
20
suant to p a ra gra p h ( c ) o f this section, its notes, debentures,
20
subject to S tate, T errito ria l, co u n ty, m un icipal, or local ta x-
21
bonds,
the
21
a tion to the sam e extent according to its valu e as other real
22
option o f the corporation before m a tu rity in such m a n n er as
22
p r o p e r ty is taxed.
28
w a y be stipulated, in such obligations, and to bear such rate
23
24
or rates o f interest, and to m a tu re at such time or times as
24
with such fo r m s o f notes, debentures, bonds, or other such
25
m a y be determ ined b y the c o r p o r a tio n : P r o v id e d , T h a t the
2 5
obligations as it m a y need, /o r issuance u n d er this A c t, the
and
to have outstanding at a n y
aggregating
or
other such
not
m ore
than
obligations,
to
tw ice
be
sum
redeem able
of
at
( o ). I n
ord er that the corp ora tion m a y
be su p p lied
27
26
1
S e c r e ta r y
to p rep a re such
1
to be an obligation
or coupon issued b y the corp oration , or
2
fo r m s as shall he suitable and appro red, b y the co rp o ra tio n ,
2
( 2 ) passes, utters,
or publishes, or attempts to pass, u tterf
3
to be held, in the T r e a s u r y subject to d e liv e r y , u p on order
3
or publish, a n y false, fo rg ed , or cou n terfeited obligation or
4
o f the corp o ra tio n .
4
coupon p u rp ortin g
to have been issued, b y the corp o ra tio n
5
and other m aterial executed in connection
5
kn ow in g the sam e
to be false, fo r g ed , or cou n terfeited , or
6
rem ain
6
( 3)
7
T h e corporation shall reim bu rse the S e c r e ta r y o f the T r e a s -
7
p ortin g
8
u r y fo r a n y expenses incurred in the prep a ra tion , cu stod y,
8
passes, utters,
9
and
9
publish, as true, a n y fa lsely altered or sp u rio u s obligation or
10
cou p on , issued or p u rp o rtin g to have been issued b y the c o r -
T h e corp ora tion shall a n n u a lly m ake a rep ort o f
11
pora tion , k n ow in g the sam e to be fa lsely altered or sp u riou s,
12
its opera tions to the C o n g ress as soon as practicable after
12
shall be punished b y a fine o f not m ore than $ 10,000 or b y
13
the
13
im p rison m en t fo r not m o re than five yea r s, or both.
10
in
of
the
T rea su ry
T h e engraved, plates, dies, bed pieces,
the cu stod y
d eliv e ry
of
is authorized
such
o f the S e c r e ta r y
notes,
debentures,
therewith shall
of
the
bonds,
T rea su ry
or
.
other
such obligations.
11
“ (p )
1st
d a y o f J a n u a r y in each y e a r .
fa lsely alters a n y obligation or coupon
to
have
been,
issued,
or publishes,
by
the
,
issued or p u r -
corp oration ,
( 4)
or
or attem pts to pass,
utter,
or
W h o e v e r , fo r the p u rp ose o f obtaining a n y loan
14
15
fr o m the corp ora tion , or a n y extension or ren ew a l thereof,
15
the corp oration ,
16
or the acceptance, release, or substitution o f secu rity there
16
fu lly
in
fo r , or fo r the p u rp o se o f inducing the corp ora tion to p u r -
17
things
18
chase a n y assets, or fo r the p u rp ose o f influencing in a n y
18
oth erw ise intrusted to it, or ( 2 )
19
w a y the action o f the corp oration under this section, makes
19
corp oration or a n y other b o d y, politic or corp ora te, or a n y
20
o n y statem ent, kn ow in g it to be false, or w ilfu lly overva lu es
20
in d ivid u a l, or to deceive a n y officer, auditor, or exam in er
21
a n y secu rity, shall be punished b y a fine o f not m ore than
21
of
22
$ 5,000 or b y im prison m ent fo r not m ore than two y ea r s, or
22
rep ort,
23
both.
*>3
being d u ly authorized d ra w s a n y ord er or issues, puts forth
fa lse ly m akes, fo rg es, or counter-
24
or assigns a n y note, debenture, bond, or other such obliga-
feits a n y obligation or cou p on , in im itation o f or p u rp o rtin g
25
tion,
14
24
25
' ( (l )
“ (r)
W h oever
(1)
" (s)
W h o e v e r , being connected in a n y ca p a city
m isapp lies
of
the
value,
( 1)
any
or
or
em bezzles, abstracts, p u rloin s, or w illm o n eys,
whether
corp ora tion ,
m akes
statem ent o f or
d ra ft,
bill
with
of
fu n d s,
belonging
securities,
to
it, or
or
other
pledged,
or
with intent to d efra u d the
any
fa lse
e n tr y
in
to the corp ora tion ,
exchange,
m ortga ge,
a n y book,
or w ithout
ju d gm en t,
or
29
28
1
decree thereof, shall he punished b y a fine o f not m ore than
2
$ 10,000 or b y im prison m ent fo r not m ore than jive yea rs,
3
or both.
1
jurisdiction
2
punishable u n d er this section
3
4
u (t)
No
association, pa rtn ersh ip,
‘ F ed era l
pora tion shall use the w ord s
6
tio n f
7
or a p a rt th ereof u n d er which
he or
8
E very
association,
9
violating this subdivision shall be punished b y a fine o f not
individual,
$ 1,000
y ea r , o r both.
-
“ (u )
partnership,
or
by
im prison m ent
not
exceeding
fo llo w s :
o f section
offenses
13
o f the
as am ended, is amended, to read as
uA n y
F ed era l
reserve
bank
m ay
m ake
advances
to
so fa r as applicable, are extended to a p p ly to contracts or
16
agreem ents with, the corporation under this section, which fo r
17
the pu rp oses hereof shall be held to include loans, advances,
18
extensions, and, renew als thereof, and acceptances, releases,
and,
7
its m em ber
8
not exceeding fifteen d a ys at rates to be established b y such
9
F e d e ra l reserve bank, subject, to the, review and determ ina-
10
tion o f the F e d e r a l R e se r v e B o a r d , p ro vid ed such p ro m is-
11
s o r y notes are secured b y such notes, drafts, bills o f exchange,
12
or bankers
13
purchase b y F e d e r a l reserve banks u n d er the p rovision s o f
14
this A c t, or b y the deposit o r pledge o f bonds o r notes o f
15
the
16
such advance has been m ade shall, d u rin g the life o r con -
11
tinuance o f such advance,
18
o f the reserve bank o f the district or o f the F e d e r a l R e se r v e
19
B o a r d to the c o n tra r y increase its outstanding loans secured,
20
by
21
other such
22
organized
stock
exchange,
23
securities,
u p on
any
24
unsecured, fo r the p u rp ose o f p urchasing a n d /o r c a rryin g
banks on
their p r o m isso r y
notes fo r
a p eriod
one
15
acceptances as are eligible fo r rediscount o r fo r
o f the C rim in a l C od e o f the U n ited States
18 ,
ch.
5,
secs.
202
207 ,
to
in c lu siv e ), in
U n ited
States.
If
any
m em ber
bank
to
which
any
and despite an official w a rn in g
,
and substitutions o f secu rity th erefor, purchases or sales o f
assets, and, all contracts and, agreem ents pertain in g to
the
\:
sam e.
22
fvj
The
D ep a rtm en t
is
Secret,
S e rv ic e
a u th o n zed
to
D iv isio n
detect,
into
the
cu stod y
of
the
U n ited
of
arrest,
-
5
the
corporation
112 , 113 , 114 , 115
T h e p rovision s o f sections
117
or
( U . S . C ., title
24
F e d e r a l R e se r v e A c t,
paragraph
of
it shall do business.
14
23
4
6
116 ,
21
T h e seventh
any
L iq u id a tin g G o r p o r a -
13
20
com m itting
or a com bination o f these three w ord s, as the name
11
10
8.
person
or co r-
5
exceeding
1
in d ividual,
Sec.
any
States
the
collateral in
the form
obligations,
or
o f stocks,
bonds,
loans m ade
investm ent
to
debentures,
or
m em bers o f a n y
house,
or
dealer
in
secured,
or
T rea su ry
and
.
..
m arshal
obligation,
n ote
,
or
bill,
deliver
having
31
1
stocks, bonds, o r other investm ent securities
( except obliga-
1
other
2
tions o f the U n ited S ta te s ), such advance shall be deem ed
2
negotiations, shall be filed with the F e d e r a l R e se r v e B o a r d
3
im m ediately due and p a ya ble, and such m em ber hank shall
3
in icriting b y a d u ly authorized officer o f each F ed era l reserve
4
be ineligible as a b orrow er at the reserve bank o f the district
4
bank which shall have participated in such conferences or
5
under the p rovision s o f this p a ra gra p h fo r such p erio d as
5
negotiations
6
the F e d e r a l R e se r v e B o a r d shall determ ine
Sec . 9.
Section 14 of the Federal Reserve Act, as
8
amended, is amended by adding at the end thereof the
9
following new paragraph:
10
‘‘ ( g )
T h e F e d e ra l R ese rv e B o a r d shall exercise special
facts
appertaining
to
such
conferences
or
Section 10 of tlie Glass bill is here offered as an amendment to section 19
of the Federal reserve act. It seems to methat the subject matter of this new
paragraph is not germane tothat of the paragraph of section 19 among which
it is tobe placed.
Section 19 of the Federal reserve act deals with bank reserves, whereas
this newparagraph seems to me to deal with the so-called leakage of Federal
Reserve funds into the stock market, and probably has some relation to
member banks performing the functions of brokers, speculators, conjurers,
and so forth.
To my way of thinking the subject matter in this proposed insertion is
germane to section 22 of the 1 ederal reserve act, and not to section 19, and
if that is not correct, then I would say that it probably should be inserted as
a newsection, between sections 23 and 24, just as section 11 of the Glass bill
proposes to do, with similar subject matter.
If this criticism be correct and is applicable also to some one or two sec-1
tions of this bill, as I think it is, then it shows one of two things: Either that(
this bill has been written by some one else (Doctor Willis who has been, since i
1913, economic adviser to Senator Glass) in a very stupid manner and has <
not been read by the Senator, or that it must be even a stronger reflection oni
the Senator’s intelligence.
In the light oFthe"cIumsy wording of the previous sections criticised by
you and this obvious defect to which wehave just nowreferred, makes of the
bill one of the most stupid concoctions I have come in contact with; or moreoverTiTmaWbe evidence of the fact that anything the big bankers dictate.will
be readily accepted by the Senator and inserted without criticismon his part
or the opportunity extended to others to criticise the bill in public hearings,
and so forth.
11
su pervision
12
kind entered into b y
13
foreig n bank or banker, or with a n y g ro u p o f foreig n banks
14
or bankers, and all such relationships and transactions shall
15
be subject to such regulations, conditions, and limitations as
16
the board m a y prescribe.
17
tive o f a n y F e d e r a l reserve bank shall conduct negotiations
18
of
19
foreig n bank or banker without first obtaining the p erm is-
6
20
sion o f the F e d e r a l R e se r v e B o a r d .
The F ed era l R eserve
7
amended, is amended by inserting after the sixth paragraph
21
Roar'd shall have the right, in its discretion, to be represented
8
thereof the following new paragraph:
22
in a n y conference or negotiations b y such representative or
9
“ N o m em ber bank shall act as the m edium or agent o f
23
representatives as the board m a y designate.
fu ll rep ort
10
a n y nonbanking corporation , partnership, association, busi-
24
o f all conferences or negotiations, and all understandings or
11
ness trust, or ind ivid u a l in m aking loans on the' secu rity o f
25
agreem ents a rriv ed at or transactions agreed u p on , and all
12
stocks
any
ov er all relationships and transactions o f a n y
kind
with
any
the
F ed e ra l reserve bank with
No
officers
any
officer or other representa-
or
representatives
A
of
any
Sec.
,
10
. Section
19
of the Federal Reserve Act, as
bonds, and other investm ent securities to brokers or
furnished
7
m aterial
Comment
30
1
dealers
2
E v e r y violation o f this 'provision b y a n y m em ber bank shall
3
be punishable b y a fine o f not m ore than $ 1 0 0 p e r d a y durin g
4
the continuance o f such v io la tio n ; and such fine m a y be col-
5
lectcd,
6
o f the district in which such m em ber bank is located ”
7
in
stocks,
b y suit or
bonds,
and
otherwise,
by
other
investm ent
the F e d e r a l
reserve
bank
Sec. 11. The Federal Reserve Act, as amended, is
8
amended by inserting between sections
9
the following new section:
10
securities.
“ Sec. 23A .
N
o
23 and 24 thereof
m em ber bank shall ( 1 ) make a n y loan
11
o r a n y extension o f credit to, o r purchase securities u nder
12
repurchase agreem ent fr o m , a n y o f its affiliates, or ( 2 ) invest
13
a n y o f its fu n d s in the capital stock, bonds, debentures, or
14
other such obligations o f a n y such affiliate, o r ( 3 ) accept the
15
capital stock, bonds, debentures, o r other such obligations o f
16
a n y such affiliate as collateral secu rity fo r advances m ade
17
to a n y person , partnership, association, o r corporation, if, in
18
the case o f a n y such affiliate, the aggregate am ount o f such
19
loans,
20
m ents,
21
exceed 1 0
22
such m em ber bank, or if, in the case o f all such affiliates,
23
the aggregate am ount o f such loans, extensions o f credits,
24
rep u rch a se agreem ents, investm ents,
extensions o f credit, repu rch a se
and
agreem ents,
in vest-
adva nces against such collateral se c u r ity
w ill
p er centum o f the capital stock and su rp lu s o f
and
advances against
33
1
such collateral secu rity w ill exceed 2 0
2
capital stock and su rp lu s o f such m em ber bank.
3
'
“ W it h in
p er
centum
o f the
the fo r eg o in g lim itations, each loan or exten -
4
sion o f credit o f a n y kind or character to an affiliate shall be
5
secu red b y collateral in the fo r m o f stocks, bonds, debentures,
6
or other such obligations h a vin g a m arket valu e at the time
7
o f m aking the loan or extension o f credit o f at least 2 0 p er
8
centum m ore than the am ount o f the loan or extension o f
9
credit, or o f at least 1 0 p er centum m ore than the am ount o f
10
the loan or extension o f credit if it is secu red b y obligations
11
of
12
th e r e o f: P r o v id e d ,
13
shall not a p p ly to loans or extensions o f credit secured b y
14
obligations o f the U n ited S tates
15
interm ediate credit banks, or the F e d e r a l land banks, or b y
16
such notes, d ra fts, bills o f exchange, or bankers' acceptances
17
as are eligible fo r rediscou n t or fo r purchase b y F e d e r a l
18
reserve banks.
19
officer,
20
any
such affiliate shall be deem ed a loan
to the affiliate to
21
the extent that the p roceed s o f such loan
are used, fo r the
22
benefit o f, or tra n sferred to, the affiliate.
23
any
S tate,
clerk,
“ For
or
A
of
any
political su bdivision
T h a t the p rovision s
or
a g en cy
o f this p a ra g ra p h
G o v er n m e n t,
the F e d e r a l
loan o r extension o f credit to a director,
or other
em p lo yee
or a n y
rep resen ta tive
the p u rp oses o f this section the term
of
‘ affiliate ’
24
shall include
25
affiliates, and the p rovision s o f this section shall not a p p ly
S. 4412
holding c o m p a n y
3
affiliates
as
w ell
as
other
35
34
the bank
1
Sec. 13. The Federal Reserve Act, as amended, is
affiliated,
2
further amended by inserting after section 25 (a) thereof
engaged solely in conducting a sa fe-d ep osit business or
3
the following new section:
4
the business o f an agricultural credit corp oration or livestock
4
5
loan c o m p a n y, ( 3 )
5
o f law all suits o f a civil nature at com m on law o r in equity
6
banking
6
to which a n y corporation organized un der the law s o f the
7
section
7
U n ited States shall be a p a rty, arising out o f transactions
8
involvin g international or foreig n
9
a d ep en d en cy
1
to
2
p rem ises
3
(2 )
any
affiliate
of
(1 )
the m em ber
of
solely
bank with
in
holding
which
it is
in the capital stock o f which a national
association
25
engaged
is
the
authorized
F ed era l
to
R e se r v e
invest
A c t,
p u rsu a n t
as
to
am ended,
“ S
ec
. 25.
(b )
N o t w it h s t a n d in g
any
o t h e r p r o v is io n
J
8
or
9
R e s e r v e A c t , as
(4 )
orga n ized
under
section
25
(a )
of
the
F ed era l
a m en d ed ; but as to a n y such affiliate, m em -
r
banking,
o r insu lar possession
of
or
the
banking in
U n ited States,
10
ber banks shall
continue to besubject to other p ro visio n s o f
10
o r out o f other international or foreig n financial operations,
11
law applicable to loans b y such banks and investm ents b y
11
either directly o r through the a gen cy, ow nership, o r control
12
such
12
o f branches or local institutions in dependencies or insular
13
obligations A
13
possessions
14
S
as am ended, is
14
shall be deem ed to arise u n d er the law s o f the U n ited States,
and section
15
and
10
original jurisdiction o f all such su its; and a n y defendant in
banks
e c
in stocks,
. 12.
bonds,
debentures,
T h e F e d e r a l R e se r v e A c t,
15
amended, b y
16
th ereof the fo llow in g n ew sectio n :
17
“ S
e c
inserting
betw een
sectioyi 2 4
or
other
such
25
. 2 4 A . H e r e a fte r no national bank, w ithout the
18
a p p ro va l o f the C o m p troller o f the C u r r e n c y , and no State
19
m em ber bank, w ithout the a p p rova l o f the F e d e r a l R e se r v e
'r
(
the
of
the
district
U n ited
courts
S tates
of
the
or
in
U n ited
fo reig n
S tates
countries
shall
,
have
17
any
18
rem ove such suits fr o m a S tate court into the district court
19
o f the U n ited S tates fo r the p r o p e r district b y follo w in g the
such
suit m a y ,
at a n y
time
before
the trial
thereof,
20
B o a r d , shall ( 1 )
invest in bank prem ises, or in the stock,
20
p roced u re fo r the rem ova l o f causes otherw ise p r o v id e d b y
21
bonds, debentures, or other such obligations o f a n y c o rp ora -
21
la w A
22
tion holding the p rem ises o f such bank
23
. or
•
22
Sec. 14. Paragraph “ Seventh ” of section 5136 of
to or u p on the secu rity o f the stock o f a n y such corporation,
23
the Revised Statutes, as amended, is amended to read as
24
if
24
follows:
25
exceed the am ount o f the capital stock o f such bank A
the
aggregate
of
all
such
investm ents
(2 )
and
m ake loans
loans
will
■, ' ' ■
a \i.
,
■ •
.
•
■.
,
At
37
36
“ Seventh. To exercise by its board of directors or
1
obligor or m aker h ereafter pu rch ased and held, b y the asso-
2 duly authorized officers or agents, subject to law, all such
2
ciation
fo r
3 incidental powers as shall be necessary to carry on the busi-
3
centum
o f the total am ount o f such
4 ness of banking; by discounting and negotiating promissory
4
this limitation shall not a p p ly
5 notes, drafts, bills of exchange, and other evidences of debt;
5
am ount o f which does not exceed $ 1 0 0 , 0 0 0
6 by receiving deposits; by buying and selling exchange, coin.
0
exceed 5 0 p er centum o f the capital o f the association, n or
7 and bullion; by loaning money on personal security; and
7
(2 )
8 by obtaining, issuing, and circulating notes according to
8
a n y one obligor or m aker hereafter p u rch a sed and held b y
9 the provisions of this chapter
0
the association fo r its ow n account exceed at a n y time 1 5
1
title; and g en era lly b y en gag-
10
in g in all fo r m s o f banking business and undertaking
11
typ es o f banking transactions that m a y
its
ow n
account
exceed
at
any
time
10
per
issue outstanding, but
to a n y such
issue the total
and, does not
shall the total am ount o f the investm ent securities o f
all
10
p er centum o f the am ount o f the capital stock o f the associa-
b y the law s of. the
11
tion actually p a id in and u nim paired and 2 5 p er centum o f
12
S ta te in which such bank is situated, be perm itted to banks o f
12
its unimpaired, su rplu s fu n d .
1^
deposit and discount organ ized and in corp orated un d er the
13
term 1 investm ent se c u r itie s' shall m ean m arketable obliga-
14
law s o f such S tate, except in so fa r as th ey m a y be fo r -
14
tions evidencing indebtedness o f a n y p erson , copartn ersh ip,
15
bidden b y the p rovision s o f a n y A c t o f C o n g ress.
T h e busi-
15
association, or corp oration in the fo r m o f bonds, notes a n d /o r
16
ness o f dealing in investm ent securities b y the association shall
16
debentures co m m o n ly know n as investm ent securities un der
17
be lim ited to p u rch a sin g and selling such securities without
17
such fu rth er definition o f the term 1 investm ent s e c u r itie s’ as
18
recou rse,
of,
18
m a y b y regulation be prescribed b y the C om p troller o f the
10
custom ers, and in no case fo r its ow n account, and the asso-
19
C u rren cy.
20
ciation
shall not u n d erw rite a n y
P ro-
20
perm itted b y law , nothing herein contained shall authorize
21
vid ed ,
That
its own
21
the pu rch a se or holding b y the association o f a n y shares o f
22
account
and
22
stock o f a n y corp ora tion .
23
restrictions
24
regula tion
25
a m ount o f
solely
upon the order,
the
association
investm ent
as
the
securities
any
but in
u n d er
no
fo r
the account
issue o f secu rities:
m ay
C o m p troller
p rescribe,
and
,
of
pu rch a se
such
the
event
fo r
lim itations
E xcept
as
A s used in this section
herein after
v r o v id e d
or
the
otherw ise
T h e lim itations herein contained
C u rren cy
m ay
by
-3
as
(1 )
the total
24
o f the U n ited S tates, or gen eral obligations o f a n y State or o f
2**
a n y political su bdivision th ereof, or obligations issued under
shall
issue o f investm ent securities
o fa n y
one
t0
investm ent securities shall
not
a p p ly
to
obligations
.
39
38
1
a u th ority o f the F e d e r a l F a r m L o a n A c t, as a m en d ed : P r o -
1
or less, national banking associations n ow orga n ized or h ere-
2
vid ed , T h a t in c a r r y in g on the business com m on ly know n as
2
after orga n ized m a y , with the a p p rova l o f the C om p troller
3
the sa fe-d ep osit business the association shall not invest in
3
o f the C u r r e n c y , have a capital o f not less than $ 1 0 0 , 0 0 0 . "
4
the capital stock o f a corp oration orga n ized u n d er the law o f
4
5
a n y S ta te to conduct a sa fe-d ep osit business in an am ount in
5
6
excess o f 1 5 p e r centum o f the capital stock o f the associa-
6
7
tion a ctua lly p a id in and u n im p a ired and 1 5 p er centum o f
7
in a F e d e r a l reserve bank unless it possesses a p a id -u p u n im -
8
its u n im p a ired su rp lu s
8
p a ired capital sufficient to entitle it to becom e a national
9
banking association in the place w here it is situated un d er
9
Sec . 15.
(a) Section 5 1 3 8
of
the Revised Statutes,
10
10 as amended, is amended to read as follows:
(b )
T h e tenth para gra ph o f section 9 o f the F e d e r a l
R e s e r v e A c t , as am ended, is am ended to rea d as fo llo w s :
“No
a p p ly in g bank shall be adm itted to m em bership
the p ro visio n s o f the N a tion a l B a n k A c t , as am ended
as
11
shall
12
am ended, is am ended b y adding at the end th ereof the fo l-
13 be organized with a less capital than $100,000, except that
13
low in g n ew p a r a g r a p h :
14 banks
with a capital of not less than
14
15 $50,000 may with the approval of the Secretary of the
15
the B a n k in g
16 -Treasury he organized in any place the population of which
16
stock o f a n y such
17 does not exceed six thousand inhabitants^—and except that
17
a n y other corp ora tion , except a m em ber bank, n or shall the
18 hanks with a capital of not leas than $25,000 napy with the
18
ow n ersh ip , sale, or tra n sfer o f a n y certificate rep resen tin g
19 sanction of the Secretary of the Treasury-,- he organized in
19
the stock
20 any place the population of which does not exceed three
20
m a n n er
21 thousand inhabitants. No
21
o f a certificate rep resen tin g the stock o f a n y other c o rp o ra
'l l
tion, except a m em ber bank
11
12
22
“ Sec .
5138. No association
A fte r
this
section
a m ended takes effect, no national banking association
such
associations
such
association shall be organ-
ized in a city the population of which exceeds fifty thousand
23 persons with capital of less than $200,000, except
that in the
24
ou tlyin g districts o f such a c ity w h ere the S ta te law s p erm it
25
the orga niza tion o f S tate banks with a capital o f $ 1 0 0 , 0 0 0
S
e c
. 1 6 . S ection
5139
of
uA f t e r three y e a r s fro m
23
of
A ct
any
of 1 9 3 2 ,
the
R e v is e d
Statutes,
as
the date o f the enactm ent o f
no
certificate
rep resen tin g
the
association shall rep resen t the stock o f
such
association
w h a tsoever u p on
be
conditioned
the ow n ersh ip,
sale,
or
in
any
tra n sfer
.”
Sec. 17. Section 5144 of the Revised Statutes, as
24 amended, is amended to read as follows ;
. , j.
’■
w !.
' \\
.
.\
■ . ■■■
w.Vvu lb
40
1
41
“ Sec . 5144. In all elections of directors and in de-
1
T n a c t in g u p o n s u c h
2 ciding all questions at meetings of shareholders, each sliarc-
2
th e f i n a n c i a l c o n d it io n o f th e a p p lic a n t , th e g e n e r a l c h a r a c t e r
3 holder shall he entitled to one vote on each share of stock
3
o f it s m a n a g e m e n t , a n d th e p r o b a b le e ffe c t o f th e g r a n t i n g
4 held by him;
4
o f s u c h p e r m i t u p o n th e a f f a i r s o f s u c h b a n k , b u t n o s u c h
5
p e r m it s h a ll be g r a n t e d e x c e p t u p o n th e f o l l o w i n g c o n d it io n s :
except ( 1 )
that shares o f its ow n stock held
5
b y a national bank as trustee shall not be voted, and
(2 )
6
sh a res
of
7
national bank shall not be voted unless such
8
pang
9
a p p lic a t i o n ,
th e b o a rd , s h a ll c o n s id e r
a
6
holding com -
7
m a k in g
affiliate shall have first obtained a votin g perm it as
8
r e c e iv e , o n d a te s id e n t ic a l i v i t h th o s e f ix e d f o r th e e x a m in a -
hereinafter p rovid ed , which perm it is in force at the time
9
t io n
Shareholders may vote by proxies
10
a u t h o r iz e d
11 duly authorized in writing; but no officer, clerk, teller, or
11
e x a m in a t io n s o f s u c h h o ld in g c o m p a n y a f f ilia t e
12 bookkeeper of such association
shall act as proxy;
12
n e c e s s a r y to d is c lo s e f u l l y
13 and no shareholder whose liability is past due and unpaid
13
a n d s u c h h o ld in g c o m p a n y
14 shall be allowed to vote.
14
r e la t io n s u p o n th e a f f a i r s o f s u c h b a n k s , s u c h e x a m in a t io n s
be
15
to
10
controlled
by
any
such shares are voted.
15
“ For
the
p u rp oses
holding
of
co m p a n y
bank
this
section
affiliate
shares
shall
“ (a )
th e
affiliate if
16
e x a m in e d ;
17
they are ow n ed or controlled directly o r indirectly b y such
17
c o n t a in
18
holding
18
f u lly
19
benefit o f the shareholders or m em bers thereof.
19
and
20
banks;
20
co m p a n y
affiliate,
or
held b y
any
trustee fo r
the
“ A n y such holding co m p a n y affiliate m a y m ake appli-
w ith
to
be a t th e
deem ed to be controlled b y
such
h o ld in g
a p p lic a t i o n
o f banks
16
a holding co m p a n y
E v e ry
w h ic h
e x a m in e
expense
(2 )
fo r
th a t
of
th e
s u c h in fo r m a tio n
th e
r e la t io n s
(3 )
th a t s u c h
is
a f f ilia t e
p e r m it ,
a f f ilia t e d ,
banks,
who
s h a ll,
in
(1 )
to
a g re e
e x a m in e r s
s h a ll
m ake
d u ly
such
a s s h a ll he
th e r e la t io n s b e tw e e n s u c h b a n k s
th e
a f f ilia t e
and
h o l d in g
re p o rts
of
th e e ffe c t o f s u c h
com pany
such
a f fd ia t e
e x a m in e r s
so
s h a ll
a s s h a ll be n e c e s s a r y to d is c lo s e
b e tw e e n
th e e ffe c t o f s u c h
such,
it
such
com pany
such
a f f ilia t e
r e la t io n s
upon
e x a m in e r s
m ay
and, such
th e a f f a i r s
e x a m in e
banks
o f such,
each
bank
21
cation
a votin g p erm it
21
o w n e d o r c o n t r o lle d b y th e h o l d in g c o m p a n y a f f ilia t e , b o th
22
entitling it to cast one vote at all elections o f directors o f
22
i n d i v i d u a l l y a n d i n c o n ju n c t io n i v i t h o t h e r b a n k s o w n e d o r
26
such
The
23
c o n t r o lle d b y s u c h h o ld in g c o m p a n y a f f i li a t e ; a n d
24
F ed era l
or
24
p u b lic a t i o n o f i n d i v i d u a l o r c o n s o lid a t e d s ta te m e n ts o f c o n -
25
withhold such
require.
2b
d i t i o n o f s u c h b a n k s m a y be r e q u i r e d ;
to the F e d e r a l R e se r v e B o a r d fo r
bank on
each
R e se r v e
share
Board,
perm it
as
o f stock controlled
m ay,
in
its
the public
by
discretion,
interest
m ay
it.
gran t
(4 )
th a t
43
1
“ (b )
A f t e r J a n u a r y 1 , 1 9 3 5 , e v e r y s u c h h o ld in g c o m
1
book value o f its oivn shares outstanding a reserve o f rea d ily
2
m arketable assets in an am ount not less than 1 2 p e r centum
2
p a n y a f f ilia t e ( 1 ) s h a ll posse ss, a n d s h a ll c o n t in u e to p osse ss
3
d u r in g
o f s u c h p e r m it , f r e e a n d c le a r o f th e lie n ,
3
o f the aggregate p a r value o f bank stocks controlled b y it,
4
p le d g e , o r h y p o th e c a t io n o f a n y n a t u r e , r e a d i l y m a r k e ta b le
4
and
5
a s se ts o t h e r t h a n
a m o u n t n o t le ss t h a n
5
b y such holding co m p a n y
6
1 2 p e r c e n tu m o f th e a g g r e g a te p a r v a lu e o f a l l b a n k s to c k s
0
replacem ent o f capital in banks affiliated w ith it and fo r
7
c o n tr o lle d , b y s u c h h o ld in g c o m p a n y a f f ilia t e , w h ic h a m o u n t
7
losses in cu rred
8
s h a ll be in c re a s e d , b y n o t le ss t h a n 2 p e r c e n tu m p e r a n n u m o f
8
assets resulting fr o m such use shall be m ade u p w ithin such
9
s u c h a g g r e g a te p a r v a lu e u n t i l s u c h asse ts s h a ll a m o u n t to 2 5
9
p eriod
10
p e r c e n tu m o f th e a g g r e g a te p a r v a lu e o f s u c h b a n k s to c k s ;
10
11
a n d ( 2 ) s h a ll r e in v e s t i n r e a d i l y m a r k e ta b le a sse ts o t h e r t h a n
13
b a n k s to c k a l l n e t e a r n in g s o v e r a n d a b o v e 6 p e r c e n tu m
13
13
per annum
o n th e b o o k v a lu e o f it s o w n s h a r e s o u t s t a n d in g
18
14
u n t il
asse ts s h a ll a m o u n t
15
a g g r e g a te
16
“ .(c )
th e l i f e
such
par
b a n k s to c k i n
v a lu e
of
an
the assets required, b y this section to be possessed
affiliate m a y
in such banks,
be used b y
but, a n y
as the F e d e r a l R e s e r v e
B oard
deficiency
m ay
by
it fo r
in such
regulation
p r esc rib e ;
“ (d)
E very
officer,
director,
agent,
and em p loyee o f
e v e r y such holding co m p a n y affiliate shall be subject to the
sam e
penalties
fo r
false
entries
in
any
book,
report,
or
c e n tu m
of
th e
14
statement o f such holding co m p a n y affiliate as are applicable
s to c k s c o n t r o lle d
by
it ;
15
to
th e f o r e g o in g p r o v is io n s o f t h is
16
banks
17
a m en d ed ; and
to
a ll b a n k
N o t w it h s t a n d in g
(2 )
17
s e c tio n , a f t e r J a n u a r y 1 , 1 9 3 5 , ( 1 )
18
pany
19
be i n d i v i d u a l l y
25
per
a n y s u c h h o ld in g c o m -
officers,
directors,
u n d er
section
agents,
5209
and
of
the
em p loyees
R e v is e d
of
m em ber
Statutes,
as
s h a ll
18
“ ( e ) E v e r y such holding c o m p a n y affiliate shall, in its
th e
19
application fo r such votin g perm it, ( 1 ) sh ow that it does not
20
n u m b e r o f s h a r e s o f s u c h h o ld in g c o m p a n y a f f ilia t e h e ld b y
20
ow n , control, or have a n y interest in, and is not participa ting
21
th e m
to a m o u n t s in v e s te d t h e r e in ,
21
in the m anagem ent o r direction of, a n y corporation , business
22
f o r a l l s t a t u t o r y l i a b i l i t y im p o s e d o n s u c h h o l d in g c o m p a n y
22
trust, association, or other sim ilar organization form ed fo r
23
a f f ilia t e b y r e a s o n o f it s c o n t r o l o f s h a r e s o f s to c k o f b a n k s ,
23
the p u rp ose of, or engaged p rin cip a lly in, the issue, fiota-
24
s h a ll be r e q u i r e d o n l y to e s ta b lis h a n d m a i n t a i n o u t o f n e t
24
tion, u n d erw ritin g, public sale, or distribution, at wholesale
25
e a r n in g s o v e r a n d a b o v e 6 p e r c e n tu m
25
or re tail o r through syn dicate participation, o f stocks, bond s
a f f ilia t e
th e s h a r e h o ld e r s o r m e m b e rs o f w h ic h
and
r e s p e c t iv e ly , i n
s e v e r a lly
a d d it io n
lia b le
in
p r o p o r t io n
per annum
to
o n th e
,
45
44
1
debentures, notes, or other securities o f a n y sort (h erein a fter
1
serve B o a r d shall have revoked a n y such votin g perm it, no
2
referred to as securities c o m p a n y ) ;
2
national bank w hose stock is controlled b y the holding com
3
the p eriod that the perm it rem ains in force it w ill not acquire
3
p a n g affiliate w hose p erm it is so revoked, shall receive deposits
4
a n y ow n ership,
securities
4
o f public m o n ey s o f the U n ited States, n o r shall a n y such
5
com pany
direction
5
national
6
th ereof; ( 3 ) agree that if, at the time o f filing the application
6
co m p a n y affiliate u p on a n y shares o f such bank controlled b y
7
fo r such perm it, it ow ns, controls, or has an interest in, o r is
7
such holding c o m p a n y affiliate.
8
pa rticipa ting in the m anagem ent or direction o f, a n y such
8
9
securities com p a n y, it will, within three y e a r s after the filing
9
or
control,
participate
(2 )
or interest in
in
the
agree that d u rin g
any
such
m anagem ent
or
bank
pay
“ W h en ever
any
fu rth er
dividend
to
such
holding
the F e d e r a l R e se r v e B o a r d shall have re-
vok ed a n y votin g p erm it as hereinbefore p rovid ed , the rights
,
10
o f such application, divest itself o f
control,
10
privileges,
11
and interest in such securities co m p a n y and w ill cease par*
11
the stock o f which is controlled b y such
12
ticipating in the m anagem ent or direction thereof, and w ill
12
affiliate shall, in the discretion o f the F e d e r a l R e se r v e B o a rd ,
13
not thereafter, d u rin g the period that the perm it rem ains in
13
be subject to fo rfeitu re in accordance w ith section 2
14
force, acquire a n y fu rth er ow n ership, control, or interest in
14
F e d e r a l R e se r v e A c t, as am ended
15
a n y such securities co m p a n y or participate in the m a n a ge-
15
S e c . 1 8 . A f t e r three y e a r s fr o m the date o f the enact-
16
m ent or direction th er eo f; and
agree that thenceforth
16
m ent o f this A c t , no m em ber bank shall be affiliated in a n y
17
it w ill declare dividends on ly
actual net earnings.
17
m a n n er described, in section 2
18
u I f at a n y time it shall a p p ear to the F e d e r a l R e se r v e
18
ration, association, business trust, o r other sim ilar organiza -
19
Board, that a n y holding co m p a n y affiliate has violated a n y
19
tion engaged p rin cip a lly in the issue, flotation, underw ritin g.
20
o f the p rovision s o f the B a n k in g A c t o f 1 9 3 2
or of any
20
public sale, or distribution at wholesale or retail or through
21
agreem ent m ade p u rsu a n t to this section,
the F e d e ra l R e -
21
syn d ica te
22
serve B o a r d m a y , in its discretion, revoke a n y such votin g
22
o r other securities.
23
p erm it a fter g iv in g six ty d a ys
23
24
its intention
25
it an op p ortu n ity to be heard.
its ow n ership,
(4 )
out o f
notice b y registered mail o f
to the holding c o m p a n y affiliate and affording
W h e n ev er the F ed era l R e -
and
franchises
participation
of
any
(b )
o f stocks,
or
all
national
banks
holding c o m p a n y
o f the
hereof with a n y c o rp o -
bonds,
debentures,
notes,
For every violation of this section the member bank
24 involved shall be subject to a penalty not exceeding $1,000
25 per day for each day during which such violation continues.
46
47
Suchpenalty may be assessed by the Federal Reserve Board,
1 ciation is found to extend into an adjacent State, the Fed-
2 in its discretion, and, when so assessed, may be collected by
2 eral Reserve Board may permit the establishment of a
1
3 the Federal reserve bank by suit or otherwise.
4
3 branch or branches by such association in an adjacent State
If any such violation shall continue for six calendar
4 but not be}rond a distance of fifty miles from the place where
5 months after the member bank shall have been warned by
5 the parent bank is located. No such association shall estab-
6 the Federal Reserve Board to discontinue the same, (a) in
6 lisli a branch outside of the city, town, or village in which
7 the case of a national bank, all the rights, privileges, and
7 it is situated unless it has a paid-in and unimpaired capital
8 franchises granted to it under the National Bank Act may
\
9 be forfeited in the manner prescribed in section 2 of the
)
8 stock of not less than $500,000.”
9
Paragraph (d) of section 5155 of the Revised Statutes,
10 Federal Reserve Act, as amended, or, (b) in the case of a
10 as amended, is amended to read as follows:
11 State member bank, all of its rights and privileges of mem-
11
12 bership in the Federal reserve system may be forfeited in
12 association and its branches shall at no time be less than the
13 the manner prescribed in section 9 of the Federal Reserve
13 aggregate minimum capital required by law for the estab-
14
15
Act, as amended.
14
Sec. 19. Paragraph (c) of section 5155 of the Revised
(c) A national banking association may, after Feb-
18
4927, with the approval of the Federal Reserve
16 and its branches are situated.”
17
)
19 Board, establish and operate new branches within the limits
20 of the city, town, or village, or at any point within the
lishment of an equal number of national banking associa-
15 tions situated in the various places where such association
16 Statutes, as amended, is amended to read as follows:
17
“ (d) The aggregate capital of every national banking
-fetf No branch shall bo established after February 2tq
18 4927, within the limits of any eity? town, or -village of
19 which the population by the last dceonnial eensus was less
)
20 than twenty five thousand? No more than one sueh branch
21 State in which said association is situated: if sueh estabbsb-
21 may be thus established where the population? so deter
22 meet and operation are at the time permitted te State banks
22 mined? of sneh municipal unit does not exceed hfty thou-
23 by the law ef the State in question P ro v id e d , That, if by
23 sand-; and not more than two sneh branches -whore the
24 leason of the proximity of such an association to a State
24 population does not execcd one hundred thousand? In any
25 boundary line, the ordinary and usual business of such asso-
25 sueh municipal unit where the population cxeeeds one
48
2
branches shah he within the discretion of the Oomptrebee
3
el the Curreney.
4
Sec. 20. Sections 1 and 3 of the Act entitled “An
5
Act to provide for the consolidation of national banking
6
associations,” approved November 7, 19 1 8 , as amended,
7
are amended by striking out the words “ county, city, town,
8
or village ” wherever they occur in each such section, and
9
inserting in lieu thereof the words “ Stat eT count}7, city,
10
11
12
town, or village.”
Sec . 2 1 . The first two sentences of section 5 1 9 7 of the
Revised Statutes are amended to read as follows:
13
“An}r association may take, receive, reserve, and charge
14
on any loan or discount made, or upon any notes, bills of
15
exchange, or other evidences of debt, interest at the rate
16
allowed by the laws of the State, Territory, or District where
17
the bank is located,
18
of the discount rate on ninety-day commercial paper in effect
19
at the Federal reserve hank in the Federal reserve district
20
where the hank is located, whichever m a y he the greater.
21
and no more, except that where bv the laws of any State
22
a different rate is limited for banks of issue organized under
23
State laws, the rate so limited shall be allowed for associa-
24
tions organized or existing in any such State under this title.
25
When no rate is fixed by the laws of the State, or Territory,
or at a rate of 1 per centum in excess
49
)
1
or District, the bank may take, receive, reserve, or charge a
2
rate not exceeding 7 per centum,
3
o f
4
e f f e c t
5
d i s t r i c t
6
g r e a t e r
7
ing the days for which the note, bill, or other evidence of
8
debt has to run.”
t h e
d i s c o u n t
a t
t h e
r a t e
F e d e r a l
w h e r e
t h e
o n
p e r
is
l o c a t e d
c e n t u m
i n
c o m m e r c i a l
b a n k
i n
,
t h e
p a p e r
F e d e r a l
w h i c h e v e r
e x c e s s
m
a
y
i n
r e s e r v e
b e
t h e
, and such interest may be taken in advance, reckon-
A ~nr] tb
I111U
tllr\L
9
1
n i n e t y - d a y
r e s e r v e
b a n k
o r
or sale of a bona hde bill
10
of exchange, payable at another place than the place of each
12
rate of exchange for eight drafts
13
shall net he considered as taking or receiving a greater rate
14
of interest .
addition to the interest?
m
15
Sec. 2 2 . The second sentence of the first paragraph
16
of section 5 2 0 0 of the Revised Statutes, as amended, is
17
amended by inserting before the period at the end thereof
18
the following: “
19
o f
20
i n
21
i n t e r e s t . ”
a
c o r p o r a t i o n
w h i c h
s u c h
a n d
a l l
s h a l l
i n c l u d e
o b l i g a t i o n s
c o r p o r a t i o n
o w n s
i n
o f
t h e
a l l
o r
c a s e
o f
o b l i g a t i o n s
s u b s i d i a r i e s
c o n t r o l s
a
t h e r e o f
m a j o r i t y
22
Sec. 23. Section 5 2 1 1 of the Revised Statutes, as
23
amended, is amended by adding at the end thereof the fob
24
lowing new paragraph:
S. 4 4 1 2 ----- 4
50
1
E a c h national banking association shall obtain from.
-
eachof its affiliates other than member banks a nd furnish
o
m a y prescribe, verified by the oath or affirmation of the
5
t r a n s m i t t e d
6
a s
7
to
8
s h a l l
9
w h i c h
three
3
president, or such other officer as m a y be designated by the
board of directors of such affiliate to verify such reports,
disclosing the information hereinafter provided for as of
dates identical with those for which the Comptroller shall
during such year require the reports of the condition of the
association.
For
the
purpose
of
this section
the
affiliate’ shall include holding company affiliates as well
a s
14
be transmitted to the Comptroller at the same time as the
o t h e r
affiliates.
c o r r e s p o n d i n g
r e p o r t
E
a
c
o f
h
s u c h
t h e
r e p o r t
o f
a n
a s s o c i a t i o n ,
affiliate
e x c e p t
s h a l l
t h a t
t h e
16
Comptroller may, in his discretion, extend such time for
17
good cause shown.
18
information as in the judgment of the Comptroller of the
19
Currency shall be necessary to disclose fully the relations
20
between such affiliate a nd such bank
E a c h such report shall contain such
an d
to enable the
Comptroller to inform himself as to the effect of such relat u r n s
u p o n
affiliates
t h e
s h a l l
b e
a f f a i r s
o f
p u b l i s h e d
s u c h
b y
b a n k .
t h e
T h e
a s s o c i a t i o n
r e p o r t s
u n d e r
o f
t h e
s u c h
s a m e
24
conditions as govern
2 5
trailer shall also have power to call for additional reports
its o w n condition reports.
The C o m p -
a n y
it
h e
m
is
a
o b t a i n
.
c
11
R e v i s e d
12
t h e
18
v i s o :
14
n a t i o n a l
15
t i o n
16
a s
17
s u c h
18
u p o n
19
to
20
n a t i o n
21
to
22
f r a n c h i s e s
23
a n c e
24
a m e n d e d .
2 5
p o w e r ,
to
f a i l u r e
2 4 .
p e r i o d
a t
t h e
b a n k
t h e
s h a l l
b a n k
t h e
g i v e
a n y
o f
p e r m i t
o f
o f
i n
all
o f
w i t h
a n d
t h e
h e
h i s
j u d g m e n t
f u l l
a n d ,
c o m
a s s o c i a t i o n
w i t h
r e p o r t s
C u r r e n c y
a f f i l i a t e d
s u c h
t h i s
e a c h
b e
f o r m
w h i c h
u n d e r
f o r
s h a l l
i n
b a n k
r e q u i r e d
$ 1 0 0
is
a
s u c h
f a i l s
s e c t i o n
d a y
d u r i n g
o t h e r
f u l l y
a n d
;
t h e
a n d
i n
b e
t h e
t h e
t h e
t h e
s u b j e c t
t h e
h
o f
t h a n
o f
c o u r s e
o f
r i g h t s ,
a u t h o r i z e d ,
o f
R e s e r v e
C u r r e n c y
to
b a n k s
b e t w e e n
r e l a t i o n s
t h e
r e f u s a l
t h e
t h e
e x a i n i -
i c f i i s a l
p r i v i l e g e s ,
f o r f e i t u r e
e d e r a l
t h e
s u c h
e v e n t
a n y
e x a m i n a -
m e m b e r
o f
p r o -
o f
r e l a t i o n s
e v e n t
to
a n
p u b l i s h
t h e
b e f o r e
f o l l o w i n g
s u c h
t h e
o f
i n s e r t i n g
t h e
effect
i n
i n
all
C o m p t r o l l e r
h e r e b y
o r
b y
5 2 4 0
e x a m i n a t i o n
affiliates
r e q u i r e d
o f
t h e
i n c l u d e
b a n k
s e c t i o n
a n d
s h a l l
affiliate,
2
c o l o n
d i s c l o s e
s h a l l
o f
a m e n d e d
m a k i n g
affiliates
b a n k
is
a,
t h e
p a r a g r a p h
e x a m i n a t i o n ,
s e c t i o n
T h e
its
t o
s u c h
s u c h
o f
t h e r e o f
i n f o r m a t i o n
a n y
t h e
r e p o r t
e x a m i n e r s
s u c h
a f f a i r s
o f
a m e n d e d ,
n e c e s s a r y
a n d ,
o f
s u c h
first
T h a t
a f f a i r s
b e
y
o b t a i n
a d d i t i o n a l
p e n a l t y
e n d
t h e
n
a n y
T h e
a s
“ P r o v i d e d ,
o f
S u c h
i n
c o n t i n u e s
( a )
S t a t u t e s ,
to
c o n d i t i o n s
A
a
w h e n e v e r
o r d e r
C o m p t r o l l e r
f u r n i s h
s u b j e c t
e
i n
t h e
p r e s c r i b e .
s u c h
S
t h e
a n d
b e
o f
affiliate
affiliated.
to
y
s u c h
n e c e s s a r y
k n o w l e d g e
10
term
13
p l e t e
to
a r e
w h i c h
11
s a m e
4
10
-,3
t h e
rep0rtS durin9 each U ear, in such form as the Comptroller
9
22
2
r e s p e c t
4
8
21
w i t h
to the Comptroller of the Currency not less than
7
1 5
1
3
6
12
51
i n
a n d
a c c o r d -
A c t ,
s h a l l
t h e
a s
h a v e
r e p o r t -
53
52
1
o f
2
affiliate
3
d a y s
4
o f
5
p l i e d
6
p r i o r
h i s
e x a m i n a t i o n
w h i c h
a f t e r
t h e
7
o f
s h a l l
n o t
n o t i f i c a t i o n
c o m p t r o l l e r ,
w i t h
to
a n y
t h e
s u c h
( b )
s a m e
w i t h i n
o f
t h e
h a n k i n g
o n e
r e c o m m e n d a t i o n s
o n
to
s a t i s f a c t i o n .
h i s
s h a l l
5 2 4 0
o f
s a i d
b e
1
t w e n t y
2
s u g g e s t i o n s
3
a n d
o r
e x a m i n a t i o n ,
g i v e n
t h e
o r
a s s o c i a t i o n
h u n d r e d
b a s e d ,
p u b l i c i t y
S e c t i o n
n a t i o n a l
to
R e v i s e d
t h e
o r
S t a t u t e s ,
a s
is
9
t h e r e o f
10
“
f u r t h e r
a m e n d e d
t h e
f o l l o w i n g
T h e
o f
12
e x a m i n a t i o n
13
s o
14
a n y
15
u n d e r
16
C o m p t r o l l e r
17
o f
13
n a t i o n a l
t o
affiliate."
6
o r
s h a l l
7
o f
a n y
h e
s h a l l
o f
a n d
o f
u p o n
o r
20
l i o n
21
r e f u s e
22
s i x t y
23
e x p e n s e s
24
a n d ,
25
P r o v i d e d ,
r e s o u r c e s
o f
t h e
m
w h e n
t h e
y
s o
a f f a i r s
b e
t o
b e
o f
b y
t h e
8
a f f i l i a t e d
9
f o r
a
T h e
a s s e s s e d
d a t e
o f
o r
o f
b e
if
a n y
s u c h
t h e
p a i d
t h e
i n
12
d o i n g
t h e
15
D i s t r i c t
e x a m i n a t i o n s
16
e r a l
17
b a n k
18
r e l a t i n g
i d
t i n u e d
s h a l l
20
o f
w i t h i n
21
b y
s u c h
22
b a n k
23
b a n k .
t o
o f
a s s e s s m e n t ,
s u c h
a f f i l i a t i o n
o f
to
e x a m i n a -
s o
t h e n
n a t i o n a l
n a t i o n a l
is
t h e
a s s e t s
w i t h
t w o
o r
!
t h e
all
m a i l
o f
to
o f
a
m a k e
a n y
b e
s u c h
C o m p t r o l l e r
affiliate
g i v e
^
t h e
.
o f
a s s e s s e d ,
n a t i o n a l
o f
t h e
n a t i o n a l
a n
b a n k
e x a m i n a t i o n
b a n k s
t h e
b a n k
t h e
i n
i n
m
s h a l l
o f
r e q u i r e d
n a t i o n a l
a g a i n s t ,
C u r r e n c y
i n f o r m a t i o n
to
t h e
b a n k
a g e n t ,
s u c h
b a n k
a
y
r e f u s e
affiliate
t h e
c o u r s e
w i t h
w h i c h
m o r e
t h a n
C o m p t r o l l e r
o f
a g e n t ,
a s
t h e
m
o f
l a w
o r
s u c h
24
o f
t h e
25
be,
m
c a s e
u n s a f e
C u r r e n c y
a
y
c e r t i f y
o r
t h e
t h e
o r
h a v e
o r
t r u s t
it
is
t r u s t
o r
be,
to
F e d e r a l
to
o f
o f
offi c e r
d o i n g
i n
t h e
officer
t h e
o f
o p i n i o n
o f
c o m p a n y
o r
c o n d u c t i n g
h a v i n g
o r
t h e
d i s c o n t i n u e
p r a c t i c e s ,
r e s e r v e
t h e
S t a t e
s h a l l
a g e n t ,
F e d e r a l
a
t h e
F e d -
a n y
h a v e
l a w
c o n -
t h e
b u s i n e s s
b e e n
w a r n e d
s u c h
a s
i n
m e m b e r
F e d e r a l
t h e
o m p -
n a t i o n a l
b u s i n e s s
v i o l a t e
a f t e r
C
a
to
i n
a n d
e x a m i n a t i o n s
c o n t i n u e d
u n s o u n d
f a c t s
o r
p e n -
C u r r e n c y
o p i n i o n
C u r r e n c y
y
t h e
a
p r a c t i c e s
t h e
o f
$ 1 0 0
S u c h
o f
c o m p a n y ,
a
c o n t i n u e .
c o m p a n y
d i r e c t o r
u n s o u n d
o r
t h e
w h e n e v e r ,
s h a l l
n o t
e x p e n s e s
d i r e c t o r
t r u s t
a n y
s h a l l
a s
i n
a n y
o r
o f
C o m p t r o l l e r
m a n n e r
b a n k
o r
p e n a l t y
r e f u s a l
t h e
o r
d i s t r i c t
u n s a f e
s u c h
b y
C u r r e n c y ,
h i s
a
s u c h
C o l w n b i a ,
r e s e r v e
to
W h e n e v e r ,
a
o f
i n
a n y
s a m e
2 5 .
t h e
o r
s u b j e c t
a s s e s s e d
i n
o f
b e
t h a t
b e
e c
b a n k ,
d o
a f f i l i a t e d
S
s h a l l
y
14
t h e r e o f
affiliate
t o
a
t r o i l e r
d a t e s
s u c h
m
1 3
e x a m i n e
p r o p o r t i o n
f a i l
b y
c o l l e c t e d
f i n d i n g s
to
o r
e x a m i n a t i o n ,
d a y
11
a g e n t s
o f
e a c h
t h o r o u g h
C o m p t r o l l e r
t h e
s h a l l
a g a i n s t
h i s
i n
u p o n
I f
)
a l l y
to
a s
e x a m i n e r
s u c h
10
a n d
a n d
t h e
a
a n y
a n y
r e f u s e
affiliate
a n y
a n d
e x p e n s e
e x a m i n e d
s h a l l
T h a t ,
o a t h s
b y
affiliates
a s s e s s e d
h o w e v e r ,
affiliate,
r e p o r t
e x p e n s e s
a s s e s s e d ,
t h e
o f
a n
e x p e n s e s
I
p a r a g r a p h
m a k e
e m p l o y e e s ,
affiliates.
t h e
to
a d m i n i s t e r
affiliates
s u c h
a f t e r
a
y
first
(
p o w e r
C u r r e n c y .
a
t h e
e x a m i n a t i o n
h a v e
m a k e
v a r i o u s
p a y
d a y s
m
t h e
d i r e c t o r s ,
to
h e l d
t h e
to
t h e
p o w e r
affiliates
C u r r e n c y
s h a l l
officers,
o a t h
19
h a v e
t h e
s u c h
all
a f t e r
I f
p e r m i t
s u c h
f r o m ,
p r o p o r t i o n s
5
p a r a g r a p h :
m a k i n g
b a n k
o f
a d d i n g
n e w
e x a m i n e r
11
a
b y
s u c h
n o t i c e
a m e n d e d ,
b a n k s ,
c o l l e c t e d
p r e s c r i b e .
i
8
a n d
4
d a y s '
b a n k
n a t i o n a l
c o m -
h a v e
N i n e t y
m o r e
r e s e r v e
v i o l a t i o n s
C o m p t r o l l e r
t h e
R e s e r v e
c a s e
m
a
y
B o a r d .
1
I n
2
n o t i c e
a n y
s u c h
t o
b e f o r e
b e
r e m o v e d
5
e a c h
(>
a f t e r
7
o p p o r t u n i t y
8
t h a t
9
b a n k
o f
g r a n t i n g
o r
p r a c t i c e s
11
c o m p a n y
12
t h e
13
s u c h
b e
i n
F e d e r a l
t h e
o f
l a w
t h a t
16
o f
s u c h
o r d e r
17
A
c o p y
o f
18
w h i c h
19
o f f i c e r
20
P r o v i d e d ,
21
w h i c h
22
a n y o n e
23
t o r s
24
p r o c e e d i n g s
25
o r
d i r e c t o r
h e
s h a l l
it
a
d i r e c t o r
t h e
s u c h
b a s e d
e x c e p t
o f f i c e r
to
T h a t
is
t h e
t h e
b a n k
f o r
b e e n
b e
o r d e r
c e a s e
b e
r e m o v e d ,
r e s e r v e
o r d e r
s h a l l
d i r e c t o r
v i o l a t i o n
f r o m
a n d
n o t
b e
o r
m
o f f i c e r
office
t h i s
a s
3
n o t
to
4
c o u r t .
I f
5
r e a s o n a b l e
6
is
f i n d s
7
o r
s u c h
8
is
u n s o u n d
9
o f
o r
t o
a
y
A
t h e
o f
o r
i n
c o p y
officer.
b a n k
o f
d i r e c t o r
o r
s u c h
o f
i n v o l v e d
o r d e r
o r
s u c h
p u b l i c
b a n k :
f a c t
a n d
y
u p o n
d i s c l o s e d
t h e
c o n n e c t i o n
n
o f
p r a c t i c e s ,
m
u p o n
A
t r u s t
d i s c o n t i n u e
d i r e c t o r
f i n d i n g s
h e r e i n
o r
office.
o f f i c e r
s e c t i o n .
t o
C o m p t r o l l e r
f r o m
t h a n
s e n t
m a i l .
u n s o u n d
s e r v e d
a d e
b e
n o t
b a n k
t h e
s u c h
t h e
s h a l l
b e
d i s c r e t i o n ,
o r
o t h e r w i s e
o f
s u c h
w h e r e u p o n
d i r e c t o r
b a n k
B o a r d
u n s a f e
o r
r e m o v e d
b e
2
r e l a t i n g
a g e n t
u n s a f e
officer,
a
l a w
b y
a l s o
a p p e a r
y
t o
a
R e s e r v e
w a r n e d
u p o n
p a r t i c i p a t e s
s h a l l
o f f i c e r
o f
s e i w e d
o r
o r
its
a f t e r
r e g i s t e r e d
a n y
i n
1
a
s h o u l d
o r d e r
b u s i n e s s
b e
s h a l l
h e
b y
c a u s a .
m
o f f i c e r
y
c o n t i n u e d
s u c h
i n v o l v e d ,
a
h a s
o f f i c e r
h
F e d e r a l
B o a r d ,
o r
s h a l l
s u c h
is
o r
o r
s u c h
v i o l a t e
o r
w
d i r e c t o r
F e d e r a l
R e s e r v e
15
o f
o r
o f
t h e
t o
h a v i n g
v i o l a t i o n
s u c h
h e a r d ,
c o n d u c t i n g
a f t e r
c a u s e
a f f e c t e d ,
a c c u s e d
c o m p a n y
C u r r e n c y
t h e
b a n k
B o a r d
d i r e c t o r
c o p y
c o n t i n u e d
R e s e r v e
s u c h
s h o i v
A
t h e
t h e
to
t r u s t
10
t o
office.
d i r e c t o r
h a s
F e d e r a l
u / p o n
b o a r d
f r o m
h e
t h e
s e r v e d
s u c h
4
14
c a s e
s u c h
p r o v i d e d
w
h
to
d i r e c -
w i t h
d i r e c t o r
o
t h e r e -
10
b e
m o r e
S
e c
h e r e b y
t h e
h e l d
n o t
s u c h
b e
f i n e d
t h a n
.
i n
2 6 .
f i v e
T h e
e x p r e s s l y
a p p l i c a t i o n
i n v a l i d ,
t h e
p r o v i s i o n
a f f e c t e d
a n y
n o t
m a n n e r
m o r e
y e a r s ,
right,
t h a n
o r
to
r e m a i n d e r
to
o t h e r
t h e r e b y .
b o t h ,
I f
to
m a n a g e m e n t
i n
a n y
t h e
p e r s o n s
o r
t h e
a m e n d ,
a n y
o f
t h e
$ 5 , 0 0 0
a l t e r ,
r e s e r v e d .
t h e r e o f
i n
i m p r i s o n e d
d i s c r e t i o n
o r
r e p e a l
p r o v i s i o n s
p e r s o n
A c t ,
o r
o f
o r
a n d
o f
s u c h
f o r
o f
t h e
t h i s
A c t
t h i s
A c t
,
c i r c u m s t a n c e s ,
t h e
a p p l i c a t i o n
c i r c u m s t a n c e s ,
s h a l l
—
Calendar No. 604
7 2 d CONGRESS
2 d S e s s io n
)
S.
A
B IL L
4 4 1 2
T o p ro v id e fo r the sa fe r and m ore effective
use of th e assets of F e d e ra l reserve banks
and of n a tio n a l b an k in g associations, to
reg u late in te rb a n k control, to p re v e n t th e
undue diversion of fu n d s into speculative
operations, an d fo r o th er purposes.
B y M r. G lass
A p r il 1 8 , 1 9 3 2
Read twice and referred to the Committee on
Banking and Currency
A p r il 1 8 , 1 9 3 2
Reported without amendment
J a n u a r y 1 0 (calendar day, J a n u a r y 12
Ordered reprinted
), 1933
■
—;
Calendar No. 6
72d
0 4
CO NGRESS
1s t S e s s io n
4
4
1
2
IN TH E SENATE OF THE U N ITED STATES
A
Mr.
G
lass
in tr o d u c e d
.
th e
1 8 ,1 9 3 2
p r il
fo llo w in g
b ill;
w h ic h
w as
rea d
tw ic e
and
re fe r r e d
to th e C om m ittee on B a n k in g an d C urrency
A
1 8 ,1 9 3 2
p r il
R ep o rted by M r. G lass, w ith o u t am endm ent
A B IL L
/r
To provide for the safer and more effective use of the assets of
Federal reserve banks and of national banking associations,
to regulate interbank control, to prevent the undue diver
sion of funds into speculative operations, and for other
purposes.
1
B
e
it
e n a c t e d
b y
t h e
S e n a t e
a n d
H o u s e
2
t i v e s
3
That the short title of this Act shall be the
4
of 1 9 3 2 .”
5
6
o f
t h e
U n i t e d
S t a t e s
o f
A m e r i c a
i n
o f
R e p r e s e n t a -
C o n g r e s s
“
a s s e m b l e d
,
Banking Act
^33
Sec . 2.
As used in this Act and in any provision of
law amended by this Act—
3
2
national bank,” “ national
1
or other persons exercising similar functions are directors
2
banking association/' “ member bank,” “ board,” “ district,”
2
of a member bank.
3
and “ reserve bank ” shall have the meanings assigned to
3
(c) The term “ holding company affiliate ” shall include
4
them in section 1 of the Federal Reserve Act, as amended.
4
any corporation, business trust, association, or other similar
5
(b) Except where otherwise specifically provided,
5
organization—
6
the term “ affiliate ” shall include any corporation, business
6
( 1 ) Which owns or controls, directly or indirectly,
7
trust, association, or other similar organization—
7
either a majority of the shares of capital stock of a member
1
(a) The terms “ bank/’
“
8
( 1 ) Of which a member bank, directly or indirectly,
8
bank or more than 5 0 per centum of the number of shares
9
owns or controls either a majority of the voting shares or
9
voted for the election of directors of such bank at the
10
more than 5 0 per centum of the number of shares voted for
10
preceding election, or controls in any manner the election
11
the election of its directors, trustees, or other persons exer-
11
of a majority of the directors of such bank; or
12
cising similar functions at the preceding election, or con-
12
( 2 ) For the benefit of whose shareholders or members
13
trols in any manner the election of a majority of its directors,
13
all or substantially all the capital stock of a member bank
14
trustees, or other persons exercising similar functions; or
14
is held by trustees.
Se c . 3.
Os* -* r v*~ "
(a) The fourth paragraph after paragraph
15
( 2 ) Of which control is held, directly or indirectly,
15
16
through stock ownership or in any other manner, by the
16
“ Eighth ” of section 4 of the Federal Reserve Act, as
17
shareholders of amember bank
who own or control either
17
amended, is amended to read as follows:
18
a majority of the shares of such bank or more than 5 0 per
18
“ Said board of directors shall administer the affairs
19
centum of the number of shares voted for the election of
19
of said bank fairly and impartially and without discrimina-
20
directors of such
bank at the preceding election, or by
20
tion in favor of or against any member bank or banks and
21
trustees for the
benefit of the shareholders of any such
21
may, subject to the provisions of law and the orders of
22
bank; or
22
the Federal Reserve Board, extend to each member bank
23
(3) Of which either a majorhy of the members of its
23
such discounts, advancements, and accommodations as may
24
executive committee or a majority of its directors, trustees,
24
be safely and reasonably made with due regard for the
-
4
1
claims and demands of other member banks, the mainte-
1
terminate such suspension or may renew it from time to
2
nance of sound credit conditions, and the accommodation of
2
time.,,
3
commerce, industry, and agriculture.
The Federal Reserve
3
(b) The paragraph of section 4 of the Federal Reserve
4
Board may prescribe regulations further defining within the
4
Act, as amended, which commences with the words “ The
5
limitations of this Act the conditions under which discounts,
5
Federal Reserve Board shall classify ” is amended by insert-
0
advancements, and accommodations may be extended to
6
ing before the period at the end thereof a colon and the
7
member banks.
Each Federal reserve bank shall keep
7
following:
3
itself informed of the general character and amount of the
3
member banks within the same Federal reserve district are
9
loans and investments of its member banks with a view to
9
affiliated with the same holding company affiliate, participa-
IQ
ascertaining whether undue use is being made of bank credit
10
tion by such member banks in any such nomination or
[1
for the speculative carrying of or trading in securities,
11
election shall be confined to one of such banks, which may
j2
real estate, or commodities, or for any other purpose incon-
12
be designated for the purpose by such holding company
[3
sistent with the maintenance of sound credit conditions; and,
13
affiliate.”
14
in determining whether to grant or refuse advances, redis-
14
Sec. 4 . The first paragraph of section 7 of the Federal
15
counts or other credit accommodations, the Federal reserve
15
Reserve Act, as amended, is amended, effective July 1 ,
10
bank shall give consideration to
The
10
1 9 3 2 , to read as follows:
17
chairman of the Federal reserve bank shall report to the
17
“After all necessary expenses of a Federal reserve bank
13
Federal Reserve Board any such undue use of bank credit
18
shall have been paid or provided for, the stockholders shall
19
by any member bank, together with his recommendation.
19
be entitled to receive an annual dividend of 6 per centum
>0
Whenever, in the judgment of the Federal Reserve Board,
20
on the paid-in capital stock, which dividend shall be
2[
any member bank is making such undue use of bank credit,
21
cumulative.
22
the board may, in its discretion, after reasonable notice and
22
been fully met, the net earnings shall be paid into the
. 23
an opportunity for a hearing, suspend such bank from the use
23
surplus fund of the Federal reserve bank.”
of the credit facilities of the Federal reserve system and may
24
'
24
such information.
95
Se c .
“ Provided ,
That whenever any two or more
*
After the aforesaid dividend claims have
5. (a) The second paragraph of section 9 of
the Federal Reserve Act, as amended, is amended by adding
6
1
at the end thereof the following:
That
1
oral Reserve Board may, in its discretion, extend such time
2
nothing herein contained shall prevent an}7 State member
2
lor good cause shown.
3
bank from establishing and operating branches in the United
3
information as in the judgment of the Federal Reserve
4
States or any dependency or insular possession thereof or in
4
Board shall be necessary to disclose fully
5
any foreign country, on the same terms and conditions and
5
between such affiliate and such bank andto enable the hoard
6
subject to the same limitations and restrictions as are appli-
6
to inform itself as to the effect of such relations upon the
7
cable to the establishment of branches by national banks.”
7
affairs of such bank.
8
(b) Section 9 of the Federal Reserve Act, as amended,
8
be published by the bank under the same conditions as
9
is further amended by adding at the end thereof the follow-
9
govern its own condition reports.
10
“ P ro v id e d , h o w e ve r,
ing new paragraphs:
Each such report shall contain such
the relations
The reports of such affiliates shall
10
“Any such affiliated member bank may be required to
11
“ Each bank admitted to membership under this section
11
obtain from any such affiliate such additional reports as
12
shall obtain from each of its affiliates other than member
12
in the opinion of its Federal reserve bank or the Federal
13 banks and furnish to the Federal reserve bank of its district
13
Reserve Board may be necessary in order to obtain a full
14 and to the Federal Reserve Board not less than three reports
14
and complete knowledge of the condition of the affiliated
15 during each year. Such reports shall be in such form as
15
member bank.
10 the Federal Reserve Board may prescribe, shall be verified
16
to the Federal reserve bank and the Federal Reserve Board
17 by the oath or affirmation of the president or such other
17
and shall be in such form as the Federal Reserve Board
18 officer as may be designated by the board of directors of such
18
may prescribe.
19 affiliate to verify such reports, and shall disclose the infor-
19
“Any such affiliated member bank which fails to
20
mat-ion hereinafter provided for as of dates identical
20
obtain from any of its affiliates and furnish any report
21
with those fixed by the Federal Reserve Board for
21
provided for by the two preceding paragraphs of this section
22
reports of the condition of the affiliated member bank.
22
shall be subject to a penalty of $100 for each day during
23 Each such report of an affiliate shall be transmitted
23
which such failure continues, which, by direction of the •
24 as herein provided at the same time as the corresponding
24
Federal Reserve Board, may be collected, by suit or other-
25 report of the affiliated member bank, except that the Fed-
25
wise, by the Federal reserve bank of the district in, which
Such additional reports shall be transmitted
9
8
For the purposes of this
1 require any or all State member hanks affiliated with such
1
such member bank is located.
2
paragraph and the two preceding paragraphs of this section,
2
holding company affiliate to surrender their stock in the
8
the term ‘ affiliate ’ shall include holding company affiliates
3
Federal reserve bank and to forfeit all rights and privileges
4
as well as other affiliates.
4
of membership in the Federal reserve s}^stem as provided in
5
this section.
5
“ State member banks shall be subject to the same
6
limitations and conditions with respect to the purchasing,
f>
7
selling, underwriting, and holding of investment securities
7
8
and stock as are applicable in the case of national banks
^ Reserve Board shall make such examinations of the affairs
9
under paragraph 4 Seventh 5 of section 5136 of the Revised
9
10
Statutes, as amended.
“ In connection with examinations of State member
banks, examiners selected or approved by the Federal
of all affiliates of such banks as shall be necessarv
•/ to disclose
10
fully the relations between such banks and their affiliates
11
“After three years from the date of the enactment
11
and the effect of such relations upon the affairs of such banks.
12
of the Banking Act of 1932, no certificate representing the
12
The expense of examination of affiliates of any State member
13
stock of any State member bank shall represent the stock
13
bank ma}% in the discretion of the Federal Reserve Board,
14
of any other corporation, except a member bank, nor shall
14 he assessed against such bank and, when so assessed, shall
15
the ownership, sale, or transfer of any certificate represent-
15 be paid by such bank. In the event of the refusal to give
i l i W t 4 & ■A'1
If«u
f m a t © &hn?>l obtain frcn such holding oorapany affiliato, with
in adtth t t i W & W W
aaotproonont that each holding company affiliate ohall ho subject to the
same IdrbndlflhbCHa oeat Ikeltku oao m e ;orfi a^ltnubift
,
SI44 of the evt sed -tatutoc, aa amended, in the cat* of holding
o o m p w o f n e t l & n r i f c . banks. A copy of each such agreemeat sh J.1 be" filed with the Foderal ?.oservo loaru* Upon the
faUWTf of a.
affiliate to obtain such ah agrdenent within, the tine so pre
suoh,bank to
V W J * > ~ 1 le
surrender Its si
aonre
s. as
1sys
1 1 tetr as “pl
16 any information requested in the course of the examination
17 of any such affiliate, or in the event of the refusal to permit
18 such examination, or in the event of the refusal to pay
19 any expense so assessed, the Federal Reserve Board may,
20
in its discretion, require any or all State member banks
21
affiliated with such affiliate to surrender their stock in the
22 Federal reserve hank and to forfeit all rights and privileges
23 amended. Whenever the Federal Reserve Board shall have
23 of membership in the Federal reserve system, as provided
24 revoked the voting permit of any such holding company
24
25 affiliate, the Federal Reserve Board may, in its discretion,
in this section.”
11
10
1
(b) The second paragraph of section
of the Fed-
]
Sec . 6 . (a) The first paragraph of section 10 of the
2
Federal Beserve Act, as amended, is amended to read as
2 eral Beserve Act, as amended, is amended to read as follows:
3
follows:
3
“
10
The Comptroller of the Currency shall be ineligible
4 during the time he is in office and for two years thereafter
4
“A Federal Beserve Board is hereby created which
5
shall consist of seven members, including the Comptroller of
5
to hold any office, position, or employment in any member
6
the Currency, who shall be a member ex officio, and six
6
bank. The appointive members of the Federal Beserve
7 members appointed by the President of the United States,
and for two years thereafter to hold any office, position, or
8
by and with the advice and consent of the Senate.
9
selecting the six appointive members of the Federal Beserve
10
Board, not more than one of whom shall be selected from
10
tion shall not apply to a member who has served the full
11
any one Federal reserve district, the President shall have
11
term for which he was appointed. Upon the expiration of
12
due regard to a fair representation of the financial, agricul-
12 the term of any appointive member of the Federal Beserve
13
tural, industrial, and commercial interests, and geographical
13 Board in office when this paragraph as amended takes effect,
14
divisions of the country, and at least two of such members
14 the President shall fix the term of the successor to such
15
shall be persons of tested banking experience.
The six
15 member at not to exceed twelve years, as designated by the
16
members of the Federal Beserve Board appointed b}7 the
10 President at the time of nomination, hut in such manner as
17
President and confirmed as aforesaid shall devote their entire
17 to provide for the expiration of the term of not more than one
18
time to the business of the Federal Beserve Board and shall
18 appointive member in any two-year period, and thereafter
19
each receive an annual salary of $ 12 ,000 , pa}7able monthly,
19 each appointive member shall hold office for a term of twelve
20
together with actual necessary traveling expenses, and the
20
years from the expiration of the term of his predecessor. Of
21
Comptroller of the Currenc.y, as ex officio member of the
21
the six persons thus appointed, one shall be designated by
22
Federal Beserve Board, shall, in addition to the salary now
22 the President as governor and one as vice governor of the
23
paid him as Comptroller of the Currency, receive the sum
23 Federal Beserve Board. The governor of the Federal
24
of $7,000 annually for his services as a member of said
24 Beserve Board, subject to its supervision, shall he its active
25
board.”
•<
In
7 Board shall be ineligible during the time they are in office
8
9 employment in any member bank, except that this restric-
25 executive officer. Each member of the Federal Beserve
13
12
1
Board shall within fifteen days after notice of appointment
2
make and subscribe to the oath of office/’
j
4,
4'm
J
Sec . 7 .
The Federal Beserve Act, as amended, is
amended by inserting between sections 12 and 13 thereof
the following new sections:
•
3
(c) The fourth paragraph of section 10 of the Federal
3
4
Keserve Act, as amended, is amended to read as follows:
4
5
“ The principal offices of the hoard shall be in the Dis-
5
Open Market Committee (hereinafter referred to as the
“ Sec .
1 2 A.
(a)
There
is
hereby created a Federal
0
trict of Columbia.
At meetings of the hoard the governor
0
committee), which shall consist of as many members as
7
shall preside as chairman, and, in his absence, the vice gov-
7
there are Federal reserve districts. Each Federal reserve
3
ernor shall preside.
In the absence of both the governor
3
bank by its board of directors shall annually select one
9
and the vice governor, the board shall elect a member to act
9
member of said committee. The meetings of said com-
10
us chairman pro tempore.
No member of the Federal Be
10
mittee shall be held at Washington, District of Columbia,
ll
serve Board shall be an officer or director of any bank, bank-
11
at least four times each year, upon the call of the governor
12
ing institution, trust company, or Federal reserve bank or
12
of the Federal Beserve Board or at the request of any
13
hold stock in any bank, banking institution, or trust corn-
13
three members of the committee, and, in the discretion of
14
pany; and before entering upon his duties as a member of
14
the board, may be attended by the members of the board.
15
the Federal Beserve Board he shall certify under oath that
15
“ (b) No Federal reserve bank shall engage in open
IP
he has complied with this requirement and such certification
10
market operations under section 14 of this Act except in
17
shall be filed with the secretary of the board.
Whenever a
17
accordance with resolutions adopted by the committee and
13
vacancy shall occur, other than by expiration of term, among
18
approved by the Federal Beserve Board as hereinafter pro-
1 <) the six members of the Federal Beserve Board appointed bv
19
vided. The committee shall consider, adopt, and transmit
20
the President as above provided, a successor shall be
20 to the several Federal reserve banks resolutions relating to
21
appointed by the President, by and with the advice and
21
the open market transactions of such banks and the relations
22
consent of the Senate, to fill such vacancy, and when
22
of the Federal reserve system with foreign central or other
23
appointed he shall hold office for the unexpired term of
23
foreign banks. Every such resolution shall be reported to
24
his predecessor.”
24 the Federal Beserve Board and be subject to its approval.
14
15
1
“ (c) The time, character, and volume of all purchases
1
board for the purpose, and three selected annually by the
2
and sales of paper described in section 14 of this Act as
2
governors of the twelve Federal reserve banks under such
3
eligible for open market operations shall be governed with
3
procedure as may be prescribed by the Federal Reserve
4
a view to accommodating commerce and business and with
4
Board.
5
regard to their bearing upon the general credit situation of
5
any additional compensation for his services as such member.
6
7
the country.
“ (d) If any Federal reserve bank shall decide not to
8
participate in open market operations recommended and ap
9
proved as provided in paragraph (b) hereof, it shall file'
10
with the chairman of the committee within thirty days a
11
notice of its decision, and transmit a copy thereof to the
12
Federal Reserve Board.
18
“ Sec .
12
No member of such board of directors shall receive
out of any'nsnoy In tab Trafcurury not otherwise appropriated, the
ft.by the
7
oration
n an equal c
_
■
u
r 1
ho subject to call in whole or in pxr% by the pourd of directors
!i ofirttat r i w f r i y r n i ln'?kct»>
a t t a i n jjn
aiammt of capital stock required to h>e
i subscribed for by
and tho United states shall bo entitled to the payment of divide
Tt^W»t
rtrnirjlentitled
to such payment on the Class A stoe'e of the corporation held by
11
count oi such stoat snail be isr.uod hr- the corporation to the
B. (a) There is hereby created a Federal
14 Liquidating Corporation (hereinafter referred to as the
14
15 corporation), whose duty it shall be to purchase, hold,
15
divided into shares of $100 each.
and liquidate as hereinafter provided, the assets of national
10
the corporation shall be of two classes, class A and class B.
17 banks which have been closed by action of the Comptroller
17
Class A stock shall be held by member banks only and they
18 of the Currency, or by vote of their directors, and the assets
18
shall he entitled to payment of dividends out of net earnings
() of State member banks which have been closed by action
19
at the rate of six per centum per annum on the capital stock
20
of the appropriate State authorities, or by vote of their
20
paid in by them, which dividends shall be cumulative, or to the
21
directors.
“ (b) The management of the corporation shall be
21
extent of 80 per centum of such net earnings in any one year,
22
whichever amount shall be the greater, but such stock shall
10
1
22
“'(d) The capital stock of the corporation shah be
Certificates of stock of
23 vested in a board of directors consisting of five members,
23
have no vote at meetings of stockholders.
04
one of whom shall be the Comptroller of the Currency, one
24
shall be held by Federal reserve banks only and shall not
\5
a member of the Federal Reserve Board designated by the
25
be entitled to the payment of dividends.
Class B stock
Every Federal
16
1
reserve bank shall subscribe to shares of class B stock in
2
the corporation to an amount equal to one-fourth of the
3 surplus of such bank on July 1 , 1932, and its subscriptions
4
shall be accompanied by a certified check payable to the
5
corporation in an amount equal to one-half of such subscrip-
6
tion. The remainder of such subscription shall be subject
7
to call from time to time by the board of directors upon
8
ninety days’ notice.
9
“ (e) Every member bank shall subscribe to the class
10 A capital stock of the corporation in an amount equal to
11
one-fourth of
12
and demand deposits on July 1 , 1932, as computed in
1
per centum of its total net outstanding time
13 accordance with regulations of the Federal Reserve Board
14
governing the computation of reserves. One-half of such
15 subscription shall be paid in full within ninety days after
16 receipt of notice from the chairman of the board of directors
17 of the corporation, and the remainder of such subscription
18 shall be subject to call from time to time by the board of
19 directors of the corporation.
20
“ (f) The amount of the outstanding class A stock of
21
the corporation held by member banks shall be annually
22
adjusted as hereinafter provided as of the last preceding
23 call date as member banks increase their time and demand
24 deposits or as additional banks become members, and such
25 stock may be decreased in amount as member banks reduce
17
1
their time and demand deposits or cease to be members.
2
Shares of the capital stock of the corporation owned by
3
member banks shall not be transferred or hypothecated.
4 When a member bank increases its time and demand
5
deposits, it shall, at the beginning of each calendar year,
6
subscribe for an additional amount of capital stock of the
7 corporation equal to one-fourth of
8
1
per centum of such
increase in deposits. One-half of the amount of such addi-
9 tional stock shall be paid for at the time of the subscription
i
10
therefor and the balance shall be subject to call by the board
11
of directors of the corporation. A bank admitted to mem-
12
bership in the Federal reserve system at any time after the
13 organization of the corporation shall be required to sub14 scribe for an amount of class A capital stock equal to
15 one-fourth of
1
per centum of the time and demand
16 deposits of the applicant bank as of the date of such ad17 mission, paying therefor its par value plus one-half of 1
18 per centum a month from the period of the last dividend on
19 the class A stock of the corporation. When a member bank
20
reduces its time and demand deposits it shall surrender, not
21
later than the 1st day of January thereafter, a proportionate
22
amount of its holdings in the capital stock of the corporation,
23 and when a member bank voluntarily liquidates it shall sur24 render all its holdings of the capital stock of the corporation
S. 4412---- 2
1 8
19
1
and be released from its stock subscription not previously
1
2
called. The shares so surrendered shall be canceled and
2
3
the member bank shall receive in payment therefor, under
3
4
regulations to be prescribed by the Federal Reserve Board,
4 cers and employees as are not otherwise provided for in this
5
a sum equal to its cash-paid subscriptions on the shares
5 section, to' define their duties, fix their compensation,
G surrendered and its proportionate share of dividends not to
G require bonds of them and fix the penalty thereof, and to
7
exceed one-half of
8
of the last dividend on such stock, less any liability of such
9
member bank to the corporation.
1
per centum a month, from the period
i
Fourth. To sue and be sued, complam and defend,
in any court of law or equity, State or Federal.
“
Fifth. To appoint by its board of directors such offi-
7 dismiss at pleasure such officers or employees. Nothing in
8
this or any other Act shall be construed to prevent the
9 appointment and compensation as an officer or employee
“ (g) If any member bank shall be declared insolvent,
10
of the corporation of any officer or employee of the United
11
the stock held by it in the corporation shall be canceled,
11
States in any board, commission, independent establishment,
12
without impairment of the liability of such bank, and all
12
or executive department thereof.
1
(»
“
13 cash-paid subscriptions on such stock, with its proportionate
13
“
Sixth. To prescribe by its board of directors, by-laws
14
share of dividends not to exceed one-half of
per centum
14 not inconsistent with law, regulating the manner in which
15
per month from the period of last dividend on such stock
15 its general business may be conducted, and the privileges
1
1
G shall be first applied to all debts of the insolvent bank or
17
the receiver thereof to the corporation, and the balance, if
18 any, shall be paid to the receiver of the insolvent bank.
)
1G granted to it by law may be exercised and enjoyed.
17
“ Seventh. To exercise by its board of directors, or duly
18 authorized officers or agents, all powers specifically granted
11
“ (h) Upon the date of enactment of the Banking Act
20
of 1932, the corporation shall become a body corporate and
20
as shall be necessary to carry out the powers so granted.
21
as such shall have power—
21
“ (i) The board of directors shall administer the
affairs of the corporation fairly and impartially and without
19 by the provisions of this section and such incidental powers
22
“ First. To adopt and use a corporate seal.
22
23
“ Second. To have succession until dissolved by an
23 discrimination in favor of or against any member bank or
24 Act of Congress.
24 banks and may, subject to the provisions of law, extend to
25
25
“ Third. To make contracts.
each national bank which is closed by action of the Comp-
2 0
21
1
troller of the Currency, or by vote of its directors, and to
1
tion committee of three members consisting of the receiver
2
each State member bank which is closed by action of the
2
of such bank, a member to be named by the board of direc-
3 appropriate State authorities, or by vote of its directors, such
3 tors of such bank, and a person to be chosen by the receiver
4 accommodations as may be safely and reasonably made
4 and the member named by such board of directors. It
5 with due regard for the claims and demands of other mem-
5 shall be the duty of the. corporation to proceed to
6
her banks. The board of directors of the corporation shall
7 determine and prescribe the manner in which its obligations
8
shall he incurred and its expenses allowed and paid. The
9 corporation shall be entitled to the free use of the United
(1
realize as rapidly as possible, having due regard to the
V condition of credit in the district in which such bank
8
is located, upon any assets so purchased, and if the net
9 amount realized from the sale or other disposition of such
10
States mails in the same manner as the executive depart-
10
assets exceeds the sum paid therefor, the corporation shall
11
ments of the Government. The corporation with the con-
11
make an additional payment to the receiver of the bank
12
sent of any Federal reserve bank or of any board, commis-
12
equal to the amount of such excess, if any, after deducting a
13 sion, independent establishment, or executive department
13 liquidation fee of 8 per centum of the sum thus realized; but
14 of the Government, including any field service thereof, may
14 any income derived by the corporation from such assets shall
15 avail itself of the use of information, services, and facilities
15 be the property of the corporation. Money of the corpora
J6
ls
17
thereof in carrying out the provisions of this section.
tion not otherwise employed shall be invested in securities
“ (j) Whenever any member bank shall have been
17 of the Government of the United States, except that for
18 closed by action of its board of directors, the Comptroller of
18 temporary periods, in the discretion of the board of directors,
19 the Currency, or the appropriate State authority, as the case
19 funds of the corporation may be deposited subject to check
20
may be, the receiver may tender the assets of such bank to
20
in any Federal reserve bank or with the Treasurer of the
21
the corporation which may purchase the same, or make a loan
21
United States. When designated for that purpose by the
22
on the security thereof, in whole or in part, as in the deter-
22 Secretary of the Treasury, the corporation shall be a deposi-
23 mination of its board of directors the prompt and economical
23
24 liquidation of the assets of such bank may require, on the
24 such regulations as may be prescribed by the said Secretary,
basis of such valuations as may be agreed upon by a valua-
25 and may also be employed as a financial agent of the Govern-
25
ta ry
of public moneys, except receipts from customs, under
23
1
ment.
It shall perform all such reasonable duties as deposi-
1
troller of the Currency may, in his discretion, pay dividends
2
tary of public moneys and financial agent of the Government
2
on proved claims at any time after the expiration of the
3
as may be required of it.
3
period of advertisement made pursuant to section 5 2 3 5 of
4
“ (k) The corporation may, in its discretion, purchase
4
the Revised Statutes, and no liability shall attach to the
5
the assets of banks in the hands of receivers on the date of
5
Comptroller of the Currency or to the receiver of any
6
its organization, but on the same conditions and terms as are
6
national bank by reason of any such payment for failure to
7
applicable in the case of assets of banks which may fail or
7
pay dividends to a claimant whose claim is not proved at
8
be closed after such date.
Nothing herein contained shall
8
the time of any such payment.
9
be construed to prevent the corporation from making loans
9
10
to national banks closed by action of the Comptroller of the
10
to issue and to have outstanding at
11
Currency, or by vote of their directors, or to State member
11
amount aggregating not more than twice the
12
banks closed by action of the appropriate State authorities,
12
capital and the amount authorized to be appropriated pur-
13
or by vote of their directors, or from entering into negotia-
13
suant to paragraph (c) of this section, its notes,
14
tions to secure the reopening of such banks.
14
bonds, or other such obligations, to be redeemable at the
“ (m )
The corporation is authorized and empowered
any one time in an
sum of its
debentures,
15
“ ( 1 ) Receivers or liquidators of member banks which
15
option of the corporation before maturity in such manner as
16
are now or may hereafter become insolvent or suspended
16
may be stipulated in such obligations, and to bear such rate
17
shall be entitled to offer the assets of such banks for sale to
17
or rates of interest, and to mature at such time or times as
18
the corporation or as security for loans from the corpora-
18
may be determined by the corporation: P r o v i d e d , That the
19
tion, upon receiving permission from the appropriate State
19
corporation may sell on a discount basis short-term obliga-
20
authority in accordance with express provision of State law
20
tions payable
21
in the case of State member banks, or from the Comptroller
21
debentures, bonds, and other such obligations of the corpora^
22
of the Currency in the case of national banks.
The pro-
22
tion may be secured by assets of the corporation in such
23
ceeds of every such sale or loan shall be utilized for the same
23
manner as shall be prescribed by its board of directors.
24
purposes and in the same manner as other funds realized
24
obligations may be offered lor sale at such price or prices
25
from the liquidation of the assets of such banks.
25
as the corporation m ay determine.
The Comp-
at maturity
without
interest.
The
notes,
Such
24
25
1
“ (n) A ll notes, debentures, bonds, or other such obliga-
1
ury for any expenses incurred in the preparation, custody,
2
tions issued by the corporation shall be exempt, both as to
2
and delivery of such notes, debentures, bonds, or other
3
principal and interest, from all taxation (except estate and
3
such obligations.
4
inheritance taxes) now or hereafter imposed by the United
4
“ (p)
5
States, by any Territory, dependency, or possession thereof,
5
its operations to the Congress as soon as practicable after
6
or by any State, county, municipality, or local taxing author-
0
the 1 st day of January in each year.
7
ity.
The corporation, including its franchise, its capital,
7
8
reserves, and surplus, and its income, shall be exempt from
8
from the corporation, or any extension or renewal thereof,
9
all taxation now or hereafter imposed by the United States,
9
or the acceptance, release, or substitution of security there-
10
for, or for the purpose of inducing the corporation to pur-
11
chase any assets, or for the purpose of influencing in any
12
way the action of the corporation under this section, makes
13
any statement, knowing it to be false, or wilfully overvalues
14
any security, shall be punished by a fine of not more than
15
$ 5 ,0 0 0 or by imprisonment for not more than two years, or
both.
10
by any Territory, dependency, or possession thereof, or by'
11
any State, county, municipality, or local taxing authority,
12
except that any real property of the corporation shall be
1 ,>
subject to State, Territorial, county, municipal, or local tax-
14-
ation to the same extent according to its value as other real
15
property is taxed.
“ (q)
The corporation shall annually make a report of
W hoever, for the purpose of obtaining any loan
lb
(o ) In order that the corporation m ay be supplied
16
17
with such forms of notes, debentures, bonds, or other such
17
18
obligations as it may need for issuance under this A ct, the
18
feits any obligation or coupon, in imitation of or purporting
19
Secretary of the Treasury is authorized to prepare such
19
to be an obligation or coupon issued by the corporation, or
20
forms as shall be suitable and approved by the corporation,
20
( 2 ) passes, utters, or publishes, or attempts to pass, utter,
21
to be held in the Treasury subject to delivery, upon order
21
or publish, any false, forged, or counterfeited obligation or
22
of the corporation.
The engraved plates, dies, bed pieces,
22
coupon purporting to have been issued by the corporation,
23
and other material executed in connection therewith shall
23
knowing
24
lemain in the custody of the Secretary of the Treasury.
24
25
The corporation shall reimburse the Secretary of the Treas-
25
“ (r)
W hoever ( 1 ) falsely makes, forges, or counter-
the same to be false, forged, or counterfeited, or
(3 ) falsely alters any obligation or coupon issued or purporting to have been issued by the corporation, or
(4)
27
1
passes, utters, or publishes, or attempts to pass, utter, or
1
Every individual, partnership, association, or corporation
2
publish, as true, any falsely altered or spurious obligation or
2
violating this subdivision shall be punished by a fine of not
8
coupon, issued or purporting to have been issued by the cor-
3
exceeding $ 1 , 0 0 0 or by imprisonment not exceeding one
4
poration, knowing the same to be falsely altered or spurious,
4
year, or both.
5
shall be punished by a fine of not more than $ 1 0 , 0 0 0 or by
5
6
imprisonment for not more than five years, or both.
6
116, and 117 of the Criminal Code of the United States
W hoever, being connected in any capacity with
7
(U . S. C ., title 18, ch. 5, secs. 2 0 2 to 2 0 7 , inclusive), in
8
the corporation, ( 1 ) embezzles, abstracts, purloins, or will-
8
so far as applicable, are extended to apply to contracts or
0
fully misapplies any moneys, funds,
securities, or other
9
agreements with the corporation under this section, which for
10
things of value, whether belonging to it or pledged, or
10
the purposes hereof shall be held to include loans, advances,
11
otherwise intrusted to it, or ( 2 ) with intent to defraud the
11
extensions, and renewals thereof, and acceptances, releases,
12
corporation or any other body, politic or corporate, or any
12
and substitutions of security therefor, purchases or sales of
18
individual, or to deceive any officer, auditor, or examiner
13
assets, and all contracts and agreements pertaining to the
14
of the corporation, makes any false entry in any book,
14
same.
15
report, or statement of or to the corporation, or without
15
16
being duly authorized draws any order or issues, puts forth
16
Department is authorized to
17
or assigns any note, debenture, bond, or other such obliga-
17
into
18
tion, or draft, bill of exchange, mortgage, judgment, or
18
jurisdiction any
13
decree thereof, shall be punished by a fine of not more than
19
punishable under this section.”
20
$ 1 0 , 0 0 0 or by imprisonment for not more than five years,
20
21
or both.
21
Federal Deserve A ct, as amended, is amended to read as
N o individual, association, partnership, or cor-
22
follows:
28
poration shall use the words ‘ Federal Liquidating Corpora-
23
“ A n y Federal reserve bank m ay make advances to
24
tion / or a combination of these three words, as the name
24
its member banks on their promissory notes for a period
25
or a part thereof under which he or it shall do business.
7
22
“ (s)
“ (t)
“ (u)
“ (v)
the
Sec.
The provisions of sections 1 1 2 , 113, 1 14, 115,
The Secret Service Division of the Treasury
custody
of the
detect,
United
arrest,
States
person committing
any
and
deliver
marshal
having
of the
offenses
8 . The seventh paragraph of section 13 of the
29
28
1
Sec.
9. Section 14 of the Federal Reserve A ct, as
1
not exceeding fifteen days at rates to be established by
2
such Federal
and
2
amended, is amended by adding at the end thereof the
3
determination of the Federal Reserve Board, provided such
3
following new paragraph:
4
promissory notes are secured by such notes, drafts, bills of
4
“ (g) The Federal Reserve Board shall exercise special
5
exchange, or bankers’ acceptances as are eligible for redis-
5
supervision over all relationships and transactions of any
6
count or for purchase by Federal reserve banks under the
6
kind entered into by any Federal reserve bank with any
7
provisions of this A ct, or by the deposit or pledge of bonds
7
foreign bank or banker, or with any group of foreign banks
8
or notes of the United States.
If any member bank to
8
or bankers, and all such relationships and transactions shall
9
which any such advance has been made shall, during the
9
be subject to such regulations, conditions, and limitations as
10
life or continuance of such advance, and despite an official
10
the board m ay prescribe.
11
warning of the reserve bank of the district or of the Federal
11
tive of any Federal reserve bank shall conduct negotiations
12
Reserve Board to the contrary, increase its outstanding
12
of any kind with the officers or representatives of any
13
loans secured by collateral in the form of stocks, bonds,
13
foreign bank or banker without first obtaining the permis-
14
debentures, or other such obligations, or loans made to mem-
14
sion of the Federal Reserve Board.
15
bers of any organized stock exchange, investment house,
15
Board shall have the right, in its discretion, to be represented
10
or dealer in securities, upon any obligation, note, or bill,
16
in any conference or negotiations by such representative or
17
secured or unsecured, for the purpose of purchasing and/or
17
representatives as the board may designate.
18
carrying stocks, bonds, or other investment securities
18
of all conferences or negotiations, and all understandings or
19
cept obligations of the United States) such advance shall be
19
agreements arrived at or transactions agreed upon, and all
20
deemed immediately due and payable, and such member
20
other material facts appertaining to such conferences or
21
bank shall be ineligible
reserve
21
negotiations, shall be filed with the Federal Reserve Board
22
bank of the district under the provisions
of this para-
22
in writing by a duly authorized officer of each Federal reserve
23
graph for such period as the Federal Reserve Board shall
23
bank which shall have participated in such conferences or
21
determine.”
24
negotiations.”
reserve
bank,
subject to
as a
borrower
the
at
review
the
(ex-
N o officer or other representa-
The Federal Reserve
A full report
30
1
Sec. 10.
Section
19
31
of the Federal Reserve A ct, as
1
loans, extensions of credit, repurchase agreements, invest-
2
amended, is amended by inserting after the sixth paragraph
2
ments, and advances against such collateral security will
3
thereof the following new paragraph:
3
exceed 1 0 per centum of the capital stock and surplus of
4
“ N o member bank shall act as the medium or agent of
4
such member bank, or if, in the case of all such affiliates,
5
any nonbanking corporation, partnership, association, busi-
5
the aggregate amount of such loans, extensions of credits,
6
ness trust, or individual in making loans on the security of
6
repurchase agreements, investments, and advances against
7
stocks, bonds, and other investment securities to brokers or
7
such collateral security will exceed 2 0 per centum of the
8
dealers in stocks, bonds, and other investment securities.
8
capital stock and surplus of such member bank.
9
Every violation of this provision by any member bank shall
9
“ W ithin the foregoing limitations, each loan or exten-
10
be punishable by a fine of not more than $ 1 0 0 per day during
10
sion of credit of any kind or character to an affiliate shall he
11
the continuance of such violation; and such fine may be col-
11
secured by collateral in the form of stocks, bonds, debentures,
12
lected, by suit or otherwise, by the Federal reserve bank
12
or other such obligations having a market value at the time
13
of the district in which such member bank is located.”
13
of making the loan or extension of credit of at least 2 0 per
14
centum more than the amount of the loan or extension of
15
credit, or of at least 1 0 per centum more than the amount of
10
the loan or extension of credit if it is secured by obligations
17
of any State, or of any political subdivision or agency
18
thereof: P r o v i d e d , That the provisions of this paragraph
19
shall not apply to loans or extensions of credit secured by
20
obligations of the United States Government, the
21
intermediate credit banks, or the Federal land banks, or by
22
such notes, drafts, bills of exchange, or bankers* acceptances
23
as are eligible for rediscount or for purchase by Federal
24
reserve hanks.
25
officer, clerk, or other employee or any representative of
1 <
S e c . 1 1 . The Federal Reserve A ct, as amended, is
sections (g) end
16
me ivuv> . . ^ 0 new
aUb~
r - *
‘ *
he I s aii executive o f f i c e r , and no :j$*nbar baak sh a ll saakc ^ny
.
loan or
U
<*P- f t t i f x.’i'ier
ecutivo o f f icere*
I f any executive o f f ic e r o f any aodbor bonk
borrow ffbja or* jUfrifo beagrebettofc:lc*tubowl <& U uf$ aim* pt&e^2 invest
than & Doraber bank o f which he i s an executive o f f i c e r , he sh a ll
make a w r itte fc ^ j^ r fc s th iM s £>5tlm *b*pifo ft >fetyufeibffts
es, or
o f tho member bank o f which he i s an oxocitiva o f f i c e r 9 sta tin g
th« ilate^wid
9*
thc
t ;©rofor, and tne purpose fo r which the proceeds have been or afe to
demeanor e^nd shall
act m
o
r
e
cr xnxn;
provisions of this subsection shall .bo fined not nore than 10.000 .
and aay
m 1
W W i i m f a i P W & m e 'f r u- m
credit so extended*
25
the { &>'<- of anv such affiliate, the aggregate an >
-uch
(h) if :1 oaso, i ’:rot .^r* cr a ..ister* a lineal ancestor,
or a direct Jeecoimant oi an executive officer of any aenber bank >
borrow from or if he or she be or become indebted to such suonber
bank, such executive officer shall make a written report to the
chairman of the board of directors of the member bank of which he
is an executive officer, stating the date and amount of such loan
or indebtedness, the security therefor^ and the purpose for which
the proceeds have been or are to be
Federal
A loan or extension of credit to a director,
32
1
any such affiliate shall he deemed a loan to the affiliate to
2
the extent that the proceeds of such loan are used for the
3
benefit of, or transferred to, the affiliate.
4
“ For the purposes of this section the term * affiliate 9
5
shall include holding company affiliates as well as other
6
affiliates, and the provisions of this section shall not apply
7
to any affiliate
8
premises of the member bank with which it is affiliated,
9
( 2 ) engaged solely in conducting a safe-deposit business or
10
the business of an agricultural credit corporation or livestock
11
loan company, (3 ) in the capital stock of which a national
12
banking association is authorized to invest pursuant to
13
section
25
14
or
organized under section 2 5
15
Reserve A ct, as amended; but as to any such affiliate, m em -
1
her banks shall continue to be subject to other provisions of
IT
law applicable to loans by such banks and investments by
18
such banks in stocks, bonds,
19
20
obligations.”
/3
Sec . 1 2 . The Federal Reserve Act, as amended, is
21
amended by inserting between section 24 and section 25
22
thereof the following new section:
23
(4 )
“
of
(1 )
the
engaged solely in holding the bank
Federal
Reserve
A ct,
(a)
debentures,
as
amended,
of the Federal
or other such
Sec . 24A. Hereafter no national bank, without the
24
approval of the Comptroller of the Currency, and no State
25
member bank, without the approval of the Federal Reserve
( 1 ) invest in bank premises, or in the stock,
1
Board, shall
2
bonds, debentures, or other such obligations of any corpora-
3
tion holding the premises of such bank, or ( 2 ) make loans
4
to or upon the security of the stock of any such corporation,
5
if the aggregate of all such investments and loans will
6
exceed the amount of the capital stock of such bank.”
7
Sec . IS . The Federal Reserve A ct, as amended, is
8
further amended by inserting after section 2 5
9
the following new section:
10
(a)
thereof
“ Sec . 25. (b) Notwithstanding any other provision
in equity
11
of law all suits of a civil nature at common law or
12
to which any corporation organized under the laws of the
13
United States shall be a party, arising out of transactions
14
involving international or foreign banking,
15
a dependency or insular possession of the United States,
16
or out of other international or foreign financial operations,
17
either directly or through the agency, ownership,
18
of branches or local institutions in dependencies or insular
19
possessions of the United States or in foreign countries,
20
shall be deemed to arise under the laws of the United States,
21
and the district courts of the United
22
original jurisdiction of all such suits; and any
23
any such suit may, at any time before the trial thereof,
24
remove such suits from a State court into the district court
S. 4 4 1 2 -------- 3
or banking in
or control
States shall have
defendant in
34
35
1
of the United States for the proper district by following the
1
ciation shall not underwrite any issue of securities: P r o -
2
procedure for the removal of causes otherwise provided by
2
v id e d ,
3
law.”
3
account investment securities under such limitations and
/r
That
the
association m ay
purchase
for
its
own
.
4
Sec . 14: Paragraph “ Seventh ” of section 5136 of
4
restrictions as the Comptroller of the Currency m ay by
5
the Eevised Statutes, as amended, is amended to read as
5
regulation prescribe, but in no event
6
follows:
6
amount of any issue of investment securities of any one
■
(1 )
shall the total
7
“ Seventh. To exercise by its board of directors or
7
obligor or maker hereafter purchased, and held by the asso-
8
duly authorized officers or agents, subject to law, all such
8
ciation for
9
incidental powers as shall he necessary to can y on the busi-
9
centum of the total amount of such issue outstanding, but
10
ness of banking; by discounting and negotiating promissory
10
this limitation shall not apply to any such issue the total
11
notes, drafts, bills of exchange, and other evidences of debt;
11
amount ofwhich does not exceed $ 1 0 0 , 0 0 0 and does
12
by receiving deposits; by buying and selling exchange, coin,
12
exceed 5 0
13
and bullion; by loaning money on personal security; and
13
(2 ) shall the total amount of the investment securities of
14
by obtaining, issuing, and circulating notes according to
14
any one obligor or maker hereafter purchased and held by
15
the provisions of this title; and generally by engaging in all
15
the association for its own account exceed at any time 15
16
forms of banking business and undertaking all types
of
16
per centum of the amount of the capital stock of the associa-
17
banking transactions that may, by the laws of the State
17
tion actually paid in and unimpaired and 2 5 per centum of its
18
in which such bank is situated, be permitted to banks of
18
unimpaired surplus fund.
19
deposit and discount organized and incorporated under the
IS
‘ investment securities ’ shall mean marketable obligations
20
lawTs of such State, except in so far as they m ay be for-
20
evidencing indebtedness of any person, copartnership, asso-
21
bidden by the provisions of any A ct of Congress.
The busi-
21
ciation, or corporation in the form of bonds, notes and /or
22
ness of dealing in investment securities by the association shall
22
debentures commonly known as investment securities under
23
be limited to purchasing and selling such securities without
23
such further definition of the term ‘ investment securities ’ as
24
recourse, solely upon the order, and for the account of,
24
may by regulation be prescribed by the Comptroller of the
25
customers, and in no case for its own account, and the asso-
its own account exceed
at any time
1 0 per
not
per centum of the capital of the association, nor
A s used in this section the term
37
36
1
Currency.
2
permitted by law, nothing herein contained shall authorize
8
the purchase or holding by the association of any shares of
4
stock of any corporation.
5
as to investment securities shall not apply to obligations
6
of the United States, or-general obligations of an} 7 State or of
7
any political subdivision thereof, or obligations issued under
8
authority of the Federal Farm Loan A ct, as amended: P r o -
9
v id c d , That in carrying on the business commonly known as
10
the safe-deposit business the association shall not invest in
11
the capital stock of a corporation organized under the law of
12
any State to conduct a safe-deposit business in an amount in
13
excess of 15 per centum of the capital stock of the associa-
Except
as hereinafter provided
or otherwise
The limitations herein contained
14
tion actually paid in and unimpaired and 15 per centum of
15
its unimpaired surplus.”
•io
17
18
Sec.
15. (a) Section 5 1 3 8 of the Revised Statutes, as
amended, is amended to read as follows:
“
Sec. 5 1 3 8 .
After this section as amended takes effect,
19
no national banking association shall be organized with a
20
less capital than $ 1 0 0 ,0 0 0 , except that such associations
21
with a capital of not less than $ 5 0 ,0 0 0 may be organized
22
in any place the population
23
six thousand inhabitants.
N o such association
24
organized
population
25
fifty thousand persons ~?ith a capital of less than $ 2 0 0 ,0 0 0 ,
in
a
city
the
of which
of
does not exceed
which
shall
be
exceeds
1
except that in the outlying districts of such a city where the
2
State laws permit the organization of State banks with a
3
capital of $ 1 0 0 , 0 0 0 or less, national banking associations
4
now organized or hereafter organized may, with the approval
5
of the Comptroller of the Currency, have a capital of not
6
less than $ 1 0 0 ,0 0 0 .”
7
8
(b)
The tenth paragraph of section 9 of the Federal
Reserve A ct, as amended, is amended to read as follows:
9
“ N o applying bank shall be admitted to membership
10
in a Federal reserve bank unless it possesses a paid-up unim-
11
paired capital sufficient to entitle it to become a national
12
banking association in the place where it is situated under
13
the provisions of the National Bank A ct, as amended.”
/>
14
Se c .
.
16. Section 5 1 3 9
.
of the Revised Statutes,
as
15
amended, is amended by adding at the end thereof the fol-
16
lowing new paragraph:
17
“ After three years from the date of the enactment of
18
the Banking A ct of 1932, no certificate representing the
19
stock of any such association shall represent the stock of
20
any other corporation, except a member bank, nor shall the
21
ownership, sale, or transfer of any certificate representing
22
the stock of any such association be conditioned in any
23
manner whatsoever upon the ownership, sale, or transfer
24
of a certificate representing the stock of any other corpora-
25
tion, except a member bank.”
38
1
2
39
Sec. IT. Section 5144 of the Revised Statutes, as
amended, is amended to read as follows:
1
Federal Reserve Board may, in its discretion, grant or
2
withhold such permit as the public interest may require.
3
“ Sec. 5144. In all elections of directors and in de-
3
In acting upon such application, the board shall consider
4
ciding all questions at meetings of shareholders, each share-
4
the financial condition of the applicant, the general character
5
holder shall be entitled to one vote on each share of stock
5
of its management, and the probable effect of the granting
6
held by him; except (1) that shares of its own stock held
6
of such permit upon the affairs of such bank, but no such
i
by a national bank as trustee shall not be voted, and (2)
7
permit shall be granted except upon the following conditions:
8
shares controlled by any holding company affiliate of a
8
“ (a) Every such holding company affiliate shall, in
9
national bank shall not be voted unless such holding com-
9
10
Pany affiliate shall have first obtained a voting permit as
10
receive, on dates identical with those fixed for the examina-
11
hereinafter provided, which permit is in force at the time
11
tion of banks with which it is affiliated, examiners duly
12
such shares are voted,
shareholders may vote by proxies
12
authorized to examine such banks, who shall make such
13
duly authorized in writing; but no officer, clerk, teller, or
13
examinations of such holding company affiliate as shall be
14
bookkeeper of such bank shall act as proxy; and no share-
14
necessary to disclose fully the relations between such banks
15
holder whose liability is past due and unpaid shall be allowed
15
and such holding company affiliate and the effect of such
16
to vote.
16
relations upon the affairs of such banks, such examinations
making the application for such permit, agree
(1)
to
17
“ For the purposes of this section shares shall be
17
to be at the expense of the holding company affiliate so
18
deemed to be controlled by a holding company affiliate
18
examined; (2) that the reports of such examiners shall
19
if they are owned or controlled directly or indirectly by
19
contain such information asshall be necessary to disclose
20
such holding company affiliate, or held by any trustee for
20
fully the relations between such affiliate and such banks
21
the benefit of the shareholders or members thereof.
2
22
Any such holding company affiliate may make appli-
23
24
25
L and the effect of such relations upon the affairs of such
22
banks; (3) that such examiners may examine each bank
cation to the Federal Reserve Board for a voting permit
23
owned or controlled bv the holding company affiliate, both
entitling it to cast one vote at all elections of directors of
A
such bank on each share of stock controlled by it. The
24
individually and in conjunction with other banks owned or
25
controlled by such holding company affiliate; and (4) that
*******
£>
7^-v,T"
40
41
1
publication of individual or consolidated statements of con-
1
shall be required only to establish and maintain out of net
2
dition of such banks may be required;
2
earnings over and above 6 per centum per annum on the
3
“ (b) After January 4, 1935, every such holding com
3
book value of its own shares outstanding a reserve of readily
4
pany affiliate (1) shall possess, and shall continue to possess
4
marketable assets in an amount not less than 12 per centum
5
during the life of such permit, free and clear of tho lien,
5
of the aggregate par value of bank stocks controlled by it,
6
pledge, or hypothecation of any nature, readily marketable
6
and (2) the assets required by this section to be possessed
7
assets other than bank stock in an amount not less than
7
by such holding company affiliate may be used by it for
8
12 per centum of the aggregate par value of all bank stocks
8
replacement of capital in banks affiliated with it and for
9
controlled by such holding company affiliate, which amount
9
losses incurred in such banks, but any deficiency in such
10
shall be increased by not less than 2 per centum per annum of
10
assets resulting from such use shall be made up within such
11
such aggregate par value until such assets shall amount to 25
11
period as the Federal Reserve Board may by regulation
12
per centum of the aggregate par value of such bank stocks;
12
prescribe;
13
and (2) shall reinvest in readily marketable assets* other than
13
“ (d) Every officer, director, agent, and employee of
14
bank stock all net earnings over and above 6 per centum
14
every such holding company affiliate shall be subject to the
15
per annum on the book value of its own shares outstanding
15
same penalties for false entries in any book, report, or
16
until such assets shall amount to 25 per centum of the
16
statement of such holding company affiliate as are applicable
17
aggregate par value of all bank stocks controlled by it;
17
to officers, directors, agents, and employees of member
18
“ (c) Notwithstanding the foregoing provisions of this
18
banks under section 5209 of the Revised Statutes, as
19
section, after January 1, 1935, (1) any such holding com-
19
amended; and
20
pany affiliate the shareholders or members of which shall
20
21
be individually and severally liable in proportion to the
21
application for such voting permit, (1) show that it does not
22
number of shares of such holding company affiliate held by
22
own, control, or have any interest in, and is not participating
23
them respectively, in addition to amounts invested therein,
23
in the management or direction of, any corporation, business
24
for all statutory liability imposed on such holding company
24
trust, association, or other similar organization formed for
25
affiliate by reason of its control of shares of stock of banks,
25
the purpose of, or engaged principally in, the issue, flota-
“ (e) Every such holding company affiliate shall, in its
43
42
1
tion, underwriting, public sale, or distribution, at wholesale
1
permit after giving sixty days' notice by registered mail of
2
or retail or through syndicate participation, of stocks, bonds,
2
its intention to the holding company affiliate and affording
3
debentures, notes, or other securities of any sort (here-
3
it an opportunity to be heard.
4
inafter referred to as securities company) ; (2) agree that
4
serve Board shall have revoked any such voting permit, no
5
during the period that the permit remains in force it will
5
national bank whose stock is controlled by the holding com-
6
not acquire any ownership, control, or interest in any such
6
pany affiliate whose permit is so revoked shall receive deposits
7
securities company or participate in the management or
7
of public moneys of the United States, nor shall any such
8
direction thereof; (3) agree that if, at the time of filing
8
national bank pay any further dividend to such holding com-
9
the application for such permit, it owns, controls, or has an
9
pany affiliate upon any shares of such bank controlled by
10
interest in, or is participating in the management or direc-
10
11
tion of, any such securities company, it will, within three
If
“ Whenever the Federal Reserve Board shall have re-
12
years after the filing of such application, divest itself of its
12
voked any voting permit as hereinbefore provided, the
13
ownership, control, arid interest in such securities company
13
rights, privileges, and franchises of any or all national banks
14
and will cease participating in the management or direction
14
the stock of which is controlled b}^ such holding company
15
thereof, and will not thereafter, during the period that the
15
affiliate shall, in the discretion of the Federal Reserve Board.
16
permit remains in force, acquire any further ownership,
16
be subject to forfeiture in accordance with section 2 of the
17
control, or interest in any such securities company or par-
17
Federal Reserve Act, as amended."
18
ticipate in the management or direction thereof; and (4)
18
19
agree that thenceforth it will declare dividends only out of
19
ment of this Act, no member bank shall be affiliated in any
20
actual net earnings.
20
manner described in section 2 (b) hereof with any corpo-
.
Whenever the Federal Re-
such holding company affiliate.
Sec .
After /hree years from the date of the enact-
21
“ If at any time it shall appear to the Federal Reserve
21
ration, association, business trust, or other similar organiza-
22
Board that any holding company affiliate has violated any
22
tion engaged principally in the issue, flotation, underwriting,
23
of the provisions of the Banking Act of 1932 or of any
23
public sale, or distribution at wholesale or retail or through
24
agreement made pursuant to this section, the Federal Re-
24
syndicate participation of stocks, bonds, debentures, notes,
25
serve Board may, in its discretion, revoke any such voting
25
or other securities.
. .
iq 33
44
45
1
For evety violation of this section the member hank
1
and usual business of such association is found to extend into
2
involved shall be subject to a penalty not exceeding $1,000
2
an adjacent State, the Federal Reserve Board may permit
3
per day for each day during which such violation continues.
3
the establishment of a branch or branches by such association
4
Such penalty may he assessed by the Federal Eeserve Board,
4
in an adjacent State hut not beyond a distance of fifty miles
5
in its discretion, and, when so assessed, may be collected by
5
from the place where the parent bank is located.
6
the Federal reserve bank by suit or otherwise.
6
association shall establish a branch outside of the city, town,
7
If any such violation shall continue for six calendar
7
or village in which it is situated unless it has a paid-in and
8
months after the member bank shall have been warned by
8
unimpaired capital stock of not less than $500,000.”
9
the Federal Reserve Board to discontinue the same, (a) in
9
10
the case of a national bank, all the rights, privileges, and
10
11
franchises granted to it under the National Bank Act may
11
“ (d) The aggregate capital of every national banking
12
be forfeited in the manner prescribed in section 2 of the Fed-
12
association and its branches shall at no time be less than the
13
eral Reserve Act, as amended, or, (b) in the case of a State
13
aggregate minimum capital required by law for the estab-
14
member bank, all of its rights and privileges of membership
14
lishment of an equal number of national hanking associations
15
in the Federal reserve system may be forfeited in the manner
15
situated in the various places where such association and
16
prescribed in section 9 of the Federal Reserve Act, as
16
its branches are situated.”
17
amended.
17
o
Sec . W . Paragraph (c) of section 5155 of the Revised
a
18
19
Statutes, as amended, is amended to read as follows :
20c)
a natifcUA WlkkHiP- e
J
m
k
m
ap
of1 the Comptroller of the Currency establish and operate
2 $raxp^f*I
v&!tbi*h^
rthei&fctyi, twm* or Tillage
or at any point within the State in which said association is
jjJ
No such
rtf
t Vi a
■— -
XI
_________ w _
.
.
_ .
.
expressly authorized to State banks by the law of the State in
sw ifteM * m e ® * s * s a r
&
a t a s m
capital stock, of not lees than 'SQO.OO02m Broyided.
That la
S ta *e »
’o cities located therein with a population exceeding 100,000,
the capital shall be not less than ?250,000.»
Paragraph (d) of section 5155 of the Revised Statutes,
as amended, is amended to read as follows:
Sec .
2/
20.
.
.
.
Sections 1 and 3 of the Act entitled “An Act
18
to provide for the consolidation of national banking associa-
19
tions,” approved November 7, 1918, as amended, are
20
amended by striking out the words “ county, city, town, or
21
village ” wherever they occur in each such section, and
22
inserting in lieu thereof the words * State, county, city,
28
town, or village.”
24
25
Sec . 21. The first two sentences of section 5197 of the
Revised Statutes are amended to read as follows:
46
47
1
“Any association may take, receive, reserve, and charge
1
of a corporation all obligations of all subsidiaries thereof in
2
on any loan or discount made, or upon any notes, bills of
2
which such corporation owns or controls a majority
3
exchange, or other evidences of debt, interest at the rate
3
interest.”
4
allowed by the laws of the State, Territory, or District where
4
Sec . 2§. Section 5211 of the Eevised Statutes, as
5
the bank is located, or at a rate of
per centum in excess
5
amended, is amended by adding at the end thereof the fol-
6
of the discount rate on ninety-day commercial paper in effect
6
lowing new paragraph:
7
at the Federal reserve bank in the Federal reserve district
8
-where the bank is located, whichever may be the greater,
9
1
3 *1
7
“ Each national hanking association shall obtain from
8
each of its affiliates other than member banks and furnish
and no more, except that where by the laws of any State
9
to the Comptroller of the Currency not less than three
10
a different rate is limited for banks of issue organized under
10
reports during each year, in such form *as the Comptroller
11
State laws, the rate so limited shall be allowed for associa-
11
may prescribe, verified by the oath or affirmation of the
12
tions organized or existing in any such State under this title.
12
president or such other officer as may be designated by the
13
When no rate is fixed by the laws of the State, or Territory,
13
board of directors of such affiliate to verify such reports,
14
or District, the bank may take, receive, reserve, or charge a
14
disclosing the information hereinafter provided for as of
15
rate not exceeding 7 per centum, or 1 per centum in excess
15
dates identical with those for which the Comptroller shall
16
of the discount rate on ninety-day commercial paper in
16
during such year require the reports of the condition of the
17
effect at the Federal reserve bank in the Federal reserve
17
association.
18
district where the bank is located, whichever may be the
18
‘ affiliate 9 shall include holding company affiliates as well
19
greater, and such interest may be taken in advance, reckon-
19
as other affiliates.
20
ing the days for which the note, bill, or other evidence of
20
be transmitted to the Comptroller at the same time as the
21
corresponding report of the association, except that the
The second sentence of the first paragraph
22
Comptroller may, in his discretion, extend such time for
23
of section 5200 of the Eevised Statutes, as amended,
23
good cause shown.
24
is amended by inserting before the period at the end thereof
24
information as in the judgment of the Comptroller of the
25
the following: “ and shall include in the case of obligations
25
Currency shall be necessary to disclose fully the relations
. 21
22
debt has to run.”
Sec .
22.
For the purpose of this section the term
Each such report of an affiliate shall
Each such report shall contain such
48
1
between such affiliate and such bank and to enable the
2
Comptroller to inform himself as to the effect of such rela-
3
tions upon the affairs of such bank.
4
affiliates shall be published by the association under the same
5
conditions as govern its own condition reports.
6
troller shall also have power to call for additional reports
7
with respect to any such affiliate whenever in his judgment
8
the same are necessary in order to obtain a full and com-
9
plete knowledge of the conditions of the association with
The reports of such
The Comp-
10
which it is affiliated.
Such additional reports shall be
11
transmitted to the Comptroller of the Currency in such form
12
as he may prescribe.
13
to obtain and furnish any report required under this section
14
shall be subject to a penalty of $100 for each day during
15
which such failure continues.”
Any such affiliated bank which fails
10
Sec . 24. (a) The first paragraph of section 5240 of the
17
Ee vised Statutes, as amended, is amended by inserting before
18
the period at the end thereof a colon and the following pro-
19
viso: “P r o v i d e d , That in making the examination of any
20
national bank the examiners shall include such an examina-
21
tion of the affairs of all its affiliates other than member banks
22
as shall be necessaiy to disclose fully the relations between
23
such bank and such affiliates and the effect of such relations
24
upon the affairs of such bank; and in the event of the refusal
25
to give any information required in the course of the exami-
49
c
1
nation of any such affiliate, or in the event of the refusal
2
to permit such examination, all the rights, privileges, and
3
franchises of the bank shall be subject to forfeiture in accord-
4
ance with section 2 of the Federal Reserve Act, as
5
amended.
0
power, and he is hereby authorized, to publish the report
7
of his examination of any national banking association or
8
affiliate which shall not within one hundred and twenty
9
days after notification of the recommendations or suggestions
10
of the comptroller, based on said examination, have com
il
plied with the same to his satisfaction.
12
prior to such publicity shall be given to the bank or
13
affiliate.,,
The Comptroller of the Currency shall have
Ninety days’ notice
14
(b) Section 5240 of the Revised Statutes, as amended,
15
is further amended by adding after the first paragraph
10
thereof the following new paragraph:
17
“ The examiner making the examination of any affiliate
18
of a national bank shall have power to make a thorough
19
examination of all the affairs of the affiliate, and in doing
20
so he shall have power to administer oaths and to examine
21
any of the officers, directors, employees, and agents thereof
22
under oath and to make a report of his findings to the
23
Comptroller of the Currency.
24
of such affiliates may be assessed by the Comptroller of the
25
Currency upon the affiliates examined in proportion to assets
S. 4412------ 1
The expense of examinations
1
or resources held by the affiliates upon the dates of examina-
2
tion of the various affiliates.
3
refuse to pay such expenses or shall fail to do so within
4
sixty days after the date of such assessment, then such
5
expenses may be assessed against the affiliated national bank
6
and, when so assessed, shall be paid by such national bank:
7
P r o v id e d , h o w e v e r,
8
more national banks, such expenses may be assessed against,
9
and collected from, any or all of such national banks in such
10
proportions as the Comptroller of the Currency may
11
prescribe.
12
to permit an examiner to make an examination of the affiliate
13
or shall refuse to give any information required in the course
14
of any such examination, the national bank with which it is
15
affiliated shall be subject to a penalty of not more than $100
16
for each day that any such refusal shall continue.
17
alty may be assessed by the Comptroller of the Currency and
18
collected in the same manner as expenses of examinations.”
19
Sec . 2 5 . Whenever, in the opinion of the Comp-
If any such affiliate shall
That, if the affiliation is with two or
If any affiliate of a national bank shall refuse
Such pen-
*7
20
C i O B # W f c e # W l f n f t f i o l f c l
Comptroller of the Currency, It would be to the advantage <
2
iqcreyi..
...
banking association whose business
. comptroller, of all or any part of Its deposits, the comptroller
to .reaps* business, if depositors and unsecured creditors of
LW
total deposit and unsecured credit liabilities consent in
shall bo construed to affect in any manner any powers of the
comptroller under the provisions o? law in force on the date
of enactment of this act with respect to the reorganization
of national banking associations*”
51
1
tinued unsafe or unsound practices in conducting the business
2
of such bank or trust company, after having been warned
3
by the Comptroller of the Currenc}^ or the Federal reserve
4
agent, as the case may be, to discontinue such violations
5
of law or such unsafe or unsound practices, the Comptroller
6
of the Currency or the Federal reserve agent, as the case may
7
be, may certify the facts to the Federal Reserve Board.
8
In any such case the Federal Reserve Board may cause
9
notice to be served upon such director or officer to appear
10
before such board to show cause why he should not be
11
removed from office.
12
each director of the bank affected, by registered mail.
13
after granting the accused director or officer a reasonable
14
opportunity to be heard, the Federal Reserve Board finds
15
that he has continued to violate any law relating to such
1G
bank or trust company or has continued unsafe or unsound
17
practices in conducting the business of such bank or trust
18
company after having been warned by the Comptroller of
19
the Currency or the Federal reserve agent to discontinue
20
such violation of law. or such unsafe or unsound practices,
21
the Federal Reserve Board, in its discretion, may order
22
that such director or officer be removed from office. A copy
23
of such order shall be served upon such director or officer.
24
A copy of such order shall also be served upon the bank of
25
which he is a director or officer, whereupon such director or
A copy of such order shall be sent to
If
)
I
52
1
officer shall cease to be a director or officer of such bank:
2
Provided,
3
which it is based shall not be made public or disclosed to
4
anyone
5
tors of the bank involved, otherwise than in connection with
6
proceedings for a violation of this section.
7
or officer removed from office as herein provided w h o tliere-
8
after participates.in any manner in the management of such
9
bank shall be fined not more than $5,000 or imprisoned for
10
not more than five years, or both, in the discretion of the
11
court.
12
That such order and the findings of fact upon
e x c e p t the
director or officer involved and the direc-
A n y such director
S e c . 26. The light to alter, amend, or repeal this Act
13
is hereby expressly reserved.
14.
or the application thereof to any person or circumstances,
15
is held invalid, the remainder of the Act, and the application
16
of such provision to other persons or circumstances, shall
17
nor be affected thereby.
If any provision of this Act,
i
Calendar No. 604
72d CONGRESS!
lB T S * 8 8 I0 N
A A 1 O
Q
J
J,
&A
To provide for the safer and more effective
use of the assets of Federal reserve banks
and of national banking associations, to
regulate interbank control, to prevent the
undue diversion of funds into speculative
operations, and for other purposes.
By Mr.
G lass
A pb il 18,1932
R ead
tw ice
a n d re fe rre d to th e C om m ittee
B a n k in g a n d C u rren cy
A p b il
18,1932
R ep o rted w ith o u t a m en d m en t
on
72 d Congress
)
)
1st Session
HOUSE OF REPRESENTATIVES
(
R eport
( N o . 1085
T O A M E N D T H E N A T IO N A L B A N K IN G A C T A N D T H E F E D E R A L
R E S E R V E A C T A N D T O P R O V ID E A G U A R A N T Y F U N D F O R D E P O S I
TO R S IN BA N K S
A p r il 19, 1 9 3 2 .— C o m m itte d to th e C o m m itte e of th e W hole H ouse on th e s ta te
of th e U nio n a n d o rd ered to be p rin te d
Mr.
S
t e a g a l l
,
from the Committee on Banking and Currency, sub
mitted the following
EEPOET
•
[T o acco m p an y H . R . 1 1 3 6 2 ]
■
The Committee on Banking and Currency, to whom was referred
the bill (H. R. 11362) to amend the national banking act and the
Federal reserve act, and to provide a guaranty fund for depositors in
banks, having considered the same, report favorably thereon with
the recommendation that the bill do pass.
The bill is intended to encourage the organization of banks by
making investment in banking capital more attractive, to provide
stricter methods of examination, better management, and protection
to depositors.
.
.
Section 1 of the bill amends existing law so as to require national
banks hereafter organized to have a minimum capital of $50,000.
Section 2 provides that no association shall be organized without an
initial surplus amounting to 10 per cent of its capital stock. An
exception is made in the case of an association formed for the pur
pose of succeeding to the business of an existing bank, which is per
mitted to be organized with a capital of not less than $25,000 in the
discretion of the Comptroller of the Currency. These provisions
raising the minimum capital and surplus requirement seems to be
generally accepted as constructive and desirable. The report of the
Comptroller of the Currency discloses that near 60 per cent of fail
ures for the past 10 years have been of banks with capital of $25,000
and less. It can not be fairly contended that all the failures of these
banks are due to inadequate capital structure but unquestionably it
is not wise to permit a bank with such a minimum of capital stock
to accept deposits from the public in unlimited amounts. When
initial expenses and overhead costs are absorbed very little is left
as margin to safeguard deposits. The requirement for larger cr,[ital
stock and surplus would be highly advantageous to the stockholders
themselves as well as to the public at large.
2
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
Section 3 of the bill amends existing law by striking out the pro
vision which renders shareholders of national banking associations
liable to assessments in amounts equal to the shares held by them in
addition to the amount invested in such shares. The provision for
assessment of liability upon shareholders of national banking associa
tions is intended to operate as an additional protection for deposits.
In actual practice it has been found that this protection is of little
practical value. Only 16 per cent of the liability is collected in cases
of insolvent banks liquidated. These collections are usually made
upon shareholders of national banking associations not directly
connected with the operation of banks but in many cases citizens who
merely invested their money to aid in promoting the interest of the
community. Many instances are disclosed of heirs inheriting invest
ments in bank stock that turned out to be liabilities entailing hardship
and injustice. This has happened so often that the public no longer
looks with favor upon investment in bank stock. Citizens no longer
-care to incur the risk of assessment in addition to money subscribed.
The amendment removing that liability will encourage "the organiza
tion of banks in communities where banking facilities have been
destroyed without depriving depositors of any very substantial
protection.
Section 4 of the bill provides that sections 1, 2, and 3 of the act
shall only apply to national banking associations hereafter organized.
Section 5 of the bill amends the Federal reserve act by providing
that Federal reserve banks shall pay one-lialf of net earnings to mem
ber banks to be prorated on a basis of capital stock held by member
banks in Federal reserve banks and the other half of net earnings to
a fund for the guaranty of deposits. Existing law provides that
member banks shall be paid 6 per cent cumulative dividends on their
capital stock and that Federal reserve banks shall set aside 10 per
cent of earnings to surplus account. Under the bill this will be
continued but any remaining earnings will be divided between mem
ber banks and a fund for the guaranty of deposits.
Section 6 of the bill would require Federal reserve banks to give
immediate credit to member banks upon checks received. It is now
the practice of Federal reserve banks to defer payment of checks
received from member banks until actually collected or for the period
which is estimated to cover the time required for making collection.
Federal reserve banks are permitted to charge current rate of interest
to cover the time of collection. This charge would be of considerable
aid to member banks in maintaining necessary balances and would
be especially helpful at seasonal periods when cash requirements are
accentuated on account of marketing of crops.
Section 7 of the bill provides that no member bank shall be per
mitted to pay interest on deposits at a greater rate than 4 per cent
per annum with respect to any deposit made after the passage of this
act. This provision is designed to prevent any bank from bidding
unfairly for deposits. It would protect the public as well as all soundly
managed banks against improper practices on the part of weak or
less efficiently managed banks.
Section 8 would prevent any member bank of the Federal reserve
system from paying any dividend until its surplus amounts to 25 per
cent of its paid-in capital stock. When such an amount of surplus
is accumulated 6 per cent dividends is permitted to be paid. When
3
the surplus of a bank amounts to 50 per cent of its paid-in capital stock
such bank is permitted to pay 8 per cent in dividends. Whenever
the surplus of a bank amounts to 100 per cent of its paid-in capital
stock the payment of dividends is made discretionary so long as the
surplus is not reduced below 100 per cent of capital. This section
is designed to require a surplus to afford the actual protection to
depositors which the extra liability of shareholders of national
banking associations was intended to afford but which experience
has shown to be without the desired practical result.
Section 9 of the bill would confer upon the board provided for in
this act the authority to require the removal of any officer or director
of any national bank whose continued service is regarded as detri
mental to the safe operation of such bank. This provision is intended
for the protection of the public and for other banks contributing to
the guaranty fund. It is manifest that the success of any plan for
the insurance of deposits requires that every safeguard be afforded
for honest and efficient management of all banks of the system. The
board will have the duty of protecting the public and safeguarding
the interest of the banks. No bank official should be allowed to serve
unless he measures up to proper standards of honesty and efficiency.
No bank official who objects to this standard is worthy of such a trust.
Title 2 of the bill provides for the creation of a guaranty fund for
the protection of depositors in banks. Section 201 of this title pro
vides for the establishment of a board to be known as the Federal
liquidating board, referred to as the board, to consist of the Secretary
of the Treasury, the Comptroller of the Currency, and three members
to be appointed by the President by and with the advice and consent
of the Senate. Not more than one of the appointed members of the
board shall be of the same political party as the President. The
appointed members of the board shall hold their offices for a term of
four years; the salary of the appointed members of the board shall be
$10,000 per annum, payable monthly; appointed members are in
eligible to hold any office, position, or employment in any member
bank of the Federal reserve system or on the Federal Reserve Board.
The board shall elect its own chairman and is authorized to employ
and fix the compensation of such employees, examiners, agents, and
other officers as may be necessary; but the compensation of none of
these shall be at a rate in excess of $10,000 per annum. I t is provided
that the Secretary of the Treasury and the Comptroller of the Currency
shall receive no compensation for their services. The expenses of the
board are to be paid out of the funds of the board under such rules
and regulations as may be prescribed by the board.
Section 202 (a) provides for the payment into the guaranty fund by
the United States Treasury an amount equal to the entire sums that
have been paid to the United States in lieu of franchise taxes. (This
sum is approximately $150,000,000.) Federal reserve banks are
required to pay into the fund out of their surplus the sum of
$150,000,000 to be prorated among the Federal reserve banks on a
basis of the surplus held by each of such banks.
(b)
The board shall also collect and pay into the fund from mem
ber banks of the Federal reserve system the sum of $100,000,000 to
be prorated and paid by member banks on a basis of average deposits
during the preceding calendar year. Any time after 12 months from
the payment of this sum the board is authorized to collect for the fund
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
from member banks of the Federal reserve system annually the whole
or any part of $100,000,000 to be prorated and paid by member banks
on a basis of average deposits during the preceding calendar year.
Payments by Federal reserve banks or by member banks, under this
section, are made subject to call by the board at such times and in such
amounts as may be determined except that assessments against mem
ber banks shall be payable in installments of not more than 25 per
cent of such assessments. When the fund exceeds $500,000,000 the
board is authorized to return funds to banks which they have con
tributed, prorating to each bank its portion of such excess on the basis
of its last annual contribution. Sums in the fund shall be invested
in interest-bearing obligations of the Government of the United
States or noninterest-bearing deposits in member banks of the Federal
reserve system.
The Federal reserve banks have made net profits of approximately
$500,000,000. After taking the amount of $150,000,000 from their
surplus funds, they would still have a surplus close to $150,000,000.
The requirement of Federal reserve banks in connection with the
guaranty fund could not hamper or embarrass the Federal reserve
system.
Section 203 provides that when a bank is found to be insolvent or
has been closed by order of the Comptroller of the Currency the Comp
troller of the Currency shall certify the fact to the board and the board
shall proceed to take over and wind up such bank and the board
is given the same powers and duties as apply to the Comptroller of
the Currency in such cases. Within 30 days the board shall appoint
a committee consisting of one person selected by the board, one se
lected by owners of a majorit}^ of stock of such banks, and one selected
by the depositors of more than 50 per cent of outstanding deposits.
The committee shall appraise the assets of the bank and estimate
the amount of liabilities and make a statement of the amount of the
outstanding deposits of each depositor. Upon approval by the board
of the estimate and report of the committee and not later than 90
days after the closing of the bank the board shall pay to each depositor
whose deposit does not exceed $1,000, 50 per cent of such deposit
and to each depositor whose deposit exceeds $1,000 not less than 25
per cent of such deposit or not less than $500. Six months after the
first payment the board shall pay each depsoitor whose deposit is
$1,000 or less the full balance remaining unpaid. Not less than six
months later all depositors that have not been paid in full shall be
paid not less than 25 per cent of such deposits. Not less than sLx
months later all deposits are to be paid in full. This method of paying
depositors would enable the board to realize on the assets of an in
solvent bank and meet portions of its obligation out of funds collected
in that way. This would prevent any unusual demands upon the
board that might result in case of the failure of a large bank.
Section 205 provides that the board may borrow money upon the
assets of any bank in process of liquidation for the purpose of making
payments to depositors or to creditors, but only for paying depositors
and creditors of the particular bank the assets of which are pledged
for such loans.
Section 206 provides a method for paying State banks that are
members of the Federal reserve system. The same method is employed
as in the case of payments of depositors in national banks except
that such payments are made to receivers or liquidating agents of
such banks in trust for depositors.
Section 207 provides method for requiring banks to comply with
the provisions of this title. Any State bank that is a member of the
Federal reserve system may be required to forfeit its membership.
Any national bank may forfeit franchises granted under the law.
Section 208 provides that any bank not a member of the Federal
reserve system having capital and surplus of $25,000 or more may
contribute to the fund and in case of insolvency have its depositors
receive the benefits provided in section 206. No such bank shall be
permitted to contribute to such fund nor share in its benefits except
after examination by authority of the board and a determination by
the board that such bank is in sound financial condition and the
further requirement that such bank shall submit to examination by
the board at any time. It is further provided that for a period of not
more than three years after the passage of this act any bank that is
not a member of the Federal reserve system may be permitted to
contribute to the fund and share in its benefits upon certificate of
the duly constituted State examining authority that such bank is in
sound financial condition provided such bank shall pay into the fund
an initial assessment equal to twice the amount paid under section
202 (a) by a member bank having the same amount of deposits arid
such annual contributions as may be required by the board, the same
to be in each case twice the amount paid under section 202 by a mem
ber bank. Sums payable by any bank under this section shall be
subject to call in whole or in part by the board ip such amounts as
may be prescribed by the board except that assessments against such
banks shall be payable in installments of not more than 25 per cent of
the assessment. Any bank not a member of the Federal reserve system
may be required to withdraw from participation in the benefits of the
fund or to go into liquidation and receive its benefits. Any bank
withdrawing from participation in the fund shall be reimbursed such
an amount of its annual contribution in the proportion which the
number of months remaining in the year since such contribution bears
to the whole year.
Section 209 provides that until January, 1934, the board shall be
authorized to borrow of the Reconstruction Finance Corporation such
sums as the board may deem necessary up to a maximum amount of
$500,000,000 at any one time. The board is authorized to contract
wdth the Reconstruction Finance Corporation for such loans and for
their repayment in installments out of sums received under section
202, all such loans to be payable in full not later than January 22,
1942. For the purpose of making such loans provision is made for
the issue of such notes, debentures, bonds, and other obligations as
may be necessary.
It is not thought that there will be any necessity for loans by the
Reconstruction Finance Corporation. But the legislation establish
ing the Reconstruction Finance Corporation w^as designed primarily
to afford assistance to banks to revive confidence in them and to pre
vent a further breaking dowm of the banks of the country. The
Reconstruction Finance Corporation has rendered splendid service
in that connection. It is in keeping with the purpose of that legislation
to require of the Reconstruction Finance Corporation the service
4
6
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
provided for in this bill should such aid be required to insure the
success of the plan. It is recognized that the success of any guaranty
plan depends upon the assurance of the public that adequate resources
are available to meet all public demands. I t is for this reason that
provision is made for loans by the Reconstruction Finance Corpora
tion.
If loans should be made by the Reconstruction Finance Corporation,
they would be repaid as in the case of other loans which the corpora
tion is authorized to make.
It is urged by opponents of a depositors’ guaranty law that several
States have enacted laws for the insurance of depositors against loss
and that these State statutes proved inadequate in periods of panic.
But the fact remains that these State laws saved depositors in broken
banks from losses of many millions of dollars. They prevented runs
that would otherwise have closed hundreds of banks had the confi
dence caused by State guaranty laws been lacking. In the State of
Nebraska, where a guaranty of deposits law was in force for nearly
20 years, depositors were protected from loss and confidence in the
law was such that after one-third of the State banks had closed the
total of deposits in the remaining State banks equaled that held by
the banks of that State in the boom year of 1920. Until the con
stitutionality of the law and the sufficiency of the guaranty fund was
attacked there were no runs on the banks insured under the State
guaranty law, nor did fall in deposits show loss of confidence by the
people of the State.
The State laws to insure bank depositors against loss from failed
banks were pioneers in a new field. Because of bad banking, lax
enforcement, and weak regulation, the guaranty funds finally proved
insufficient to pay losses in a period of panic. The State depositors
insurance laws pointed the way to a sound national insurance system.
Such a guaranty fund sufficiently financed and properly administered
will afford the security that depositors are justly entitled to, who put
their faith and money in banks chartered under Federal laws.
Many State laws proved faulty in that they did not give to the
State banking department the right to refuse bank charters where
such charters should not be granted in the public interest. A sound
banking system can only exist where the number of banks is limited
to public needs. Banking is a quasi public business. The public
interest should always be the first consideration in the granting of
bank charters. The public has two prime interests in banks, the
first is to provide a safe place for the people’s money, the second is
to provide a financial reservoir where money and credit may be
obtained upon reasonable terms. Overbanking breeds bad banking,
speculation and bankruptcy. No matter how sound and carefully
drawn laws may be, they will not be effective in protecting the
interests of depositors if bankers are permitted to violate their
most important provisions.
In Nebraska, the courts decreed that the banking department could
not refuse charters. This decision denied to the State’s officers an
authority essential to the safety of banking and the security and
sufficiency of the bank guaranty fund. During the war boom,
hundreds of additional State banks were chartered, for which there
was no economic use. Too many banks and too few bankers of
ability and character destroyed the State guaranty of deposits laws.
The depositors guaranty laws brought prosperity and strength to the
State banks when properly administered and saved depositors from
losses of millions of dollars. The State depository insurance laws
were discredited and destroyed by those who should have been their
staunchest defenders. Prudent management and Government super
vision of themselves have not proven sufficient security for bank
depositors in the past. This fact gives absolute warrant for additional
legislation for the safety of depositors from losses in failed banks.
The constitutionality and soundness of a bank depositors'* insurance
law was established through the enactment and operation of the State
laws. In the case of Shallenberger v. First State Bank of Nebraska,
and Noble State Bank v. Haskell, reported in 219 U. S. 114, the United
States Supreme Court sustained the State’s right to require corpora
tions engaged in banking to contribute a certain percentage to a fund
for the protection of depositors who sustained losses because of the
failure of insolvent banks. In a more recent case from Nebraska,
Abie State Bank v. Weaver (282 U. S. 265), the Supremo Court again
sustained the constitutionality of the Nebraska statute.
The inefficient examination, lax administrations, and indiscriminate
granting of charters in States that enacted guaranty laws furnish
lessons of great value in the preparation of new legislation. The
experience of States having guaranty laws shows that it is practicable
and advisable to adopt a guaranty plan for the Nation.
The bill does not provide for a Government guaranty of deposits.
The fund is to be raised by the banks. The initial fund—approxi
mately $300,000,000—is to be derived entirely from earnings of the
Federal reserve banks. These earnings in all fairness belong to the
member banks of the Federal reserve system that pay the interest
and supply the capital and deposits out of which the Federal reserve
banks accumulate their earnings. Assessments upon deposits of
banks sharing in the benefits of the fund are to bear the balance of
the burden.
Any insurance plan is to be calculated on the cost covering a period
of years. Experience shows that over any extended period total
losses to depositors in the United States have not reached serious
proportions. In a statement before the Committee on Banking and
Currency the Comptroller of the Currency testified that the total
losses to depositors in national banks and member banks from the
enactment of the national bank law down to 1930 amounted to only
$82,000,000. Since then the number of failures and deposits involved
have been unprecedented. During the past 10 years 7,800 banks
have failed, having deposits of $2,500,000,000. This is the worst
period in history. Surely we shall not have another such experience.
But the fund established by this bill would have been more than
ample to have carried out the purpose contemplated over the last 10year period. Surely if this be true we can not doubt that it will be
sufficient to meet the exigencies of the future. We have every reason
to hope that the recent wave of failures has spent its force. During
the month of February there were 51 failures and during the month of
March only 25 and the number is still decreasing.
It is to be regretted, however, that conditions are such that banks
continue to hold billions of eligible paper and enormous amounts of
cash which could and would be employed in easing credits and reviving
business but for the fear of continued withdrawals of deposits.
7
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
Loss of confidence is the major factor in this unhappy development.
The removal of this fear is the first indispensable step toward business
recovery in the United States.
. . .
.
We can not work out of the present situation without the use of
banking facilities and banks can not do their part without employing
their deposits. They can not employ deposits unless they can get
them and they dare not employ them when they have them so long
as there is constant danger of wholesale withdrawals.
The public welfare demands relief from these conditions. We
must not fail to safeguard the Nation against a repetition of the
disasters and distress resulting from bank failures during the past 10
years. It has brought ruin to banks, suffering to depositors, distress
to the public, and destruction to business. The one sure method of
prevention is protection to depositors. The principle is accepted as
sound on every hand by the Government, by the public and by the
banks themselves. The Government demands insurance when its
funds are intrusted to a bank. Banks require bonds of employees for
protection against dishonesty. The public invests in life insurance,
in fire insurance, in the insurance of crops. Citizens insure themselves
against their own negligence. Banks constantly protect particular
deposits when such protection is required. Common sense and simple
fairness suggest that the public at large be accorded the same con
sideration.
.
I t is argued by some that the proposed guaranty plan would require
well-managed banks to bear a portion of the losses from mismanage
ment in other banks. This argument is too shallow and shortsighted
to merit serious consideration. There can be no separation of the
interests of banks. The little bank is interested in the large bank
and the large bank is interested in the little bank. Our banking
structure is one building. Any disaster coming upon one is a serious
cause for the concern of all. Any bank that carries burglary insurance
helps to pay for any burglary that may occur in the United States.
Any bank that pays for insurance against the dishonesty of one of its
officials contributes to the protection of any bank the funds of which
are stolen by an employee. Bankers now universally approve the
Federal reserve act, though they vigorously opposed its passage, just
as some of them now oppose all suggestions for a guaranty plan for
deposits. But the Federal reserve act requires national banks to
become members of the system to invest stock in the capital of
Federal reserve banks upon which decreased returns are received and
requires national banks to maintain deposits with Federal reserve
banks without interest. Bankers have learned that the system has
brought a vast improvement in banking and great enhancement of the
public welfare. Of course, there are some banks that could operate
all right without the Federal reserve system just as some banks may
still be able to operate all right without guaranty of deposits. But
no one would again give serious consideration to any argument against
the Federal reserve system because of the requirements imposed upon
member banks.
.
.
. .
The test to be applied in this legislation as in all others is its eflect
upon the public welfare. Banks are the creatures of government,
established primarily for public service and the promotion and
development of agriculture, industry, and commerce. It is not unfair
to say that our present banking system fails to afford this service in a
measure essential to national welfare. Present conditions must not
be accepted as permanent. They constitute a challange to the cour
age and constructive leadership of Congress. We must find a remedy.
The first step is a sound plan for the protection of depositors. Some
time it will be taken. Why not now?
In conformity with section 2a of Rule X III of the House Rules,
there is herewith printed the various amendments referred to in this
bill, showing the paragraphs specifically mentioned of the various
sections, with the amendments proposed thereto in italics, as follows:
8
9
S e c . 51 3S (as am en d ed 1 9 2 7 ). N o n a tio n a l b a n k in g association shall be
o rganized w ith a less c a p ita l th a n $ 1 0 0 ,0 0 0 , ex cep t t h a t such asso ciatio n s w ith a
c a p ita l of n o t less th a n $ 5 0 ,0 0 0 m ay , w ith th e a p p ro v a l of th e S ecretary of th e
T re a su ry , be organized in an y place th e p o p u latio n of w hich does n o t exceed six
th o u s a n d in h a b ita n ts , [a n d ex cep t t h a t such associations w ith a c a p ita l of n o t
less th a n $ 2 5 ,0 0 0 m ay , w ith th e san ctio n of th e S ecretary of th e T re a su ry , be
o rg anized in a n y place th e p o p u la tio n of w hich does n o t exceed th re e th o u s a n d
in h a b ita n ts ] an d except that associations formed for the purpose of succeeding to the
business of an existing bank may, in the discretion of the Comptroller of the Currency,
be organized with a less capital than $50,000 but not less than $25,000.
No such association shall be organized in a city th e p o p u la tio n of w hich exceeds
fifty th o u s a n d persons w ith a c a p ita l of less th a n $ 2 0 0 ,0 0 0 , ex cep t t h a t in th e
o u tly in g d istric ts of such a city w here th e S ta te law s p e rm it th e o rg a n iz a tio n of
S ta te b a n k s w ith a ca p ita l of $ 1 0 0 ,0 0 0 or less, n a tio n a l b a n k in g associations now
o rganized or h ere a fte r organized m ay , w ith th e a p p ro v a l of th e C o m p tro ller of
th e C u rren cy , h av e a c a p ita l of n o t less th a n $ 1 0 0 ,0 0 0 . No association shall be
organized unless with a surplus (hereinafter called initial surplus) of not less than
an amount equal to 10 per centum of its capital stock.
S e c . 5 1 6 8 . W henever a certificate is tr a n s m itte d to th e C o m p tro ller of th e
C u rren cy , as p ro v id ed in th is title a n d th e association tr a n s m ittin g th e sam e
notifies th e C o m p tro ller t h a t a t le a st 5 0 per cen tu m of its c a p ita l stock and that at
least 50 per centum of its initial surplus h as been d u ly p a id in, a n d t h a t such
asso ciation has com plied w ith all th e provisions of th is title req u ired to be com
p lied w ith before a n association shall be a u th o riz e d to com m ence th e business of
b a n k in g , th e C o m p tro ller shall exam ine in to th e co n d itio n of such association,
a sc e rta in especially th e a m o u n t of m oney p aid in on acco u n t of its c a p ita l, and on
account of its initial surplus, th e n am e a n d place of residence of each of its d irecto rs
a n d th e a m o u n t of th e c a p ita l stock of w hich each is th e ow ner in good fa ith ,
a n d generally w h eth er such association h as com plied w ith all th e provisions of
th is title req u ired to e n title it to engage in th e business of b an k in g ; an d shall cause
to be m ad e a n d a tte s te d b y th e o a th s of a m a jo rity of th e d irecto rs, a n d b y th e
p re sid e n t or cashier of th e asso ciatio n , a s ta te m e n t of all th e facts necessary to
e n ab le th e C o m p tro ller to d eterm in e w h eth er th e association is law fully en title d
to com m ence th e business of b an k in g .
3 3 . T h a t a n y tw o o r m ore n a tio n a l b a n k in g associations lo cated w ith in th e
sam e co u n ty , c ity , tow n, or village m a y , w ith th e ap p ro v a l of th e C o m p tro ller
of th e C u rren cy , consolidate in to one association u n d e r th e c h a rte r of e ith e r
existing b a n k , on such te rm s a n d co nditions as m ay be law fully agreed u pon
b y a m a jo rity of th e b o a rd of d irecto rs of each association proposing to consoli
d a te , a n d be ratified a n d confirm ed b y th e affirm ative v o te of th e shareh o ld ers
of each such association ow ning a t le a st tw o -th ird s of its c a p ita l stock o u ts ta n d
ing, a t a m eetin g to be held on th e call of th e d irecto rs a fte r p u b lish in g notice
of th e tim e, place, an d o b je c t of th e m eeting for fo u r consecutive w eeks in som e
new spaper published in th e place w here th e said association is lo cated , a n d if
no new spaper is p u b lish ed in th e place, th en in a p a p e r published n e a re s t th e re to ,
a n d a fte r sending such no tice to each sh areh o ld er of record b y reg istered m ail
a t le a s t te n d ay s p rio r to said m eeting: Provided, T h a t th e c a p ita l stock and
initial surplus of such co nsolidated association shall n o t be less th a n t h a t required
u n d e r existing law for th e o rg an izatio n of a n a tio n a l b a n k in th e place in w hich
i t is lo cated: And provided further, T h a t w hen such consolidation shall h a v e been
effected a n d a p p ro v ed b y th e co m p tro ller a n y sh areh o ld er of e ith e r of th e asso
c iatio n s so consolidated w ho h as n o t v oted for such co nsolidation m ay give
n o tice to th e d irecto rs of th e association in w hich he is in te re ste d w ith in tw e n ty
d a y s from th e d a te of th e certificate of ap p ro v a l of th e co m p tro ller t h a t he
d issen ts from th e p lan of consolidation as ad o p te d an d a p p ro v ed , w hereupon
10
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
he shall be entitled to receive the value of the shares so held by him, to be ascer
tained by an appraisal made by a committee of three persons, one to be selected
by the shareholder, one by the directors, and the third by the two so chosen;
and in case the value so fixed shall not be satisfactory to the shareholder he may
within five days after being notified of the appraisal appeal to the Comptroller
of the Currency, who shall cause a reappraisal to be made, which shall be final
and binding; and if said reappraisal snail exceed the value fixed by said commit
tee, the bank shall pay the expenses of the reappraisal; otherwise the appellant
shall pay said expenses, and the value so ascertained and determined shall be
deemed to be a debt due and be forthwith paid to said shareholder from said
bank, and the share so paid shall be surrendered and after due notice sold at
public auction within thirty days after the final appraisement provided for in
this act.
S e c . 2. That associations consolidating with another association under the
provisions of this act shall not be required to deposit lawful money for their
outstanding circulation, but their assets and liabilities shall be reported by the
association with which they have consolidated. And all the rights, franchises,
and interests of the said national bank so consolidated in and to every species
of property, personal and mixed, and choses in action thereto belonging, shall
be deemed to be transferred to and vested in such national bank into which it is
consolidated without any deed or other transfer, and the said consolidated national
bank shall hold and enjoy the same and all rights of property, franchises, and
interests in the same manner and to the same extent as was held and enjoyed
by the national bank so consolidated therewith.
S e c . 3. That any bank incorporated under the laws of any State, or any bank
incorporated in the District of Columbia, may be consolidated with a national
banking association located in the same county, city, town, or village under the
charter of such national banking association on such terms and conditions as
may be lawfully agreed upon by a majority of the board of directors of each
association or bank proposing to consolidate, and which agreement shall be
ratified and confirmed by the affirmative vote of the shareholders of each such
association or bank owning at least two-thirds of its capital stock outstanding
or by a greater proportion of such capital stock in the case of such State bank
if the laws of the State w'here the same is organized so require, at a meeting to
be held on the call of the directors after publishing notice of the time, place, and
object of the meeting for four consecutive weeks in some newspaper of general
circulation published in the place where the said association or bank is situated,
and in the legal newspaper for the publication of legal notices or advertisements,
if any such paper has been designated by the rules of a court in the county where
such association or bank is situated, and if no newspaper is published in the
place, then in a paper of general circulation published nearest thereto, unless
such notice of meeting is waived in writing by all stockholders of any such asso
ciation or bank, and after sending such notice to each shareholder of record by
registered mail at least ten days prior to said meeting, but any additional notice
shall be given to the shareholders of such State bank which may be required by
the laws of the State where the same is organized. The capital stock and in itia l
su rp lu s of such consolidated association shall not be less than that required
under existing law for the organization of a national banking association in the
place in which such consolidated association is located; and all the rights, fran
chises, and interests of such State or District bank so consolidated with a na
tional banking association in and to every species of property, real, personal,
and mixed, and choses in action thereto belonging, shall be deemed to be trans
ferred to and vested in such national banking association into which it is con
solidated without any deed or other transfer, and the said consolidated national
banking association shall hold and enjoy the same and all rights of property,
franchises, and interests including the right of succession as trustee, executor, or
in any other fiduciary capacity in the same manner and to the same extent as
was held and enjoyed by such State or District bank so consolidated with such
national banking association.
When such consolidation shall have been effected and approved by the comp
troller any shareholder of either the association or of the State or District bank
so consolidated, who has not voted for such consolidation, may give notice to
the directors of the consolidated association within twenty days from the date
of the certificate of approval of the comptroller that he dissents from the plan of
consolidation as adopted and approved, whereupon he shall be entitled to receive
the value of the shares so held by him, to be ascertained by an appraisal made
by a committee of three persons, one to be selected by the shareholder, one by
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
11
the directors of the consolidated association, and the third by the two so chosen;
and in case the value so fixed shall not be satisfactory to such shareholder he may
within five days after being notified of the appraisal appeal to the Comptroller
of the Currency, who shall cause a reappraisal to be made, which shall be final
and binding; and the consolidated association shall pay the expenses of reap
praisal, and the value as ascertained by such appraisal or reappraisal shall be
deemed to be a debt due and shall be forthwith paid to said shareholder by said
consolidated association, and the shares so paid for shall be surrendered and, after
due notice, sold at public auction within thirty days after the final appraisement
provided for in this act; and if the shares so sold at public auction shall be sold
at a price greater than the final appraised value, the excess in such sale price
shall be paid to the said shareholder; and the consolidated association shall have
the right to purchase such shares at public auction, if it is the highest bidder
therefor, for the purpose of reselling such shares within thirty days thereafter to
such person or persons and at such price as its board of directors by resolution
may determine. The liquidation of such shares of stock in any State bank shall
be determined in the manner prescribed by the law of the State in such cases if
such provision is made in the State law; otherwise as hereinbefore provided. No
such consolidation shall be in contravention of the law of the State under which
such bank is incorporated.
,
.
The words “ State bank,” “ State banks,” “ bank” or “ banks” as used in this
section shall be held to include trust companies, savings banks, or other such
corporations or institutions carrying on the banking business under the authority
of State laws.
S e c . 5154. Any bank incorporated by special law of any State or of the
United States or organized under the general laws of any State or of the United
States and having an unimpaired capital sufficient to entitle it to become a
national banking association under the provisions of the existing laws may, by
the vote of the shareholders owning not less than 51 per centum of the capital
stock of such bank or banking association, with the approval of the Comptroller
of the Currency be converted into a national banking association, with any
name approved by the Comptroller of the Currency: P r o v id e d , how ever, That
said conversion shall not be in contravention of the State law. In such case the
articles of association and organization certificate may be executed by a majority
of the directors of the bank or banking institution, and the certificate shall declare
that the owners of 51 per centum of the capital stock have authorized the
directors to make such certificate and to change or convert the bank or banking
institution into a national association. A majority of the directors, after executing
the articles of association and the organization certificate, shall have power to
execute all other papers and to do whatever may be required to make its organi
zation perfect and complete as a national association. The shares of any such
bank may continue to be for the same amount each as they were before the
conversion, and the directors may continue to be directors of the association
until others are elected or appointed in accordance with the provisions of the
statutes of the United States. When the comptroller has given to such bank
or banking association a certificate that the provisions of this act have been
complied with, such bank or banking association, and all its stockholders,
officers, and employees, shall have the same powers and privileges, and shall
be subject to the same duties, liabilities, and regulations, in all respects, as
shall have been prescribed by the Federal reserve act and by the national
banking act for associations originally organized as national banking associa
tions: P r o v id e d , That the in itia l s u rp lu s o f su ch a ssocia tio n shall be not less than that
requ ired u n d er ex istin g la w f o r the o rg a n iza tio n o f a n a tiona l b a n k in g a sso cia tio n in
the pla ce in w hich su ch a sso cia tio n is located.
S e c . 5140. At least 50 per centum of the capital stock a n d at least 5 0 per
c en tu m o f the in itia l s u r p lu s of every association shall be paid in before it shall
be authorized to commence business; and the remainder of the capital stock
[of such association] a n d in itia l sxirplus shall be paid in installments of at least
10 per centum each, on the whole amount of the capital a n d in itia l s u r p lu s ,
as frequently as one installment at the end of each succeeding month from the
time it shall be authorized by the Comptroller of the Currency to commence
business; and the payment of each installment shall be certified to the Comp
troller, under oath, by the president or cashier of the association.
Sec. 5141. Whenever any shareholder, or his assignee, fails to pay any install
ment on the stock or on the in itia l s u r p lu s when the same is required by the pre
ceding section to be paid, the directors of such association may sell the stock of
such delinquent shareholder at public auction, having given three weeks’ pre
12
AMEND NATIONAL. AND FEDERAL RESERVE BANKING ACTS
AMEND NATIONAL AND FEDERAL RESERVE BANKING ACTS
vious notice thereof in a newspaper published and of general circulation in the
city or county where the association is located, or if no newspaper is published
in said city or county, then in a newspaper published nearest thereto, to any
person who will pav the highest price therefor, to be not less than the amount
then due thereon (in clu d in g a m o u n ts d u e f r o m su ch shareholder w ith resp ect to
in itia l s u r p lu s ), with the expenses of advertisement and sale; and the excess, if
any, shall be paid to the delinquent shareholder. If no bidder can be found who
will pay for such stock the amount due thereon (in clu d in g a m o u n ts d u e f r o m such
shareholder with resp ect to in itia l s u r p lu s ) to the association, and the cost of
advertisement and sale, the amount previously paid shall be forfeited to the
association, and such stock shall be sold as the directors may order, within six
months from the time of such forfeiture, and if not sold it shall be canceled and
deducted from the capital stock of the association. If any such cancellation and
reduction shall reduce the capital of the association below the minimum of capital
required by law, the capital stock shall, within thirty days from the date of such
cancellation, be increased to the required amount; in default of which a receiver
may be appointed, according to the provisions of section 5234, to close up the
business of the association.
S e c . 5205 (as amended 1876). Every association which shall have failed to
pav up its capital stock, o r in itia l s u r p lu s, as required by law, and every asso
ciation whose capital stock shall have become impaired by losses or otherwise,
shall, within three months after receiving notice thereof from the Comptroller
of the Currency, pay the deficiency in the capital stock a n d in itia l s u r p lu s, by
assessment upon the shareholders pro rata for the amount of capital stock held
by each; and the Treasurer of the United States shall withhold the interest upon
ail bonds held bv him in trust for any such association, upon notification from
the Comptroller of the Currency, until otherwise notified by him. If any such
association shall fail to pay up its capital stock, a n d in itia l s u r p lu s, and shall
refuse to go into liquidation, as provided by law, for three months after receiving
notice from the Comptroller, a receiver may be appointed to close up the busi
ness of the association, according to the provisions of section 5234:
S e c . 5143. Any association formed under this title may, by the vote of share
holders owning two-thirds of its capital stock, reduce its capital a n d s u r p lu s to
any sum not below the amount required by [this title] ex istin g law to authorize
the formation of associations.
S e c . 5151. The shareholders of every national banking association shall be
held individually responsible, equally and ratably, and not one for another, for
all contracts, debts, and engagements of such association, to the extent of the
amount of their stock therein, at the par value thereof [in addition to the amount
invested in such shares]; except that shareholders of any banking association
now existing under State laws, having not less than $5,000,000 of capital actually
paid in, and a surplus of 20 per centum on hand, both to be determined by the
Comptroller of the Currency, shall be liable only to the amount invested in
their shares; and such surplus of 20 per centum shall be kept undiminished, and
be in addition to the surplus provided for in this title; and if at any time there is
a deficiency in such surplus of 20 per centum, such association shall not pay any
dividends to its shareholders until the deficiency is made good; and in case of
such deficiency, the Comptroller of the Currency may compel the association to
close its business and wind up its affairs under the provisions of chapter 4 of this
title.
The stockholders of every national banking association shall be held individ
ually responsible for all contracts, debts, and engagements of such association,
each to the amount of his stock therein, at the par value thereof [in addition to
the amount invested in such stock]. The stockholders in any national banking
association who shall have transferred their shares or registered the transfer
thereof within sixty days next before the date of the failure of such association to
meet its obligations, or with knowledge of such impending failure, shall be liable
to the same extent as if they had made no such transfer, to the extent that the
subsequent transferee fails to meet such liability; but this provision shall not be
construed to affect in any way any recourse which such shareholders might
otherwise have against those in whose names such shares are registered at the
time of such failure.
S e c . 7. After all necessary expenses of a Federal reserve bank have been paid
or provided for, the stockholders shall be entitled to receive an annual dividend
of 6 per centum on the paid-in capital stock, which dividend shall be cumulative.
After the aforesaid dividend claims have been fully met 1 0 p er cen tu m o f the net
earnings o f su ch ba n k shall be paid [to the United States as a franchise tax except
that the whole of such net earnings, including those for the year ending December
31, 1918, shall be paid into a surplus fund until it shall amount to 100 per centum
of the subscribed capital stock of such bank, and that thereafter 10 per centum
of such net earnings shall be paid into the surplus] in to the s u r p lu s. O n e -h a lf o f
13
the rem a in d er o f the net ea rn in g s shall be p a id in to the F ed era l g u a r a n ty f u n d f o r
d ep o sito rs i n m em b er ba nks o f the F ed era l reserve s y s te m , a n d the re m a in in g o n e -h a lf
shall be p a id to the m em ber ba nks o f the F ed era l reserve s y s te m , o f w hich a m o u n t
each su ch bank shall be p a id a n a m o u n t w hich bears the sa m e ra tio to the a m o u n t o f
su ch re m a in in g o n e -h a lf as the p a id -in ca p ita l slock o w n ed b y stockhold ers in su ch
m em ber bank bears to the total p a id -in ca pita l stock o w n ed b y all stockhold ers in all
m em b er ba nks o f su ch F ed era l reserve bank.
S e c . 7. After all necessary expenses of a Federal reserve bank have been paid
or provided for, the stockholders shall be entitled to receive an annual dividend
of 6 per centum on the paid-in capital stock, which dividend shall be cumulative.
After the aforesaid dividend claims have been fully met, the net earnings shall
be paid to the United States as a franchise tax except that the whole of such
net earnings, including those for the year ending December 31, 1918, shall be
paid into a surplus fund until it shall amount to 100 per centum of the subscribed
capital stock of such bank, and that thereafter 10 per centum of such net earnings
shall be paid into the surplus.
[The net earnings derived by the United States from Federal reserve banks
shall, in the discretion of the Secretary, be used to supplement the gold reserve
held against outstanding United States notes, or shall be applied to the reduction
of the outstanding bonded indebtedness of the United States under regulations
to be prescribed by the Secretary of the Treasury.] Should a Federal reserve
bank be dissolved or go into liquidation, any surplus remaining, after the pay
ment of all debts, dividend requirements as hereinbefore provided, and the par
value of the stock, shall i n the d iscretio n o f the S ecr eta ry , [be paid to and become
the property of the United States and shall be similarly applied.]
[Federal reserve banks, including the capital stock and surplus therein, and
the income derived therefrom shall be exempt from Federal, State, and local
taxation, except taxes upon real estate.] be u sed to s u p p lem en t the gold reserve
held a ga inst o u tsta n d in g U n ited S ta tes n o tes, or shall be a p p lie d to the red u ctio n o f
the ou tsta n d in g bond ed in d ebted n ess o f the U n ited S ta tes u n d er regu la tio n s to be
p rescribed b y the the S e cr eta ry "of the T r e a su r y .
S e c . 13. Any Federal reserve bank may receive from any of its member banks
and from the United States, deposits of current funds in lawful money, nationalbank notes, Federal reserve notes, or checks, and drifts, payable upon presenta
tion, and also, for collection, maturing notes and bills; or, solely for purposes of
exchange or of collection, may receive from other Federal reserve banks deposits
of current funds in lawful money, national-bank notes, or checks upon other Fed
eral reserve banks, and checks and drafts, payable upon presentation within its
district, and maturing notes and bills payable within its district; or, solely for
the purposes of exchange or of collection, may receive from any nonmember
bank or trust company deposits of current funds in lawful money, national-bank
notes, Federal reserve notes, checks, and drafts payable upon presentation, or
maturing notes and bills: P ro v id ed , Such nonmember bank or trust company
maintains with the Federal reserve bank of its district a balance sufficient to offset
the items in transit held for its account by the Federal reserve bank: P ro v id ed
fu rth e r, That nothing in this or any other section of this act shall be construed as
prohibiting a member or nonmember bank from making 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, based on the total of checks and drafts
presented at any one time, for collection or payment of checks and drafts and
remission therefor by exchange or otherwise; but no such charges shall be made
against the Federal reserve banks.
_ _
.
U p o n a p p lica tio n o f a s en d in g ba nk, a F ed era l reserve bank shall give im m ed ia te
creait on checks a n d d rafts received f r o m su ch bank f o r collection, but the F ed era l
reserve bank m a y charge o n su ch credit a n a m o u n t o f in terest calculated at the current
red iscou n t rate f r o m the tim e o f receipt o f su ch item to the tim e o f collection thereof,
or w ith the a p p rov a l o f the F ed era l R eserve B o a r d , m a y establish a tim e sched ule f o r
the ca lculation o f su ch periodi
o
April 20, 1932
COMMENTS ON GLASS BILL. AS REPORTED OUT BY SENATE COMMITTEE
ON BANKING AND CURRENCY
(References are to S.UU12, April IS, 1932)
Sections 5(b) and 23. page 6, line 12; page 9> line 8; page U7 , line 7?
These references are all to places in the hill dealing with reports
and examinations of affiliates.
The language of the hill is mandatory,
stating that these reports and examinations shall he made.
In view of
the very hroad definition of affiliates, which would include industrial
and other corporations having nothing to do with hanking, discretion
should he left to determine whether the reports and examinations of
affiliates should he obtained in all cases.
Language that would ac
complish this purpose is incorporated in the Board*s report on the Glass
hill, on pages 10 , 1 1 , and 67 .
Section 5(h). page 8. lines 5-10:
This section, which imposes i^pon state member hanks the same limi
tations and conditions with respect to the purchasing, selling, under
writing and holding of investment securities and stock as are applicable
in the case of national hanks, should he eliminated for the same reasons
as in the case of similar restrictions in section lU which applies to
national hanks.
The language of this provision, when read in connec
tion with lines 1 to U on page 3&» which prohibit national hanks from
holding stock, has given rise to the question whether state member hanks
would not he required to dispose immediately of stock in a subsidiary
(2)
corporation.
In view of this question, if this paragraph is not
omitted, its effective date should he postponed for a period corres
ponding to that applicable to the separation of security affiliates.
Section 7, on page 13, lines *4-9i
The establishment by law of the existing Federal open market com
mittee is undesirable on the grounds stated in the comments of the Fed
eral Reserve Board,
It is particularly important to limit the com
mittee to its present jurisdiction over open market operations for sys
tem account.
As proposed in the bill, a majority of a committee con
sisting of representatives of the twelve banks would have the power,
which they do not possess under present procedure, to prevent an indi
vidual reserve bank from purchasing an acceptance, a municipal warrant,
or any other investment authorized by law, and thus to obstruct the
operation of the reserve banks.
Section 7. page 16, lines 9-19;
Requirement that member banks shall contribute about $65,000,000
(one-half in full within 90 days) to the capital of the Liquidating
Corporation is contrary to the Federal Reserve Board*s recommendation,
and would be undesirable, particularly at this time.
Section 7, page 20, lines 2U-25: page 21, lines 1-Ut
Loans made by the Liquidating Corporation on assets of closed
banks must be based on valuations determined by committees on which it
is not represented.
It is undesirable to prescribe by law the proce
dure which should be followed in this respect.
(3)
Section 8, page 28, lines 8-2*1:
Omission of these provisions dealing with advances to member hanks
on 15-day notes was recommended by the Federal Reserve Board.
They are
■unnecessary, because their objects are accomplished in a more satisfacfactory way by section 3»
The language in section S implies that all
loans on securities are of questionable propriety, and the section is
based on the theory, not supported by the system!s experience, that ad
vances on member bank 15 -day notes have a different effect on the credit
situation than rediscounts.
The Board*s recommendation that the maxi
mum maturity of advances to member banks be extended to 90 <3Lays when
secured by eligible paper, should be incorporated in the bill*
Section lU, page
lines 15-21:
Authorizes national banks to engage in all forms of banking busi
ness permitted to state banks, unless specifically prohibited by law.
This provision would lower the standards of national banking and make
the problem of supervision over these banks more difficult*
The Comp
troller of the Currency under this section would have to be familiar
with the legislation of all the states conferring powers on the state
banks, and would have to apply this legislation in his dealings with
the national banks of each state*
Furthermore, it is doubtful whether
some powers which may be possessed by state banks should be conferred
on national banks.
The Federal Reserve Board recommended omission of
this entire section (section lH) which restricts the operations of na
tional banks in the investment field, on the general ground that at
this time when the country*s banking system is going through a period
*
(U)
of severe readjustment such restrictions on national hanks may prove
disturbing and may retard recovery*
It is also a question whether
such restrictions are wise so long as national banks are in competition
with state banks which are not subject to such restrictions.
Section 18, page U3* line 18:
It would be better to allow five years, rather than three, for the
separation of security affiliates from member banks.
Section 22* page U6, line 25. and page U7, lines 1-3?
It should be made clear that this section, which provides that
loans to subsidiaries should be included with loans to parent companies
in connection with the limitations on loans to one borrower, would be
applicable only to future loans and it should not become effective un
til after three years.
Section 2U* -page
lines 5-11:
The language on these lines gives the Comptroller of the Currency
the power to publish the report of his examinations of any national
banking association or affiliate which shall not have complied within
a certain period with his recommendations or suggestions.
This is
an extremely drastic power to place in the hands of any one man.
C alendar N o . 6 0 4
72
d
C
on gress
1st S essio n
)
)
SENATE
f
]
R
eport
No. 534
OPERATION OF T H E NATIONAL AND FED ER A L RESERVE
BANKING SYSTEMS
A pr il
22, 1932.—Ordered to be printed
M r. G lass , from the Committee on Banking and Currency, submitted
the following
R E P O R T
[To accompany S. 4412]
* The Senate Committee on Banking and Currency has had under
consideration S. 4412, “ To provide for the safer and more effective use
of the assets of Federal reserve banks and of national banking associ
ations, to regulate interbank control, to prevent the undue diversion
of funds into speculative operations, and for other purposes,” and
reports it back to the Senate with the recommendation th at the bill be
passed.
The bill thus reported is the result of extensive hearings by a duly
authorized subcommittee of the Banking and Currency Committee
of the Senate and, more recently, hearings by the general Banking
and Currency Committee. The investigation of banking problems
was held under the terms of Senate Resolution No. 71, adopted at
the second session of the Seventy-first Congress, reading as follows:
R esolved , That in order to provide for a more effective operation of the National
and Federal reserve banking systems of the country the Committee on Banking
and .Currency of the Senate, or a duly authorized subcommittee thereof, be, and
is hereby, empowered and directed to make a complete survey of the systems
and a full compilation of the essential facts and to report the result of its findings
as soon as practicable, together with such recommendations for legislation as
the committee deems advisable. The inquiry thus authorized and directed is
to comprehend specifically the administration of these banking systems with
respect to the use of their facilities for trading in and carrying speculative securi
ties; the extent of call loans to brokers by member banks for such purposes; the
effect on the systems of the formation of investment and security trusts; the
desirability of chain banking; the development of branch banking as a part of
the national system, together with any related problems which the committee
may think it important to investigate.
For the purpose of this resolution the committee, or any duly authorized sub
committee thereof, is authorized to hold hearings, to sit and act at such times
and places during the sessions and recesses of the .Seventy-first and succeeding
Congresses until the final report is submitted, to employ such clerical and other
2
NATIONAL AND FEDERAL RESERVE BAN KIN G SYSTEMS
assistants, to require by subpoena or otherwise the attendance of such witnesses
and the production of such books, papers, and documents, to administer such
oaths, and to take such testimony, and make such expenditures as it deems
advisable. The cost of such stenographic services to report such hearings shall
not be in excess of 25 cents per hundred words. The expenses of the committee,
which shall not exceed $15,000, shall be paid from the contingent fund of the
Senate upon vouchers approved by the chairman.
Acting upon the authority of the foregoing resolution the Senate
Committee on Banking and Currency appointed a subcommittee to
conduct the inquiry, which subcommittee proceeded in three ways:
1. I t held hearings during the months of January and February
of the year 1931 and at these hearings interrogated numerous wit
nesses, representing the banking, financial, and technical elements in
the community, who either indicated a desire to be heard or were
invited by the committee as probably possessing information th at
would be valuable.
#
2. Inquiries were made among a select list of representative banks
by the method of questionnaires. Lists of questions were carefully
formulated by experts and transm itted to the banks; and, in nearly
all cases, replies of a full and complete description were forwarded
by the latter. These have been carefully analyzed and the result
published as appendixes to the hearings.
3. Statistical and other investigations were conducted by inves
tigators attached to the committee; and their results reported and
published in connection with the hearings. In addition, reports on
topics of a technical nature calling for special inquiry were placed
before the committee.
.
.
*
In addition to the foregoing the committee carried on an extensive
correspondence and received numerous suggestions, recommendations,
and other presentations of argument or evidence. It also received
various drafts of proposed legislation, and gave due consideration to
all. I t found, however, that- public opinion was in an indeterminate
condition on the whole subject, and felt th at immediate emergencies
were so great th at it was wise to defer the preparation of a completely
comprehensive measure for the reconstruction of our banking system,
such as had been urged bjr some responsible men. Hence the commit
tee resolved to construct a bill to correct manifest immediate abuses,
and to bring our banking system back into a stronger condition. Thus,
for example, it seems to be the consensus of opinion among banldng
authorities th at the United States will never have a complete and
strong system until such time as it shall succeed in fully harmonizing
and adjusting State and Federal laws on banking questions. This
might involve a constitutional amendment or some equally farreaching measure necessitating a long postponement of action.
The immediate measures of reform and rectification are, how
ever, quite im portant. They include the correction of evils which
reached a peak of danger in 1929 and abuses which have gradually
grown up within the banking system itself. Immediate dangers and
emergencies have been of so pressing a nature as to throw into the
background many of the evils which have previously been recognized
and to divert discussion from causes to the immediate effects of what
was done in recent yearn. I t is, therefore, needful to consider at
some length the general background of the banldng conditions which
culminated in the breakdown of 1929.
NATIONAL AND FEDERAL RESERVE B AN K IN G SYSTEMS
IN F L A T IO N
OF
BANK
3
C R E D IT
There seems to be no difference of opinion with reference to the
t w t T T * ti l*at t!1ie
afteii 19?5 ’ and indeed to a smaller extent
those pieceding th at date and subsequent to 1922, were vears of a
very great inflation of bank credit—as well as of commercial credit
and, especially in the later years, of business. By inflation in the
WhlC1 nhai word JS here used, is meant the increase of bank
liabilities, usually demand liabilities, in a proportion or degree m ate
rially greater than the rate of increase indicated by the requirements
of a gradual growth of business transactions involving the producth°ona?Ls ^ tn b ution of goods—m a degree or ratio, therefore, greater
than th at in which the need for media of exchange had grown—
usually accompanied by corresponding changes in liquidity. By wav
of demonstration or illustration of this statem ent in very brief form
we may simply cite the enlargement of deposit liabilities of the banks
during the past few years prior to 1929 and the great subsequent
enlargement of investments and frozen loans. This growth was not
paralleled by any similar enlargement of the demand for means of
orproduction18 SUggested h y the various indexes reflecting the rate
OQ£nmatL05 WaS alf irJd\Cflte? by the uses to which the credit thus
established was put and the advance in prices thereby brought about
5 “ “ ° " eV de7 t7 t
.lncrease in deposit credit on the part of
the banks already described was largely used in three ways: (1) In
the carrying and inflating of the prices of securities, especially com
mon stocks, (2) in the overdevelopment of real estate and real estate
n n i d T n ^ ^ f l ^ h ? f m th e uP b u ild m g of a large c a p ita l eq u ip m en t
p aid for w ith sh o rt-term accom m odation b u t n o t fu n d ed a t th e tim e
in to lo n g er-term loans.
B E A R IN G S
ON
C R E D IT
E X P A N S IO N
fL ^ nf lyf is o f ,th ® ,s 0lF ces from Which the excessive credit used in
b U r w 7 k •I^ arkefc1 d an n g past years was drawn, is a prim ary factor
m determining what was really at fault in the management of bankng du ring the ye am m question. This is of special interest in connemlon W1^b the so-called brokers’ loans.
The loans in question are divided into two main groups the one
obtained from banks and bankers while a second represents those
othern n o n b « n r 0 t}W1f " These “ others” were corporations and
other nonbanlung lenders, including investment trusts and many
others haying funds to spare who chose to advance them for use
in supporting securities transactions. The question is thus naturally
Thev
Ct) the “ others”
spoken of obtain their funds?
m d X »tt n d
°l co1u rse’J,m substantial measure from the
public at large through sales of new issues, which rose steadily
through this period In part, also, they were a result of the use I f
s t o f k W dinstead
t aU2 of?°vSt-V
e.a !'m
nSs’
were retained from
stockholders
beingai>paid
out
as which
dividends.
npw m,m.aj01
ofJ ^ e indation> however, was the creation of
u
i n
through large loans and investments by banks that
oner7innts
7 1t!,SlirphlS
eTt * 6 ’etc.
0Wlng to g°ld imports, open market
operationsf of
the reserveTfbanks,
4
NATIONAL AND FEDERAL RESERVE B AN K IN G SYSTEMS
USE
OF
PROCEEDS
OF
NEW
IS S U E S
OF
S E C U R IT IE S
A large portion of the funds obtained by these issues of securities
from the public was unavoidably used in new construction and in
carrying out the legitimate purposes of the businesses which thus
obtained them from the investors of the country. Another large
portion was, however, left over; it was not directly required for
immediate use, the issuers of securities having overborrowed or over
capitalized themselves, so th a t they were in possession of more current
funds than they needed. This surplus of funds went into the stock
market and fostered excessive speculation, although it also stimu
lated business by being transferred to sellers of securities later on.
Where did the public which bought the securities of such corpora
tions get the funds they thus supplied? Some portion of the money
naturally came from savings and current incomes, but a larger frac
tion was unquestionably obtained from the banks by means of the
security borrowings to which reference has been made at an earlier
point. The banks were thus lending directly in unprecedentedly
large amounts directly to brokers; but they were also lending in even
larger amounts on collateral to the general public, which was then
taking the funds so supplied and using them in large degree for the
purchase of securities whose proceeds were applied to speculative
loans in the market. The flow of funds through the hands of the
general public into those of the corporations, and from the latter
into the hands of brokers and dealers, who then re-lent the funds
to the public engaged in speculation, was thus primarily the result
of a loose banking policy which had turned from the making of loans
on commercial paper to the making of loans on security. This policy
was critically referred to by the Federal Reserve Board, which often
called attention to it in its annual reports.
THE
GROWTH
OF
ACCEPTANCE
C R E D IT
NATIONAL AND FEDERAL RESERVE B AN K IN G SYSTEMS
ance being exhibited in connection with the stretching of the defini
tion of various transactions so as, for instance, to include storage of
commodities as an incident to their moving abroad or moving from
one market to another so that acceptances protected by such stored
goods were regarded as acceptances made against goods actually
moving in international trade. I t was easy to pass from this view
of the situation to another and more advanced view, wherein stored
goods not sold during the period of the acceptance were used as
goods properly providing a basis for renewal of the acceptance so
th at revolving acceptances or acceptances growing out of revolvingcredits became common, notwithstanding official warnings a°-ainst
them.
From the domestic standpoint, it would seem clear that not a few
banks had fallen into the habit of supplying their customers with
funds through the issue and sale of their acceptances, without much
regard to the question whether such acceptances were called for or
**pt. .
fhe iRrge am ount of reserve credit thus created prevented
effective control of security loans and investments of the banks, and
thus fostered the stock m arket boom, there can be little doubt.
Through these and similar means, too, a very large commitment
on the part of American banks taken on behalf of foreign banks came
into existence. Germany, in particular, proved to be a great borrower
on this score, and the total of acceptances made directly or indirectly
in order to provide funds for foreign banks grew to unprecedented
amounts. The effect of these transactions upon the German banks
themselves, m leading up to the German financial collapse of July,
1931, has been carefully traced by the international committee of
bankers which met under the chairmanship of M r. A. H. Wiggin in
Basle, after the breakdown of Germany during the past summer, for
the purpose of discussing ways and means of dealing with the German
credit situation.
BANK
The general ease and accessibility of credit under the regime
which existed prior tp 1929 was accentuated by the issue of the in
strum ent known as the bankers’ acceptance. In its original purpose
this form of lending was intended to include only unquestionably
liquid obligations, growing out of the actual sale of goods in foreign
trade, so th at the acceptance became a short-term claim payable in
international funds, usually gold. I t was this conception of the in
strum ent which was originally adopted in the Federal reserve act,
and on which the use of the instrum ent by the Federal reserve system
was founded. Later amendments to the reserve act, adopted during
the World War, broadened the use of the acceptance and opened the
door to the application of a conception of its use which was practically
th a t of a finance bill—a bill drawn without reference to the immedi
ately liquid character of a given transaction, and primarily based
upon the general power of the parties to it to see th at it was liquidated
from some sourse. The use of the acceptance to supply what was
called dollar exchange, although doubtless of advantage under proper
restrictions, undoubtedly opened a door to grave abuses, which were
in some measure responsible for the credit difficulties th at later made
their appearance in South American finance. These difficulties, how
ever, were after all comparatively minor, the real dangers of the accept
5
IN S O L V E N C IE S
Every discussion of the conditions which preceded the panic of
1929 m ust make full allowance for the bank insolvencies which durmg the years after 1924 began to grow so numerous. The following
brief tabulation furnished to another subcommittee affords the facts
regardmg bank insolvencies during the year 1931, while figures for
earlier years were furnished by the Comptroller of the Currency
during the hearings of the past winter, and are computed on a some
what different basis by the Federal Reserve Board in its monthly
bulletin. I t is obvious th at bank failures, whatever may be the basis
upon which they are computed, have reached an unprecedentedly
high level after a long continued growth extending over a decade,
f m e
° f theSe msolvencies Prior to the panic of 1929, was two
fold. They tended to break down the business structure of the coun
try and particularly of the places and regions in which they were
most numerous, and they tended to bring on local hoarding over large
areas. The condition of affairs is complex, growing as it did, out of
a, variety of conditions. M ost of these circumstances have been outImed m the hearings, and there is little use in further reviewing them
at this point. For the most part they are well known.
There should, however, be no failure to recognize the im portant
role played by these insolvencies in preparing the way for the gen
7
NATIONAL AND FEDERAL RESERVE B AN K IN G SYSTEMS
NATIONAL AND FEDERAL RESERVE B AN K IN G SYSTEMS
eral breakdown of 1929. The fact th at they occurred more largely
among “ small banks,” as has often been urged, in no way reduces
the significance of the phenomenon. I t points to a gradual disin
tegration of banking under present conditions and it reflects the com
m unity’s way of gradually curing the evils complained of, though
a lengthy and costly process. I t was this tendency to bank failure
starting 10 years ago after the depression of 1920—21 and steadily
growing more and more pronounced, except during the boom years,
until it reached the astonishing height touched in 1930 th a t has cul
minated in the great total of nearly 2,300 failures occurring in this
country during the year 1931. This drift toward failure among banks
laid the foundation for extreme difficulties experienced during the la t
ter part of 1931, and necessitated the remedial measures th a t were
then undertaken. Bank failures can not but be regarded as one of
the fundamental symptoms th a t must be given primary study in the
search for remedies to be applied to present conditions.
th at year. Almost all governments both hero and abroad have per
mitted themselves to overborrow on short term. When such borrow
ing has been effected at banks, as has been the case in most instances
the result has been to add to inflation by getting the banks to carry
as credit what was really long-term capital investment. In the
United States very low money, the result of exceptionally low interest
and discount rates, rendered it possible to effect such borrowing on
a very economical basis. The result was the extended use of the
banks for the purpose of carrying unfunded public debt, often in
the expectation th at such debt would be shortly funded and could
be so funded at any time determined upon by the borrowing gov
ernment as suitable. The growth of very large public-bond hold
ings, including not only the obligations of the United States but of
various States and cities, operated strongly to limit the banks’ liquidity
by engaging their funds in what were really long-term investments.
From the outbreak of the panic and during the subsequent depres
sion there was never a favorable time for refunding, and the result
has been to leave many banks with unduly large burdens of public
bonds. So far as Federal reserve banks were concerned, the fact
th a t the obligations of the Federal Government could always be
used to protect member-bank borrowings inevitably tended to encour
age such members in developing frozen portfolios.
6
B a n k s u s p e n s io n s in 1 9 3 1 , p r e lim in a r y fig u res
National banks
All banks
Num
ber
Num
ber
Deposits
State bank
members
Deposits Num
ber
Deposits
Nonmember
banks
Num
Deposits
ber
R E A L -E S T A T E
Year 1931, total.................... 2,290 $1,759,000,000
Last quarter of 1931........... 1,049 866,000,000
November and December,
527 388,000, 00C
1931...................................
522 478,000, 000
October, 1931.......................
69, 000,00C
174
November, 1931.............. .
353 319, 000, 000
December, 1931..................
410$473,000,000
199 244, 000,000
99
100
35
64
S T O C K -E X C H A N G E
128, 000, 000
116,000,000
28, 000,000
100,000,000
108$302,000,000 1,772 $984,000,000
51 155,000,000 799 467,000,000
26 37,000,000
25 118,000,000
8 4, 000,000
18 33, 000, 000
402
397
131
271
223,000,000
244, 000, 000
37, 000,000
186, 000, 000
S P E C U L A T IO N
Stock-exchange speculation in excess is often spoken of by some
as the cause and by others as an unfortunate result of the business,
banking, and credit conditions which culminated in the panic of
1929. I t was neither of these, but was an accompaniment or symptom
of unsound credit and banking conditions themselves. The facts as
to the expansion of such speculation are well known, and its history
requires no repetition, but the major data, facts, and conclusions
may be briefly summarized as including: (1) A steady increase in
bank security loans and investments; (2) rising price resulting from
the increased resulting demand; (3) a sporadically enlarging vol
ume of stock-exchange operations and new issues made possible by
popular enthusiasm thus engendered; and, finally (4) a violently
fluctuating course of prices on the stock exchange continuing until
the whole structure fell of its own weight, resulting in the sharp
downward movement which began in the autumn of 1929 and has
been followed by sporadic collapses at various times since.
IN F L U E N C E
OF
P U B L IC
F IN A N C E
I t must be noted, in reviewing the situation which preceded the
panic of 1929, th at methods then adopted in connection with public
finance had a very substantial share in bringing on the collapse of
IN F L A T I O N
One element which deserves special notice in any study of pre
panic conditions is afforded by real-estate inflation and speculation.
I t is not possible to find authoritative statem ents of the growth of
the volume of real-estate loans and security investment in the port
folios of the banks and elsewhere, but the general facts in the case
are clearly enough known. The immense increase in the volumes of
real-estate bond issues and of real-estate mortgages both in banks
and among the holdings of the financial institutions generally are
the subject of widespread comment. W hat is less well recognized
is the fact th a t an immense overexpansion of real-estate values was
set in motion and th at in consequence the coming on of the panic
and their recognition th at the country was “ overbuilt” added an
element of great difficulty to the situation. This element of difficulty
is vividly illustrated by the circumstance th a t many institutions now
find themselves hopelessly embarrassed by their real-estate com
mitments and by the fact th a t rents and selling values have so
seriously shrunk.
PROBLEM S
OF
RESERVE
BANKS
At times the reserve banks have held an unprecedented amount of
gold during the past two or three years and the gold stock of the
country has occasionally been well above $5,000,000,000, so th a t the
reserve percentage of the reserve banks has been steadily high, not
withstanding fluctuations and a recent tendency to recede. These
high ratios, however, have much less direct bearing upon the actual
condition of the system than is generally supposed. The real prob
lem of reserves is furnished by the relationship between the outstand
ing deposits of the banks of the country and the gold reserve which
the reserve banks themselves carry. This ratio or relationship has
NATIONAL AND FEDERAL RESERVE B AN K IN G SYSTEMS
NATIONAL AND FEDERAL RESERVE B AN K IN G SYSTEMS
until recent months shown continuous tendency to decline. The
great gold movements of the past half year and the liquidation of
many banks have somewhat changed the situation, but it has con
tinued true th at the ratio was inadequate while the tendency of a
portion of the public to hoard currency has necessitated the issue of
reserve notes in large volumes with corresponding shrinkage of the
so-called free gold available. During the three years before the col
lapse of 1929 unduly low discount rates were a cause of danger to
reserve banks. They have been viewed by some banking authorities
as a chief cause of the difficulties which compelled Great B ritain to
abandon the gold standard in the summer of 1931. The question of
reserve policy is an involved and complex one on which your com
mittee took "much testimony and also pursued an extended study
whose results are stated, in the words of the reserve banks them
selves, in part 6 of the hearings (appendix). So fully are the facts
there reviewed and so authoritatively are they stated by the reservebank authorities th at it has not been thought necessary to enlarge
more fully upon the situation in this report.
1. B an k loans an d their uses .—I t is evident from what lias been
said that the underlying factor in the whole prepanic situation was
excessive use of bank credit. The question of “ excess” is a question
of judgment and can only be determined by noting in specific terms
the forms it has taken and the remedies to be applied to them.
(а ) The excessive use of bank credit in making loans for the pur
pose of stock speculation or, more generally stated, for the excessive
carrying of securities with borrowed money was generally admitted
before the panic of 1929, and almost universally since that time, to
have been one of the sources of major difficulty, far exceeding in its
scope any total th a t could be reasonably asked for as a basis for
the financing of legitimate investment business. Under this same
topic, too, must be mentioned the so-called “ brokers’ loan.” These
are merely a special form of securities loan in which a bank or commerical corporation or other enterprise advances funds through an
intermediary—the broker—instead of lending direct; an excessive
volume of brokers’ loans must be considered in the light of the total
volume of security loans outstanding. The category of brokers’
loans obtained from “ others” is a separate and especially difficult
aspect of this problem.
(б ) I t seems clear that any remedial measure of legislation should
seek to provide some check upon the abnormal growth of all security
loans at banks as well as seek to limit the loans to brokers, especially
those loans originating with “ others.” Such legislation, if success
ful, should operate to lessen the danger of a repetition of the experi
ence of 1929. I t is often suggested th at control of this form of credit
ought to be effected in some way through stock exchanges. W hat
ever may be thought of th a t method of approaching the subject,
it is at all events certain that nothing of the kind would be likely to
succeed without adequate banking control, while on the other hand,
banking control alone may greatly ameliorate conditions in this field
of credit.
(c) The line of reasoning thus presented leads us to propose:
(1) Legislation designed to control and limit brokers’ loans, partic
ularly to limit the use of funds of the reserve banks for this purpose.
(2) Legislation designed to restrain the diversion of bank funds
to an undue degree into direct loans upon securities whether to
brokers or to others.
(3) Legislation intended to prevent, so far as legislation can,
speculative market loans by corporations engaged in industrial or
business enterprises.
2. B anking affiliates .—There seems to be no doubt anywhere th at
a large factor in the overdevelopment of security loans, and in the
dangerous use of the resources of bank depositors for the purpose of
making speculative profits and incurring the danger of hazardous
losses, has been furnished by perversions of the national banking and
State banking laws, and that, as a result, machinery has been created
which tends toward danger in several directions.
(a ) The greatest of such dangers is seen in the growth of “ bank
affiliates” which devote themselves in many cases to perilous under
writing operations, stock speculation, and maintaining a m arket
for the banks’ own stock often largely with the resources of the par
ent bank. This situation was never contemplated by the national
banking act, and it would, therefore, appear th a t the affiliate sys-
8
C O N D IT IO N
OF
MEMBER
BANKS
The outstanding development in the commercial banking system
during the prepanic period was the appearance of excessive security
loans, and of overinvestment in securities of all kinds. The effects
of this situation in changing the whole character of the banking
problem can hardly be overemphasized. National banks were never
intended to undertake investment banking business on a large scale,
but the whole tenor of legislation and administrative rulings con
cerning them has been away from recognition of such a growth in
the direction of investment banking, as legitimate. Nevertheless
it has continued; and a very fruitful cause of bank failures, espe
cially within the past two years, has been the fact that the funds of
various institutions have been so extensively “ tied u p ” in long-term
investments. The growth of the investment portfolio of the bank
itself has been greatly emphasized in importance by the organiza
tion of allied or affiliated companies under State laws, through which
even more extensive advances and investments in the security m arket
could be made. This question, like th at relating to the policy and
situation of reserve banks, has extensive ramifications which must
be studied statistically. In order to provide material for such a
study, the results of questionnaires addressed to a selected list of
large banks, each possessing one or more affiliates, have been assem
bled in general tabular form with such explanation as is necessary
to enable the reader to evaluate the figures thus given. They are
presented as part 7 of the hearings (appendix).
A N A L Y S IS OF P R E S E N T B A N K IN G P R O B LE M
We have furnished thus far a merely descriptive account of the
financial and credit conditions which preceded the panic of 1929. I t
now remains to consider these facts as exhibiting a distinct kind
of banking problem and to inquire in what way remedies for it may
be found. Specific conditions which stand out as requiring some
remedy are therefore taken under consideration, as follows:
9
10
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
tern c a lls fo r th e e s t a b lis h m e n t o f s o m e le g is la tiv e p r o v is io n s d e sig n e d
to d e a l w ith th e s itu a tio n .
I t h a s b e e n s u g g e s te d fr o m m a n y q u a r te r s
t h a t th e a ffilia te s y s t e m b e s i m p ly “ a b o lis h e d .”
T h i s s u g g e s tio n
h a s m u c h a u t h o r it y b e h in d it , b u t , in a d d itio n to t h e m a n ife s t d iffi
c u lt y o f e n fo r c e m e n t , o w in g to th e e x iste n c e o f w e ll-k n o w n s u b t e r
fu g e s to m a in t a in c o n t r o l, th e r e r e m a in s th e q u e s tio n w h e th e r it
w o u ld b e o f m u c h rea l se r v ic e so lo n g as S t a t e le g isla tio n p e r m it s th e
g r o w th o f a ffilia tes in c o n n e c tio n w it h S t a t e b a n k s a n d t r u s t c o m
p a n ie s .
T h e c o m m it t e e h a s , th e r e fo r e , d e te r m in e d to p r e s e n t p r o
p o s e d le g is la tio n a im e d a t th e fo llo w in g o b j e c t s :
(1 ) T o s e p a r a te as fa r as p o s s ib le n a t io n a l a n d
m em ber
banks
fr o m a ffilia tes o f a ll la n d s .
>
(2 ) T o lim it th e a m o u n t o f a d v a n c e s o r lo a n s w h ic h c a n b e o b
t a in e d b y a ffilia tes fr o m th e p a r e n t in s tit u tio n s w it h w h ic h t h e y a re
con n ected .
.
(3 ) T o in s ta ll a s a tis fa c to r y e x a m in a tio n o f a ffilia te s, w o r k in g
s im u lta n e o u s ly w it h t h e p r e se n t s y s t e m o f e x a m in a t io n a p p lic a b le
to t h e p a r e n t b a n k s .
t
.
.
(,b ) G r o u p b a n k i n g .— C lo s e ly a llied in m a n y p o in ts o f s im ila r ity
w it h th e a ffilia te s y s t e m is th e p la n o f g r o u p b a n k in g in o p e r a t io n in
s o m e p a r t s o f th e U n it e d S t a t e s , w o r k in g , in a fe w c a s e s , o n a la r g e
s c a le .
I n th is s y s t e m a h o ld in g c o m p a n y is o r g a n iz e d u n d e r S t a t e
la w a n d p r o c e e d s t o b u y a m a j o r i t y o f th e s t o c k o f a series o f b a n k s ,
o p e r a t in g t h e m t h e r e a fte r t h r o u g h th e h o ld in g c o m p a n y .
I n th is
w a y in s o m e d is tr ic ts s u c h h o ld in g c o m p a n ie s c o n t r o l th e r e se r v e
b a n k o f th e d is t r ic t th r o u g h o w n e r sh ip o f e n o u g h b a n k s to c a r r y an
e le c tio n .
T h e d iffe re n c e b e t w e e n th is p la n a n d th e a ffilia te s y s t e m
its e lf is t h a t in th e o n e b a n k s are o w n e d b y a S t a t e -o r g a n iz e d h o ld
in g c o m p a n y , w h ile in th e o th e r S t a t e -o r g a n iz e d c o m p a n ie s (affili
a te s ) are o w n e d b y a n a t io n a l b a n k ’ s s t o c k h o ld e r s , o r in s o m e c a se s
d ir e c t ly b y t r u s t c o m p a n ie s , u n d e r s o m e fo r m o f la w w h ic h a m o u n ts
to ow m ership b y th e p a r e n t b a n k its e lf.
T h e e v ils o f in d ir e c t c o n tr o l
are s im ila r in th e tw o c a se s, a n d t h e y m a y le a d to s im ila r a b u s e s , as
is s e e n w h e n i t is n o t e d t h a t h o ld in g c o m p a n ie s a lso u s u a lly c o n t r o l
c o m p a n ie s o r g a n iz e d fo r s e c u r ity fin a n c in g .
H o w e v e r , su ch c o m
p a n ie s h a v e in s o m e p a r ts o f th e U n it e d S t a t e s b e c o m e v Tell r o o t e d ,
a n d th e d iffic u lty o f e lim in a tin g or a b o lis h in g t h e m in a n y e ffe c tiv e
w a y is s im ila r to th e d iffic u lty o f e lim in a tin g o r a b o lis h in g th e a ffilia te s
o f c ity b a n k s.
I t is, th e r e fo r e , t h o u g h t b e s t to a t t e m p t th e c o n t r o l
a n d o v e r s ig h t o f th e s e c o m p a n ie s on th e fo llo w in g t e r m s :
(1 ) S in c e th e c o m p a n ie s are S t a t e c o r p o r a tio n s , C o n g r e s s h a s n o
c o n tr o l o v e r t h e m , e x c e p t t h a t w h ic h m a y b e v o lu n t a r i ly g r a n te d .
H o w e v e r , sin c e th e s t a p le o f th e ir o w n e r sh ip or h o ld in g s is th e s t o c k
o f N a t i o n a l a n d S t a t e m e m b e r b a n k s , it w o u ld s e e m t h a t C o n g r e s s
m a y c o n tr o l th e c o n d it io n s u n d e r w h ic h s u c h s t o c k s m a y b e o w n e d a n d
p a r tic u la r ly v o t e d .
(2 ) T h e a ffilia te s o f th is t y p e (h o ld in g c o m p a n ie s ) a re p r o h ib ite d
fr o m v o t in g th e s t o c k s o f n a t io n a l b a n k s u n le ss t h e y are w illin g to
u n d e r t a k e to a c c e p t e x a m in a t io n b y th e F e d e r a l R e s e r v e B o a r d ,
d iv e s t th e m s e lv e s o f o w n e r sh ip o f s t o c k a n d b o n d fin a n c in g c o n
c e r n s, a n d c o m p ly w it h r e g u la t io n s d e sig n e d to in su re th e ir o w n
ersh ip o f su ffic ie n t fr e e a s s e ts to m a k e su re t h a t t h e y c a n s a t is fy
th e d o u b le lia b ilit y o f th e ir sh a r e h o ld e r s in c a se a n y o f th e b a n k s
o w n e d b y su c h a c o m p a n y s h o u ld g o in to th e h a n d s o f r e c e iv e r s o r
b e c lo s e d .
.
11
(3 )
I t is t h o u g h t t h a t , in a n y e v e n t , h o ld in g c o m p a n ie s s h o u ld
n o t b e a llo w e d , e x c e p t in a s e v e r e ly lim ite d w a y , to v o t e a t e le c tio n s
o f F e d e r a l re se rv e b a n k d ir e c to r s , sin c e o th e r w is e th e F e d e r a l re s e r v e
b a n k w o u ld b e c o m e m e r e ly th e c r e a tu r e o f th e h o ld in g c o m p a n y .
S u c h v o t in g is th e r e fo r e d e fin ite ly r e s tr ic te d .
3 . I n s o l v e n c y o f b a n k s . — W i t h i n th e p a s t fe w y e a r s , th e in s o lv e n c y
o f b a n k s h a s b e e n a m a jo r c a u s e o f d is tre s s a n d b u s in e s s d iffic u lty
in all p a r ts o f th e c o u n t r y .
T h e r e is n o o n e s o v e r e ig n r e m e d y fo r
th is c o n d it io n o r t e n d e n c y .
I t g r o w s o u t o f th e w e a k n e s s o f th e
b a n k in g s y s t e m a n d th e w a y to c o r r e c t i t is, o f c o u r s e , to c o r r e c t
d e fe c ts in th e s y s t e m its e lf.
H o w e v e r , w e b e lie v e t h a t th is t e n d e n c y
to c o n s t itu t io n a l w e a k n e s s e s is to b e r e m e d ie d o r a lle v ia t e d b y m e a s
u res o f se v e r a l s o r ts .
T h e s e w e sh a ll b r ie fly e n u m e r a te a s fo llo w s :
( a ) S t r e n g t h e n in g o f th e c a p ita l o f b a n k s .
( b ) P r o v is io n s fo r c lo se r a n d s tr o n g e r s u p e r v is io n .
(c) M o r e c a r e fu l r e s tr ic tio n o f i n v e s t m e n t s .
0d ) R e q u i r e m e n t s fo r th e t r u th fu l v a lu a t io n o f a s s e ts .
(e )
P r o t e c t io n o f d e p o s ito r s a n d lim ita tio n o f th e ir lo sse s th r o u g h
a liq u i d a t i n g c o r p o r a tio n .
T h e s e p r o v is io n s if a c t e d u p o n in g o o d fa ith b y a d m in is t r a t o r s
w ill d o s o m e t h in g to c o r r e c t th e in s o lv e n c y s it u a t io n , b u t th e r e is
n o d e n y in g th e f a c t t h a t o u r b a n k in g s y s t e m is g o in g th r o u g h a
p e rio d o f g r e a t c h a n g e a n d t h a t th e u lt im a t e d e s tin a tio n o f th e
s y s t e m is n o t y e t fu lly c le a r .
B e c a u s e o f t h a t f a c t , p r o v is io n fo r
b r a n c h -b a n k in g p o w e rs u n d e r c a r e fu lly q u a lifie d c o n d itio n s w it h
a v ie w to m a k in g a la rg e r e x p e r im e n t w it h b r a n c h b a n k in g is d e e m e d
e ss e n tia l a n d d u e p r o v is io n fo r it is m a d e .
S p e c ific a lly , w h a t is
p r o p o s e d is th e g r a n t o f p o w e r to e s t a b lis h b r a n c h e s o f n a tio n a l
b a n k s n o t m e r e ly in th e t o w n s a n d c itie s in w h ic h t h e y are lo c a t e d
b u t a lso o u t s id e o f su c h lim it s a t a n y p o i n t w ith in th e b o r d e rs o f
th e S t a t e in w h ic h t h e y e x is t, ir r e s p e c tiv e o f S t a t e la w s .
A l s o , it
is p r o p o s e d t h a t if b y r e a s o n o f th e p r o x i m i t y o f a n a t io n a l b a n k t o
a S t a t e b o u n d a r y lin e th e o r d in a r y a n d u s u a l b u s in e s s o f th e b a n k is
fo u n d to e x t e n d in to a n a d ja c e n t S t a t e , th e F e d e r a l R e s e r v e B o a r d
m a y p e r m it th e e s t a b lis h m e n t o f a b r a n c h or b r a n c h e s in a n a d ja c e n t
S t a t e b u t n o t b e y o n d 5 0 m ile s fr o m th e p la c e w h e re th e p a r e n t b a n k
is lo c a t e d .
N o n a t io n a l b a n k is to b e p e r m it t e d , h o w e v e r , to e s ta b lis h
a b r a n c h o u t s id e o f th e c i t y , to w n o r v illa g e in w h ic h i t is lo c a t e d
u n le s s i t h a s a p a id -in a n d u n im p a ir e d c a p ita l o f n o t less th a n $ 5 0 0 ,0 0 0 .
4 . S t r e n g t h e n i n g o f F e d e r a l r e s e rv e s y s t e m .— T h e F e d e r a l re s e r v e
s y s t e m h a s b e e n s e r io u s ly im p a ir e d o f r e c e n t y e a r s a n d h a s w a n d e r e d
fa r a w a y fr o m its o rig in a l fu n c t io n .
T h i s is th e r e s u lt o f m a n y
c o m p le x c o n d it io n s .
A m o n g th e s e c o n d it io n s h a s b e e n th e u n c e r
t a i n t y o f p o lic y in th e m a t t e r o f e x e r c is in g p la in ly a u th o r iz e d c o n t r o l
b y th e c e n tr a l s u p e r v is in g a u t h o r it y a t W a s h i n g t o n a n d th e t e n d e n c y
to s u b m i t r a th e r t im id ly to c o n s id e r a tio n s o f i m m e d ia t e e x p e d ie n c y .
A m o n g th e r e s e r v e b a n k s th e m s e lv e s th e r e h a s b e e n a d e c id e d ly
d a n g e r o u s d r ift to w a r d th e c o n v e r s io n o f th e s y s t e m in to a m e d iu m
fo r t r a n s a c t in g fin a n c ia l r a t h e r t h a n c o m m e r c ia l b u s in e s s .
F u rth e r,
th e e s t a b lis h m e n t o f u n d e r s t a n d in g s o r a g r e e m e n ts w it h fo r e ig n
c e n tr a l a n d o th e r b a n k s , a n d th e a t t e m p t to c a r r y o u t p la n s a n d
m e a s u r e s o f a h a z a r d o u s n a t u r e r e la tin g to d is c o u n t r a te s a n d p r o b
le m s o f t e c h n iq u e , h a v e h a d u n fo r t u n a t e r e s u lts .
T o r e fo r m th e s e c o n d itio n s th e c o m m i t t e e r e c o m m e n d s :
12
(а )
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
I m p r o v e m e n t o f m e m b e r s h ip ,
and
in c re a se
o f in d e p e n d e n c e
o f F ed eral R eserve B oa rd .
(б) R e s t o r a t io n o f th e r e q u ir e m e n t t h a t t w o m e m b e r s o f th e b o a r d
s h a ll b e m e n o f e x p e rie n c e in b a n k in g .
(c)
E lim i n a t i o n o f th e S e c r e ta r y o f th e T r e a s u r y fr o m m e m b e r
s h ip .
(id ) B e t t e r d e fin itio n o f p o w e r s w it h r e s p e c t to s p e c u la t iv e t r a n s
a c tio n s , p a r tic u la r ly a s t o a u t h o r it y o v e r o p e n m a r k e t d e a lin g s , b y
e s t a b lis h in g a s o -c a lle d “ o p e n m a r k e t c o m m i t t e e ” w it h d e s ig n a te d
a u t h o r it y .
(e)
D e fin it io n o f p o w e r s o f th e b o a r d in th e m a n a g e m e n t o f fo r e ig n
a ffa irs.
5 . P r o t e c t i o n o j b a n k d e p o s it o r s . — T h e g r e a t n u m b e r o f b a n k s n o w
in th e h a n d s o f re c e iv e r s w it h a s s e ts w h ic h are sa id to a g g r e g a te
s o m e t h in g lik e $ 2 ,5 0 0 ,0 0 0 ,0 0 0 h a s c r e a te d a s it u a t io n in w h ic h a v e r y
la r g e n u m b e r o f p e r so n s a re u n a b le to m e e t th e ir o b lig a t io n s a n d
in w h ic h m a n y b u sin e ss h o u se s are e m b a r r a s s e d th r o u g h in a b i li t y to
g e t th e u se o f th e ir fu n d s .
I n th e n a t u r a l c o u r se o f e v e n t s i t w o u ld
b e a lo n g t im e b e fo r e th e se c o n d it io n s are v e r y g r e a t ly r e lie v e d
t h r o u g h th e liq u id a t io n o f th e se c lo s e d b a n k s .
T h e c o n t in u e d p o s t
p o n e m e n t o f liq u id a t io n is a v e r y h e a v y b u r d e n u p o n a la r g e p o r tio n
o f th e c o m m u n i t y .
F u r th e r m o r e , th e r e is a n d c a n b e n o a ss u r a n c e
t h a t fu r th e r fa ilu r e s o f c o n s id e r a b le a m o u n t a n d n u m b e r c a n b e
a v o id e d .
T h e y w ill fr o m t im e t o t im e re c u r e v e n u n d e r th e b e s t
c o n d itio n s .
I n o rd e r t o p r o v id e a g a in s t a r e p e tit io n o f th e p r e s e n t
p a in fu l e x p e rie n c e in w h ic h a v a s t s u m o f a sse ts a n d p u r c h a s in g
p o w e r is “ tie d u p ,” w e h a v e r e c o m m e n d e d th e c r e a tio n o f a F e d e r a l
liq u id a t io n c o r p o r a tio n .
T h e p r o p o s a l is t h a t th is c o r p o r a t io n s h a ll h a v e a c a p ita l s t o c k c o n
tr ib u te d b y r e se r v e b a n k s to th e e x t e n t o f o n e -q u a r t e r o f th e ir p r e s e n t
s u r p lu s , o r a s u m o f a b o u t $ 6 8 ,5 0 0 ,0 0 0 , w h ile m e m b e r b a n k s sh a ll
s u b s c r ib e to th e e x t e n t o f o n e -f o u r t h o f 1 p e r c e n t o f t o t a l n e t o u t
s t a n d in g t im e a n d d e m a n d d e p o s it s o r a s u m o f a p p r o x im a t e ly
$ 7 5 ,0 0 0 ,0 0 0 , so t h a t th e e n te r p r ise w o u ld h a v e a s u b s c r ib e d c a p ita l
o f a b o u t $ 1 4 3 ,0 0 0 ,0 0 0 .
I n a d d it io n , i t is p r o p o s e d t h a t th e G o v e r n
m e n t c o n t r ib u t e $ 1 2 5 ,0 0 0 ,0 0 0 to th e c o r p o r a t io n as p a id -in su r p lu s,
a n d th e c o r p o r a tio n is e m p o w e r e d to issu e n o t e s , b o n d s , d e b e n tu r e s ,
a n d o th e r s u c h o b lig a t io n s in a n a m o u n t e q u a l to n o t m o r e t h a n tw ic e
t h e s u m o f it s c a p ita l a n d th e a m o u n t a p p r o p r ia te d o u t o f G o v e r n
m e n t fu n d s .
T h e s u m t h u s m a d e a v a ila b le w o u ld b e a d e q u a t e to
d e a l w ith a n y p r o b a b le fa ilu r e c o n d it io n s o f th e fu t u r e . I f th e G o v e r n
m e n t s h o u ld a d d to it a p r o p o r t io n a t e s u m fo r th e b e n e fit o f S t a t e n o n
m e m b e r b a n k s i t w o u ld b e a b le to in c lu d e th e ir n e c e ssitie s a lo n g w ith
t h o s e o f th e s y s t e m ’ s o w n m e m b e r s a s a s u b je c t o f t r e a t m e n t .
The
c o r p o r a t io n m a y b e le f t fre e to in v e s t it s e x c e ss fu n d s in th e a sse ts o f
b a n k s t h a t h a v e a lr e a d y fa ile d b e fo r e i t c a m e in to e x iste n c e a n d it
m a y th u s m a t e r ia lly h e lp in c le a r in g u p th e b a d s itu a tio n t h a t h a s b e e n
le f t as a r e s u lt o f th e p a n ic .
6 . E m e r g e n c y r e l i e f . — W i t h i n r e c e n t m o n t h s th e r e h a s b e e n a v e r y
w id e s p r e a d d e m a n d fo r s o m e m e a n s o f fu r n is h in g e m e r g e n c y re lie f
t o b a n k s t h a t a re in d iffic u lt s t r a its . T h e F e d e r a l r e se r v e s y s t e m w a s
in te n d e d to fu r n is h a m e a n s o f m u t u a l a id a n d if p r o p e r ly a d m in
is te r e d w a s e n tir e ly a d e q u a t e t o th e n e c e ssitie s o f th e c a se . H o w e v e r ,
w it h c o n d it io n s as t h e y s t a n d it is lik e ly t h a t s o m e p la n w h e r e b y
13
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
a c t u a l a ss is ta n c e c o u ld b e fu r n is h e d to b a n k s w h ic h a re w illin g to
s t a n d s p o n s o r fo r o n e a n o th e r a n d t h u s e n a b le t h e m to c le a r u p
d a n g e r s p o t s in th e ir o w n s e v e r a l c o m m u n it ie s w o u ld b e h e lp fu l.
W e th e r e fo r e s u g g e s te d s u c h a p la n as a n a d d it io n a l m e a n s o f s t r e n g t h
e n in g a n d re n d e rin g u s e fu l th e p r o v is io n s o f th e F e d e r a l r e se r v e s y s
t e m . T h e g e n e r a l p la n so r e c o m m e n d e d w a s fo u n d e d u p o n th e id e a
o f jo i n t a c tio n b y c le a r in g h o u s e s o r g r o u p s o f b a n k s in d iffe re n t lo
c a litie s d e s ig n e d fo r th e p u r p o s e o f g e t t in g a c c o m m o d a t io n o n th eir
jo i n t u n s e c u r e d n o t e s a t r e s e r v e b a n k s u p to s u c h a m o u n t a s m i g h t b e
h e ld p r u d e n t ; lik e w is e , in e x ig e n t c a s e s , r e lie f w a s p r o v id e d fo r in d i
v id u a l b a n k s .
S u c h e m e r g e n c y c r e d it s h o u ld b e r e tir e d as so o n as
p o s s ib le , a n d th e r e fo r e it s e e m e d b e s t to p r o v id e s e v e r e r e s tr ic tio n s
u p o n its u se a n d d u r a t io n . T h i s p r o p o s a l w a s lif t e d fr o m th e b o d y o f
th e b ill a s first p r e p a r e d a n d h a s a lr e a d y b e e n e n a c te d in to la w .
(S ee
P u b lic N o . 4 4 , 7 2 d C o n g .)
TERMS
OF
B IL L
RECOM M ENDED
H a v i n g th u s o u t lin e d in g e n e r a l b r o a d te r m s th e m a in o b je c t s o f
t h e n e w le g is la tio n , a lth o u g h w it h o u t e n d e a v o r in g to d o m o r e th a n
s u g g e s t th e m a jo r fe a tu r e s o f t h e e n a c t m e n t , w e th in k it b e s t to
r e v ie w th e a c t u a l p r o v is io n s o f th e a c c o m p a n y in g m e a s u r e p o in t b y
p o in t in o rd er to in d ic a t e th e p r e c ise c o n t e n t o f th e v a r io u s se c tio n s
a n d th e ir m a in p r o v is io n s :
S e c t i o n 1 . — P r o v id e s a s h o r t
t it le
fo r
u se
.
in
.
.
.
c ita tio n ,
fo r
con
v e n ie n c e in d is c u s s io n , a n d fo r c e r t a in t y o f re fe r e n c e .
S e c t i o n 2 . — D e fin e s th e la n g u a g e u s e d in th e b ill an d u n d e r ta k e s
to m a k e th e m e a n in g d e fin ite .
.
S e c t i o n 8 . — P la c e s g e n e r a l r e s tr ic tio n s u p o n th e o p e r a t in g p o lic y
o f F e d e r a l r e s e r v e b a n k s w it h th e in t e n t to li m i t t h e m to th e e x t e n
s io n o f c r e d it fo r o r d in a r y b u s in e s s p u r p o s e s a n d to m a k e p la in t h a t
th e ir r e so u r c e s are n o t to b e u s e d to s u p p o r t s p e c u la t io n .
The
R e s e r v e B o a r d is g iv e n p o w e r to o v e r s e e a n d d ir e c t s u c h u se o f th e
re s o u r c e s o f b a n k s .
T h i s s e c tio n a lso p r o v id e s t h a t w h e re tw o o r m o r e m e m b e r b a n k s
a re a ffilia ted w it h t h e s a m e h o ld in g c o m p a n y , t h e y m a y p a r tic ip a te
in th e n o m in a t io n a n d e le c tio n o f d ir e c to r s o f th e F e d e r a l re s e r v e
b a n k in th e ir d is t r ic t th r o u g h o n e o f th e b a n k s t o b e d e s ig n a te d fo r
t h a t p u r p o s e b y th e h o ld in g c o m p a n y .
.
S e c t i o n 4 . — A m e n d s th e first p a r a g r a p h o f s e c t io n 7 o f th e h e d e r a l
r e s e r v e a c t so as to e lim in a te th e r e q u ir e m e n t o f t h e p a y m e n t o f
a fr a n c h is e t a x t o th e U n it e d S t a t e s b y F e d e r a l r e s e r v e b a n k s .
S e c t i o n 5 . — P r o v id e s fo r r e p o r ts o f c o n d it io n o f a ffilia tes o f S t a t e
m e m b e r b a n k s a n d fo r th e e x a m in a t io n o f a ll s u c h a ffilia te s b y e x a m
in e r s s e le c te d or a p p r o v e d b y th e F e d e r a l R e s e r v e B o a r d .
_
T h e s e c tio n a lso s u b je c t s S t a t e m e m b e r b a n k s to th e s a m e li m i t a
tio n s a n d c o n d it io n s w it h r e s p e c t t o th e p u r c h a s in g , s e llin g , u n d e r
w r it in g , a n d h o ld in g o f i n v e s t m e n t s e c u r itie s a n d s t o c k as are a p p li
c a b le in th e c a s e o f n a t io n a l b a n k s .
(S e e s e c . 1 4 .)
I t is a lso p r o v id e d t h a t a fte r th r e e y e a r s fr o m th e d a t e o f e n a c t m e n t
o f th e b ill n o c e r tific a te r e p r e s e n tin g th e s t o c k o f a S t a t e m e m b e r
b a n k s h a ll r e p r e s e n t th e s t o c k o f a n y o th e r c o r p o r a t io n e x c e p t a
m e m b e r b a n k n o r b e c o n d it io n e d in a n y m a n n e r w h a t s o e v e r u p o n th e
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
NATIONAL AND FEDERAL RESERVE BANKING SYSTEMS
o w n e r s h ip , s a le , or tr a n sfe r o f a s t o c k c e r tific a te o f a n y o th e r c o r
p o r a tio n e x c e p t a m e m b e r b a n k .
T h i s c o r r e s p o n d s to th e p r o v is io n
in s e c tio n 16 w h ic h is a p p lic a b le to n a t io n a l b a n k s .
p e r c e n t m o r e t h a n t h e a m o u n t o f th e lo a n or e x te n s io n if it is s ec u red
b y o b lig a t io n s o f a n y S t a t e o r p o lit ic a l s u b d iv is io n o f a S t a t e .
The
p r o v is io n s d o n o t a p p ly , h o w e v e r , to lo a n s o r e x te n s io n s o f c r e d it
se c u r e d b y o b lig a t io n s o f th e U n it e d S t a t e s , th e F e d e r a l in te r m e d ia t e
c r e d it b a n k s , th e F e d e r a l la n d b a n k s , o r b y p a p e r e lig ib le fo r r e d is c o u n t
o r p u r c h a s e b y F e d e r a l re s e r v e b a n k s .
C e r t a in t y p e s o f a ffilia tes
are also e x e m p t e d fr o m th e a p p lic a tio n o f th e p r o v is io n s o f th is
14
S e c t i o n 6 . — P r o v id e s fo r e lim in a tin g th e S e c r e ta r y o f th e T r e a s u r y
as a m e m b e r o f th e F e d e r a l R e s e r v e B o a r d a n d r e sto r e s th e fo r m e r
r e q u ir e m e n t t h a t tw o m e m b e r s o f th e b o a r d sh a ll be m e n o f t e s t e d
b a n k in g e x p e rie n c e .
I t a lso r e a d ju s t s th e t e r m o f m e m b e r s o f th e
b o a r d so as to sec u re as n e a r ly as p o s s ib le th e e x p ir a tio n o f t e r m s o f
m e m b e r s a t e q u a l 2 -y e a r in te r v a ls .
a n e w se c tio n 1 2 A to th e F e d e r a l r e se r v e a c t
p r o v id in g fo r th e c r e a tio n o f a F e d e r a l o p e n -m a r k e t c o m m i t t e e o f
1 2 m e m b e r s to su p e r v is e th e o p e n -m a r k e t o p e r a tio n s o f th e F e d e r a l
re se rv e b a n k s a n d th e r e la tio n s o f th e F e d e r a l r e se r v e s y s t e m w it h
fo r e ig n b a n k s .
T h i s in e ffe c t le g a liz e s a n d g iv e s official r e c o g n itio n
to th e p r e s e n t o p e n -m a r k e t c o m m it t e e .
S e c t io n
7 .— A d d s
T h i s s e c tio n a lso a d d s to th e F e d e r a l re se r v e a c t a n e w s e c tio n 1 2 B
p r o v id in g fo r a F e d e r a l liq u id a t in g c o r p o r a t io n w h ic h is g iv e n p o w e r
to liq u id a t e th e a sse ts o f m e m b e r b a n k s w h ic h h a v e b e e n c lo s e d b y
a c tio n o f th e C o m p t r o lle r o f th e C u r r e n c y , th e a p p r o p r ia te S t a t e
a u th o r itie s , o r b y v o t e o f th e ir d ir e c to r s.
T h e m a n a g e m e n t o f th e
c o r p o r a tio n is v e s t e d in a b o a r d o f fiv e d ir e c to r s c o n s is t in g o f th e
C o m p t r o lle r o f th e C u r r e n c y , a m e m b e r o f th e F e d e r a l R e s e r v e B o a r d ,
a n d th re e p e rso n s c h o se n a n n u a lly b y th e g o v e r n o r s o f th e 12 re se r v e
b an k s.
T h e c a p ita liz a tio n o f th e c o r p o r a t io n h a s a lr e a d y b e e n
referre d to .
(S ee p . 1 2 .)
S e c t i o n 8 . — I m p o s e s c e r ta in lim it a t io n s u p o n a d v a n c e s b y F e d e r a l
r e se r v e b a n k s to m e m b e r b a n k s o n th e ir 1 5 -d a y p r o m is s o r y n o t e s .
I t is p r o v id e d t h a t if, d u r in g th e life o f a n y s u c h a d v a n c e a n d d e s p ite
a n o ffic ia l w a r n in g o f th e F e d e r a l re se r v e b a n k o r th e F e d e r a l R e s e r v e
B o a r d to th e c o n t r a r y , a n y m e m b e r b a n k in c re a se s its o u t s t a n d in g lo a n s
m a d e to m e m b e r s o f a n y o r g a n iz e d s t o c k e x c h a n g e , i n v e s t m e n t h o u s e ,
or d e a le r in se c u r itie s fo r th e p u r p o se o f p u r c h a s in g or c a r r y in g s t o c k s ,
b o n d s , o r o th e r in v e s t m e n t se c u r itie s (e x c e p t o b lig a t io n s o f th e
U n it e d S t a t e s ) th e a d v a n c e to th e m e m b e r b a n k sh a ll b e i m m e d i a t e ly
d u e a n d p a y a b le a n d th e b a n k s h a ll b e in e lig ib le as a b o r r o w e r o n
1 5 -d a y p a p e r fo r su c h p e rio d as th e F e d e r a l R e s e r v e B o a r d sh a ll
d e te r m in e .
S e c t i o n 9 . — G iv e s th e F e d e r a l R e s e r v e B o a r d p o w e r to s u p e r v ise
all r e la tio n s a n d tr a n s a c t io n s o f a n y k in d e n te r e d in to b y F e d e r a l
re s e r v e b a n k s w it h fo r e ig n b a n k s o r b a n k e r s .
S e c t i o n 1 0 . — P r o h ib its m e m b e r b a n k s fr o m a c t in g as th e m e d iu m
o r th e a g e n t o f a n y n o n b a n k in g c o r p o r a t io n , p a r tn e r s h ip , a s s o c ia tio n ,
b u s in e s s t r u s t , o r in d iv id u a l in m a k i n g lo a n s o n th e s e c u r ity o f s t o c k s ,
b o n d s , a n d o th e r i n v e s t m e n t se c u r itie s to b ro k e rs o r d e a le r s in su c h
se c u r itie s.
S e c t i o n 1 1 . — I m p o s e s c e r ta in lim ita tio n s u p o n lo a n s or e x te n s io n s
o f c r e d it b y m e m b e r b a n k s to th e ir a ffilia te s a n d a lso lim its th e
a m o u n t w h ic h su c h b a n k s m a y i n v e s t in th e se c u r itie s o f s u c h affili
a te s .
I n g e n e r a l, th e m a x i m u m li m i t is 10 p e r c e n t o f th e c a p ita l
s t o c k a n d s u r p lu s o f th e m e m b e r b a n k in th e c a se o f a n y o n e a ffilia te
a n d 2 0 p e r c e n t o f th e c a p ita l s t o c k a n d su r p lu s in th e c a se o f all
s u c h a ffilia te s.
I t is a lso r e q u ir e d t h a t e a c h su c h lo a n o r e x te n s io n
o f c r e d it b e se c u r e d b y c o lla te r a l h a v in g a m a r k e t v a lu e o f a t le a s t 2 0
p e r c e n t m o r e t h a n th e a m o u n t o f th e lo a n o r e x te n s io n o r a t le a s t 10
15
s e c tio n .
S e c t i o n 1 2 — A d d s a n e w s e c tio n 2 4 A to th e F e d e r a l r e s e r v e a c t
w h ic h im p o s e s a m a x i m u m lim it u p o n th e a m o u n ts w h ic h n a t i o n a l
b a n k s a n d S t a t e m e m b e r b a n k s m a y in v e s t in b a n k p r e m is e s o r m th e
s t o c k , b o n d s , d e b e n tu r e s , o r o th e r s u c h o b lig a t io n s o f a c o r p o r a tio n
h o ld in g t h e p r e m is e s o f a n y s u c h b a n k , a n d th e a m o u n ts w h ic h s u c h
b a n k s m a y le n d t o a n y s u c h c o r p o r a tio n .
S e c t i o n 1 3 .— P r o v id e s t h a t a ll s u its o f a c iv il n a tu r e to w h ic h a n y
c o r p o r a t io n o r g a n iz e d u n d e r th e la w s o f th e U n it e d S t a t e s s h a ll b e a
p a r t y , a risin g o u t o f tr a n s a c t io n s i n v o lv in g in te r n a tio n a l o r fo r e ig n
b a n k in g , s h a ll b e d e e m e d to a rise u n d e r th e la w s o f th e U n it e d S t a t e s ,
a n d th e d is t r ic t c o u r ts o f th e U n it e d S t a t e s are g iv e n o r ig in a l ju r is
d i c t io n o f a ll s u c h s u its .
I t is a lso p r o v id e d t h a t a d e fe n d a n t in a n y
s u c h s u it m a y a t a n y t im e b e fo r e th e tria l t h e r e o f r e m o v e th e s u it
fr o m a S t a t e c o u r t to a F e d e r a l d is t r ic t c o u r t in th e s a m e m a n n e r as
n o w p r o v id e d b y la w fo r th e r e m o v a l o f o th e r s u its .
S e c t i o n 1 4 . — U n d e r t a k e s to b r o a d e n th e n a t io n a l b a n k in g la w s b y
g iv i n g n a t io n a l b a n k s all p o w e r s p o s s e s s e d b y S t a t e b a n k s o f d e p o s it
a n d d is c o u n t o r g a n iz e d in th e S t a t e s in w h ic h s u c h n a t io n a l b a n k s a ie
lo c a t e d , e x c e p t in so fa r as t h e y m a y b e p r o h ib ite d b y F e d e r a l
la t io n .
N a t i o n a l b a n k s are to b e p e r m it te d to p u r c h a s e a n d sell
i n v e s t m e n t s e c u r itie s fo r th e ir c u s to m e r s to th e s a m e e x t e n t as h e i e t o fo r e , b u t h e r e a fte r t h e y are to b e a u th o r iz e d to p u r c h a s e a n d sell
s u c h s e c u r itie s fo r th en ’ o w n a c c o u n t o n ly u n d e r s u c h lim it a t io n s a n d
r e s t r ic t io n s as th e C o m p t r o lle r o f th e C u r r e n c y m a y p r e s c r ib e , s u b je c t
t o c e r ta in d e fin ite m a x i m u m lim its as to a m o u n t.
S e c t i o n 1 5 . — P r o v id e s fo r th e a m o u n t o f c a p it a l o f n a t io n a l b a n k s
d e p e n d in g u p o n th e p o p u la t io n o f th e p la c e s w h e re t h e y are to b e
lo c a t e d a n d a lso p r o h ib its th e a d m is s io n o f a b a n k in to th e F e d e r a l
r e se r v e s y s t e m u n le s s i t p o s s e s s e s a p a id -u p u n im p a ir e d c a p ita l
su ffic ie n t to e n t itle i t t o b e c o m e a n a t io n a l b a n k .
S e c t i o n 1 6 . — P r o v id e s fo r s e p a r a t in g th e c e r tific a te s r e p r e s e n tin g
o w n e r s h ip in n a t io n a l b a n k s a n d o w n e r s h ip in a ffilia tes o th e r t h a n
m e m b e r b a n k s so t h a t in th e fu t u r e t h e y w ill n o t b e w r it te n u p o n a
s in g le c e r tific a te o f o w n e r s h ip .
T h i s c o r r e s p o n d s to th e p r o v is io n
c o n t a in e d in s e c t io n 5 o f w h ic h is a p p lic a b le to S t a t e m e m b e r b a n k s .
S e c t i o n 1 7 . — P r o v id e s fo r th e v o t in g o f n a t i o n a l-b a n k s t o c k h e ld b y
h o ld in g c o m p a n ie s u n d e r v o t in g p e r m it s o b t a in e d fr o m th e F e d e r a l
R eserve B o a rd .
C e r t a in lim it a t io n s are im p o s e d u p o n s u c li h o ld in g
c o m p a n ie s w h ic h t h e y m u s t a g ree to c o m p ly w it h a t th e t im e th e v o t in g
p e r m it s are o b t a in e d .
T h e s e li m i t a t i o n s r e la te c h ie fly to c x a m in iit io n s , r e p o r ts o f c o n d it io n , r e s e r v e r e q u ir e m e n ts , a n d o w n e r s h ip a n d
c o n t r o l b y h o ld in g c o m p a n ie s o f o r g a n iz a tio n s e n g a g e d in th e is s u a n c e ,
u n d e r w r it in g , a n d d is t r ib u t io n o f s e c u r itie s ,
l h e s e p r o v is io n s a ie
a ls o m a d e a p p lic a b le to h o ld in g c o m p a n ie s a ffilia te d w it h S t a t e
m em b er b an k s.
(S ee se c . 5 .)
16
national and federal reserve banking systems
S e c t i o n 1 8 . — P r o v id e s fo r e lim in a tin g a fte r a p e r io d o f th re e y e a r s
a ll a ffilia tio n s b y m e m b e r b a n k s w it h c o r p o r a t io n s , a s s o c ia tio n s , b u s i
n e s s t r u s t s , o r o th e r s im ila r o r g a n iz a tio n s e n g a g e d p r in c ip a lly in th e
is s u a n c e , u n d e r w r itin g , o r d is t r ib u t io n o f se c u r itie s.
S e c t i o n 1 9 . — A u t h o r iz e s n a t io n a l b a n k s to e s ta b lis h b r a n c h e s a t a n y
p la c e w it h in th e S t a t e s in w h ic h su c h b a n k s are lo c a t e d , a n d a lso
a llo w s th e e s t a b lis h m e n t o f b r a n c h e s in a d ja c e n t S t a t e s u n d e r cer
ta in c o n d it io n s , s u b je c t to th e a p p r o v a l o f th e F e d e r a l R e se r v e B o a r d , b u t n o t b p y o n d 5 0 m ile s fr o m th e s e a t o f th e p a r e n t b a n k .
N o su c h a s s o c ia tio n is to b e p e r m it t e d , h o w e v e r , to e s ta b lis h a b r a n c h
o u t s id e o f th e c i t y , t o w n , o r v illa g e in w h ic h i t is lo c a t e d u n le ss i t h a s
a p a id -in a n d u n im p a ir e d c a p ita l o f n o t le ss t h a n $ 5 0 0 ,0 0 0 .
S e c t i o n 2 0 . — A m e n d s th e a c t o f N o v e m b e r 7 , 1 9 1 8 (r e la tin g t o th e
c o n s o lid a tio n o f n a t io n a l b a n k s ), to th e e x t e n t n e c e s s a r y to c a r r y
o u t t h e p o lic y p r o v id e d fo r in s e c tio n 19.
S e c t i o n 2 1 . — L i m i t s t h e in te r e s t t h a t m a y b e c h a r g e d b y a n a t io n a l
b a n k t o t h a t w h ic h m a y b e c h a r g e d b y lo c a l b a n k s in th e S t a t e w h e r e
th e n a t io n a l b a n k is lo c a t e d , o r t o a r a te 1 p e r c e n t h ig h e r t h a n th e
d is c o u n t r a t e o n 9 0 - d a y c o m m e r c ia l p a p e r in e ffe c t a t th e F e d e r a l
r e s e r v e b a n k in th e d is t r ic t w h e re th e n a t io n a l b a n k is lo c a t e d , w h ic h
e v e r is g r e a te r .
I f n o r a t e is fix ed b y S t a t e la w , th e m a x i m u m r a t e
t h e n a t io n a l b a n k m a y c h a r g e is lim it e d to 7 p e r c e n t , o r 1 p e r c e n t in
e x c ess o f s u c h d is c o u n t r a t e , w h ic h e v e r is g r e a te r .
S e c t i o n 2 2 . — P r o v id e s t h a t in e s t im a t in g th e t o t a l a m o u n t o f lo a n s
w h ic h m a y b e m a d e b y a n a t io n a l b a n k to a c o r p o r a t io n , th e o b lig a
tio n s t o th e b a n k o f a ll s u b sid ia r ie s o f th e c o r p o r a t io n in w h ic h it
o w n s o r c o n tr o ls a m a j o r i t y in te r e s t are to b e c o u n t e d .
S e c t i o n 2 3 . — P r o v id e s fo r r e p o r ts o f c o n d it io n o f a ll t y p e s o f a ffilia te s
o f n a t io n a l b a n k s .
T h i s c o r r e sp o n d s to th e p r o v is io n s o f s e c t io n 5w h ic h a re a p p lic a b le t o a ffilia te s o f S t a t e m e m b e r b a n k s .
S e c t i o n 2 % . — R e la t e s t o t h e e x a m in a t io n s o f a ffilia tes o f n a t i o n a l
b an k s.
T h e r e is a c o r r e s p o n d in g p r o v is io n in s e c t io n 5 r e la tin g t o
a ffilia tes o f S t a t e m e m b e r b a n k s .
S e c t i o n 2 5 . — P r o v id e s fo r th e r e m o v a l fr o m o ffic e o f d ir e c to r s a n d
o fficers o f m e m b e r b a n k s w h o h a v e c o n tin u e d t o v io la t e t h e b a n k in g
la w s o r w h o h a v e c o n t in u e d u n s a fe a n d u n s o u n d b a n k in g p r a c tic e s
a ft e r b e in g w a r n e d b y a F e d e r a l re se r v e a g e n t o r th e C o m p t r o lle r
o f th e C u r r e n c y .
S e c t i o n 2 6 . — R e s e r v e s th e r ig h t to a lte r, a m e n d , o r r e p e a l th e a c t
a n d p r o v id e s fo r s e p a r a b ilit y o f it s p r o v is io n s in c a se a n y p a r t o f t h e
a c t is h e ld in v a lid .
T h e c h a n g e s w h ic h are t h u s s u g g e s te d are c o n sid e r e d to r e p r e
s e n t e s s e n tia l m a t t e r s c a lle d fo r in th e in te r e s t o f im m e d ia t e i m
p r o v e m e n t o f p r e s e n t c o n d itio n s a n d th e a v o id a n c e o f fin a n c ia l
d a n g e r s a n d th e r e is n o n e o f t h e m w h ic h c a n w ise ly b e o m i t t e d .
A l l a ffo r d so lu tio n s t h a t h a v e b e e n in d ic a t e d b y in v e s tig a t o r s in
m a n y q u a r te r s as u n a v o id a b le a n d a ll a re t h o u g h t u r g e n t fo r t h e
p u r p o s e o f c o r r e c tin g o r e lim in a tin g a c tu a l h a z a r d s .
o
72d
CONGRESS
S. 4412
1st Session
IN
T H E
S E N A T E
M ay
O E
T H E
4 (c a le n d a r d a y ,
U N IT E D
M ay
S T A T E S
6 ) , 1932
O r d e r e d t o lie o n th e t a b le a n d t o b e p r in te d
AMENDMENT
P rop osed b y
M r. G eo rg e
s a fe r a n d
m ore
banks and
bank
to th e
e ffe c tiv e
b ill
u se
(S . 4 4 1 2 )
o f th e
a ssets
to p r o v id e fo r th e
of F e d e ra l reserve
o f n a tio n a l b a n k in g a s s o c ia tio n s , to r e g u la te
c o n tr o l,
to
prevent
th e
undue
d iv e r s io n
of
in te r
fu n d s
in to
s p e c u la tiv e o p e r a tio n s , a n d fo r o th e r p u r p o s e s , v i z :
1
On
page
8,
lin e
8,
and
th e
w ord
“ sto ck ”
2
fo llo w in g :
3
th e e n a c tm e n t o f th e B a n k in g A c t o f 1 9 3 2 .”
“ u n d e rta k e n
a fte r
co n su m m a te d
a fte r
in s e r t
th e
d a te
th e
of
72d-
S. 4412
CONGRESS
1st Session
IN
TH E
SEN A TE
M at
OE TH E
4 (c a le n d a r d a y ,
U N IT E D
M ay
STA TES
6 ) , 1932
O r d e r e d to lie o n th e t a b le a n d t o b e p r in te d
AMENDMENT
P rop osed b y
M r. G eo rg e
sa fe r a n d
m ore
to th e
e ffe c tiv e
b ill
u se
o f th e
b a n k s a n d o f n a tio n a l b a n k in g
bank
c o n tr o l,
to
preven t
th e
(S . 4 4 1 2 )
a ssets
to p r o v id e fo r th e
of F e d e ra l reserve
a s s o c ia tio n s , to r e g u la te
undue
d iv e r sio n
of
in te r
fu n d s
in to
s p e c u la tiv e o p e r a tio n s , a n d fo r o th e r p u r p o s e s , v i z :
1
2
3
On
th e
page
fo llo w in g :
3 8 , lin e
“
o f s h a r e h o ld e r s .”
'**■*'■ Cl X O Cl C)
and
2 4 , a fte r th e
in
d e c id in g
w ord
a ll
“
d ir e c to r s ”
q u e s tio n s
at
in se r t
m e e tin g s
72d
CONGRESS
1si
CN
a
S ession
TN
a
4
TH E
SEN A TE
•
M
ay
OE
r \
a
4
1
2
TH E
9 (c a le n d a r d a y ,
U N IT E D
M ay
STA TES
1 0 ), 1932
O r d e r e d to b e p r in te d
M ay
9 (c a le n d a r d a y ,
M ay
1 1 ), 1932
M o d ifie d a n d o rd e r e d to b e p r in te d
AMENDMENT
P rop osed
v id e
by
M r.
fo r
th e
F ederal
to
V
sa fe r
reserve
and
banks
r e g u la te in te r b a n k
o f fu n d s in to
to
a n d e n b e r g
m ore
and
th e
b ill
e ffe c tiv e
(S .
u se
4 4 1 2 )
.o f
th e
o f n a tio n a l b a n k in g
o p e r a tio n s ,
and
fo r
pro
a ssets
of
a s s o c ia tio n s ,
c o n tr o l, to p r e v e n t th e u n d u e
s p e c u la tiv e
to
o th e r
d iv e r s io n
p u rp oses,
v iz :
1
On
page
4 5 ,
2
in g :
3
n a tio n a l
or
4
b a n k in g
b u s in e s s ,
5
b ran ch
6
a ffilia te o f s u c h
“ E xcept
in
lin e
a
S ta te
except
by
8,
c ity ,
th e
to w n ,
bank
no
a fte r
o r v illa g e
r e g u la r ly
su ch
ta k in g
p e r io d
over
a s s o c i a t i o n .”
w h ere
tr a n s a c tin g
a sso c ia tio n
an
in s e r t
e x is tin g
s h a ll
u n it
th e
fo llo w -
th e re
is
no
c u sto m a ry
e s ta b lis h
bank
or
a
an
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72d
CONGRESS
Session
1st
S.
4
4
1
2
!
H >
IN THE SENATE OE THE UNITED STATES
May 9 (calendar day, May 10), 1932
Orderedtolie onthetable and tobeprinted
A M E N D M E N T
Intended to be proposed by Mr. Copeland to the bill (S. 4412)
to provide for the safer and more effective use of the assets
of Federal reserve hanks and of national banking associations,
to regulate interbank control, to prevent the undue diversion
of funds into speculative operations, and for other purposes,
viz: On page 27, after line 19 insert the following new
section:
1
“
Sec. 7A. Section 13 of the Federal Reserve Act, as
2
amended, is amended by inserting between the third and
3
fourth paragraphs thereof the following new paragraph:
4
“ ‘ Upon the indorsement of any of its member banks
5
situated in a municipality of not more than five thousand
6
inhabitants, which shall be deemed a waiver of demand,
7
notice, and protest by such bank as to its own indorsement
o
1
exclusively, and subject to regulations and limitations to be
2
prescribed by the Federal Reserve Board, any Federal
3
reserve bank may discount or purchase notes secured by
4
first mortgage on improved real estate, including improved
5
farm lands, located in the vicinity of the municipality in
0
which the indorsing bank is located, upon such terms and at
7
such rate of discount as the reserve bank shall determine/ ”
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tsD
CONGRESS
72d
1s t S e s s i o n
S. 4412
IN THE SENATE OE THE UNITED STATES
Mat 9 (calendar day, May 10), 1932
Ordered tolie onthe table andto be printed
A M E N D M E N T S
Intended to be proposed by Mr. Blaine to the bill (S. 4412)
to provide for the safer and more effective use of the assets
of Federal reserve banks and of national banking associa
tions, to regulate interbank control, to prevent the undue
diversion of funds into speculative operations, and for other
. purposes, viz:
1
On page 52, line 1 , before the colon, insert “if a
2
national bank is involved, and shall be immediately removed
3
from office if a State member bank is involved.”
4
On page 52, line 6 , after the period, insert the follow-
5
ing new sentence: “ If any State member bank upon which
6
a copy of any such order has been served fails to remove
7
from office immediately the director or officer involved,
8
the Federal Reserve Board may, in its discretion, require
2
1
such bank to surrender its stock in the Federal reserve
2
bank and to forfeit all rights and privileges of member
s' ship in the Federal reserve system as provided in section 9
4
5
of the Federal Keserve Act, as amended.”
On page 52, lines
6
and 7, strike out “ such director
0
or officer ” and insert in lieu thereof “ director or officer
7
of a national bank.”
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p
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o
_
73
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to
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50f
£
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In
72d CONGRESS
1s t S e s s io n
S. 4412
IN THE SENATE OE THE UNITED STATES
May 9 (calendar day, May 10), 1932
Ordered to lie on the table and to be printed
A M E N D M E N T
Intended to be proposed by Mr. I v e a n to the bill (S. 4412) to
provide for the safer and more effective use of the assets
of Federal reserve banks and of national banking associa
tions, to regulate interbank control, to prevent the undue
diversion of funds into speculative operations, and for other
purposes, viz:
1
On page 43, omit section 18.
(CONGRESS
S. 4412
72d
la 'i S e s s i o n
IN THE SENATE OE THE U N ITE D STATES
May 9 (calendar day, May 10), 1932
Ordered tolie on the table and tobeprinted
A M E N D M E N T
Intended to be proposed Mr. Kean to the bill (S. 4412) to
provide for the safer and more effective use of the assets of
Federal reserve banks and of national banking associations,
to regulate interbank control, to prevent the undue diversion
of funds into speculative operations, and for other purposes,
viz:
•.
."i
.
*■'*
' , .v ^
.
1
a- ,
»! •
- »
.
•
•
On page 35, line 2 , omit the word “ association ” and
•
2
*
■ -> •;
.
substitute therefor the words “ member bank.”
S. 4412
CONGRESS
1st S ession
72d
IN T H E S E N A T E O F T H E
U N IT E D S T A T E S
M a y 9 (calendar day, M a y 1 0 ) , 1932
Ordered to lie on the table and to be printed
AMENDMENT
In te n d e d to be p ro p o sed bv M r. K ean to th e bill (S. 4 4 1 2 )
to
p ro v id e fo r th e safer a n d m o re effective use of th e assets
of F e d e ra l re serv e b an k s a n d of n atio n a l b a n k in g associa
tions, to re g u la te in te rb a n k co n tro l, to p re v e n t th e u n d u e
diversio n of funds into sp ecu lativ e o p e ra tio n s, a n d for o th e r
p u rp o ses, viz:
I
y
On p a g e 4 6 , line 1 5 , o m it th e n u m eral “ 7 ” and substitu te th e re fo r th e n u m e ra l “ 1 0 . ”
S. 4412
72d C O N G R E S S
1st S ession
IN T H E S E N A T E O F T H E U N IT E D S T A T E S
M
a t
9 (calendar day,
M
a t
10), 1932
Ordered to lie on the table and to be printed
AMENDMENT
In te n d e d to be p ro p o se d b y M r. K ean to tlie bill
(S. 4 4 1 2 )
to p ro v id e fo r th e safer an d m o re effective use of th e assets
of F e d e ra l re se rv e b an k s an d of n a tio n a l b a n k in g associa
tions, to re g u la te in te rb a n k c o n tro l, to p re v e n t th e u n d u e
d iv e rsio n of funds into sp ecu lativ e o p e ra tio n s, a n d for o th e r
p u rp o se s, viz:
1
On page 2, line 23, omit
“
of its executive committee.”
S. 4412
CONGRESS
1st S ession
72d
IN T H E S E N A T E O F T H E U N IT E D S T A T E S
M
a y
9 (calendar day,
M
a y
10),
1932
Ordered to lie on the table and to be printed
AMENDMENT
In te n d e d to be p ro p o sed b y M r. K ean to th e bill (S . 4 4 1 2 ) to
p ro v id e for th e safer a n d m o re effective use of th e assets of
F e d e ra l re se rv e b a n k s a n d of n a tio n a l b a n k in g asso ciatio n s,
to re g u la te in te rb a n k c o n tro l, to p re v e n t th e u n d u e d iv ersio n
of funds into sp ecu lativ e o p e ra tio n s, a n d for o th e r p u rp o se s,
viz:
1
On page 8 omit lines 11 to 19, inclusive.
S. 4412
CONGRESS
1st S ession
72d
IN
T H E S E N A T E O F T H E U N IT E D S T A T E S
M
a y
9 (calendar day,
M
a y
10), 1932
Ordered to lie on the table and to be printed
AMENDMENT
In te n d e d to be p ro p o sed b y M r. K ean to th e bill (S. 4 4 1 2 ) to
p ro v id e for th e safer an d m o re effective use of th e assets of
F e d e ra l re serv e b an k s an d of n a tio n a l b a n k in g associations,
to re g u la te in te rb a n k co n tro l, to p re v e n t th e un d u e diversion
of funds in to sp ecu lativ e o p e ra tio n s, an d for o th e r p u rp o ses,
viz:
1
On page 45, line 2 2 , omit the word “ State.”
S. 4412
CONGRESS
16T S ession
72d
IN T H E S E N A T E O F T H E U N IT E D S T A T E S
M
a y
9 (calendar clay,
M
a y
10), 1932
Ordered to lie on the table and to be printed
AMENDMENT
In te n d e d to be p ro p o se d b y M r. K e a n to th e bill (S . 4 4 1 2 ) to
p ro v id e for th e safer a n d m ore effective use of th e assets of
F e d e ra l re serv e b an k s an d of n atio n a l b a n k in g asso ciatio n s,
to re g u la te in te rb a n k co n tro l, to p re v e n t th e u n d u e d iv ersio n
of funds into sp ecu lativ e o p e ra tio n s, a n d for o th e r p u rp o ses,
viz:
On p a g e 3 6 , line 4 , a fte r th e w o rd “ c o rp o ra tio n ”
in sert : ‘‘ N o th in g in th is p a ra g ra p h shall b e co n stru ed to
re q u ire a n y m e m b e r b a n k to dispose of a n y in v e stm e n t
sec u rity o r stock law fu lly h e ld b y it on th e d a y of th e e n ac t
m e n t of th e B a n k in g A c t of 1 9 3 2 . ”
72d
S. 4412
CONGRESS
1st Session
IN T H E S E N A T E O F T H E U N IT E D S T A T E S
Mat 9 (calendar day, May 10), 1932
Ordered to lie on the table and to be printed
AMENDMENT
In te n d e d to be p ro p o sed b y M r. K e a n to th e bill
(S . 4 4 1 2 )
to p ro v id e for th e safer a n d m o re effective use of th e assets
of F e d e ra l re serv e b a n k s an d of n a tio n a l b a n k in g associa
tions, to re g u la te in te rb a n k co n tro l, to p re v e n t th e u n d u e
d iv ersio n of funds in to sp ecu lativ e o p e ra tio n s, an d for o th e r
p u rp o se s, viz:
1
On p a g e 4 9 , lin e 5 , a fte r th e w o rd “ C u rre n c y ” in sert
2
th e follow ing: “ shall b rin g to th e a tte n tio n of th e F e d e ra l
8
re se rv e b a n k a n d w ith th e ir a p p ro v a l.”
72d
CONGRESS
O
l s i S e s s i o n ___
/!
"“
1
jl
1
H
mal
IN T H E S E N A T E O F T H E U N IT E D S T A T E S
May 9 (calendar day, May 10), 1932
Ordered to lie on the table and to be printed
AMENDMENT
In te n d e d to be p ro p o sed b y M r. I v e a n to th e bill (S . 4 4 1 2 ) to
p ro v id e for th e safer an d m o re effective use of th e assets of
F e d e ra l re serv e b a n k s a n d of n a tio n a l b a n k in g associations,
to re g u la te in te rb a n k co n tro l, to p re v e n t th e u n d u e d iv e r
sion of funds in to sp ecu lativ e
o p e ra tio n s, a n d for o th e r
p u rp o ses, viz:
1
On p a g e 3 4 , lines 2 1 , 2 2 ; 2 3 , 2 4 , and 2 5 , a n d on p a g e
2
3 5 , lines 1 a n d 2 , o m it th e fo llo w in g : “ T h e business of
3
d e alin g in
in v e stm e n t secu rities b y th e asso ciatio n
shall b e
4
lim ited to
p u rc h a sin g a n d sellin g such secu rities
w ith o u t
5
reco u rse, solely u p o n th e o rd e r, a n d fo r th e a cco u n t of,
6
cu sto m ers,
7
association shall n o t u n d e rw rite an}^ issue of secu rities:
8
P r o v id e d ,” .
a n d in no case for its o w n a cc o u n t,
an d th e
72d
CONGRESS
1st Session
S. 4412
IN T H E S E N A T E O F T H E U N IT E D ST A T E S
Mat 9 (calendar day, May 10), 1932
Ordered to lie on the table and to be printed
AMENDMENT
In te n d e d to be p ro p o se d b y M r. K e a n to th e bill (S. 4 4 1 2 ) to
p ro v id e for th e safer an d m o re effective use of th e assets of
F e d e ra l re serv e b an k s an d of n a tio n a l b a n k in g associations,
to re g u la te in te rb a n k c o n tro l, to p re v e n t th e u n d u e d iv ersio n
of funds in to sp ecu lativ e o p e ra tio n s, a n d for o th e r p u rp o se s,
viz:
1
2
On page 3, line 11, omit the word “ such ” and sub
stitute therefor the words “ any one.”
72d
S. 4412
CONGRESS
iai Session
IN T H E S E N A T E O F T H E U N IT E D S T A T E S
May 9 (calendar day, May 10), 1932
Ordered to lie on the table and to be printed
AMENDMENT
In te n d e d to be p ro p o se d bv M r. K e a n to th e bill
(S . 4 4 1 2 )
to p ro v id e for th e safer a n d m o re effective use of th e assets
of F e d e ra l re serv e b a n k s and of n a tio n a l b a n k in g associa
tions, to re g u la te in te rb a n k c o n tro l, to p re v e n t th e u n d u e
diversio n of funds into sp ec u la tiv e o p e ra tio n s, a n d for o th e r
p u rp o se s, viz:
1
2
O n p a g e 3 , line 2 , o m it “ of a m e m b e r b a n k ” a n d
su b stitu te th e re fo r “ of a n y one m e m b e r b a n k .”
72d
CONGRESS
S.
1s t S e s s i o n
IN
T H E
SENATE
M
ay
4
OE
4
1
T H E
2
UNITED
STATES
9 (calendar day, M a y 10), 1932
Ordered to lie on the table and to be printed
AM ENDM ENT
Intended to be proposed by Hr. K ean to the bill (S. 4412) to
provide for the safer and more effective use of the assets of
Federal reserve banks and of national banking associations,
to regulate interbank control, to prevent the undue diversion
of funds into speculative operations, and for other purposes,
viz:
1
2
On page 3, line 9, omit the word “ such ” and substitute therefor the words “ anv one.”
72d
CONGRESS
S .
1s t S e s s i o n
4
4
1
2
IN THE SENATE OF THE U N ITED STATES
M
ay
9 (calendar day, M
ay
10), 1932
Ordered to lie on the table and to be printed
AM ENDM ENT
Intended to be proposed by Mr. K ean to the bill (8. 4412) to
provide for the safer and more effective use of the assets of
Federal reserve banks and of national banking associations,
to regulate interbank control, to prevent the undue diversion
of funds into speculative operations, and for other purposes,
viz:
1
On page 38, lines 6 and 7, omit
“
that shares of its
2
own stock held by a national bank as trustee shall not be
3
voted,” and substitute therefor “ shares of its own bank held
4
by a national bank as trustee amounting to more than 25
5
per centum of the capital shall not be voted, and no stock
6
shall be held by a national bank as trustee and voted for a
7
period of more than five years.”
72d
CONGRESS
S .
4
SENATE
OE
1s t S e s s i o n
IN
T H E
M
ay
4
1
T H E
2
UNITED
STATES
9 (calendar day, May 10), 1932
Ordered to lie on the table and to be printed
AM ENDM ENT
Intended to be proposed by Mr. K ean to the bill (S. 4412) to
provide for the safer and more effective use of the assets
of Federal reserve banks and of national banking associations,
to regulate interbank control, to prevent the undue diversion
of funds into speculative operations, and for other purposes,
viz:
1
On page 87, omit section 16.
t2D CONGRESS
S.
1st S ession
4
4
1
2
IN THE SENATE OE THE U N ITED STATUS
M
ay
9 (calendar day, M
ay
10), 1932
Ordered to lie on the table and to be printed
AM ENDM ENT
Intended to be proposed by Mr. D ickinson to the bill (S. 4412)
to provide for the safer and more effective use of the assets
of Federal reserve banks and of national banking associa
tions, to regulate interbank control, to prevent the undue
diversion of funds into speculative operations, and for other
purposes, viz:
1
On page 44, line 24, following the word “ situated ”
2
and before the colon insert the following: “ if such estab
lishment and operation are at the time permitted to State
4
banks by the law of the State in question.”
72 d
CONGRESS
IS.
1s t S e s s i o n
IN
T H E
SENATE
M
ay
4
OF
T H E
4
UNITED
9 (calendar day. M ay
STATES
10), 1932
Ordered to lie on the table and to be printed
AM ENDM ENT
Intended to be proposed by Mr. N orbeck to the bill (S. 4412)
to provide for the safer and more effective use of the assets
of Federal reserve banks and of national banking associa
tions, to regulate interbank control, to prevent the undue
diversion of funds into speculative operations, and for other
purposes, viz:
l
Strike out section 19.
72
d
CONGRESS
1s t
S
S.
e s s io n
4
4
1
2
IN T H E S E N A T E O F T H E U N IT E D S T A T E S
M at 9 (c a le n d a r day , M a t 1 0 ) , 1 9 3 2
O rd e red to be p rin te d
AM ENDM ENT
P ro p o se d b y M r.
Y
a n d e n b e r g
to th e bill
(S . 4 4 1 2 )
to p ro
v id e fo r th e safer a n d m o re effective use of th e assets of
F e d e ra l re se rv e b a n k s a n d of n a tio n a l b a n k in g asso ciatio n s,
to re g u la te in te rb a n k co n tro l, to p re v e n t th e u n d u e d iv ersio n
of funds in to sp ecu lativ e o p era tio n s, a n d for o th e r p u rp o se s,
v iz:
1
O n p a g e 4 5 , a t th e en d of su b sectio n 0 of sectio n 1 9 ,
2
ad d th e follow ing: “ Provided , T h a t on ly e x istin g u n it or
8
affiliated b a n k s shall beco m e b ra n c h b a n k s, e x c e p t th a t th is
4
p ro v iso sh all n o t a p p ly in a n y c ity , to w n , o r v illag e w h e re
5
no N a tio n a l or S ta te b a n k in g c o rp o ra tio n is re g u la rly tra n s-
6
a c tin g c u sto m a ry b a n k in g b u s in e s s /’
72
d
CONGRESS
Isr S
S.
e s s io n
4
4
1
2
IN T H E S E N A T E O F T H E U N I T E D S T A T E S
M
ay
9 (calen d a r day , M
ay
10), 1932
O rd ered to lie on th e table and to be p rin te d
AM ENDM ENT
In te n d e d to be p ro p o sed b y M r. C o p e l a n d to th e bill (S . 4 4 1 2 )
to p ro v id e for th e safer a n d m o re effective use of th e assets
of F e d e ra l re serv e b an k s an d of n atio n a l b a n k in g associations,
to re g u la te in te rb a n k co n tro l, to p re v e n t th e u n d u e d iversion
of funds into sp ec u la tiv e o p e ra tio n s, an d for o th e r p u rp o ses,
v iz: On p ag e 4 5 , a fte r line 2 3 , in sert th e follow ing n e w
s e c tio n :
,
1
“ S e c . 2 0 A . S ectio n 5 1 6 9 of th e E e v is e d S ta tu te s, as
2
a m e n d e d , is a m en d e d b y a d d in g a t th e end th e re o f th e
3
follo w in g n e w sen te n c e: ‘ N o such certificate shall be g iv e n
4
to a n y such associatio n unless th e c o m p tro lle r shall first h a v e
5
re c eiv e d from th e S ta te b a n k in g a u th o rity of th e S ta te in
6
w hich such associatio n is to e n g ag e in th e business of b a n k -
7
in g a s ta te m e n t s e ttin g fo rth th a t co m m ercial, in d u stria l,
72
d
CONGRESS
1s t
S
S .
e s s io n
IN T H E
SENATE
M
ay
4
OE
4
1
T H E
9 (c a le n d a r day, M
2
UNITED
ay
STATES
10), 1932
O rd e red to lie on th e table an d to be p rin te d
AM ENDM ENT
In te n d e d to be p ro p o sed b y M r. C o p e l a n d to th e bill (S . 4 4 1 2 )
to p ro v id e for th e safer and m o re effective use of th e assets
of F e d e ra l re se rv e b an k s an d of n a tio n a l b a n k in g associations,
to re g u la te in te rb a n k c o n tro l, to p re v e n t th e undue d iversion
of funds into sp ecu lativ e o p e ra tio n s, and fo r o th e r p u rp o ses,
viz:
1
On p a g e 4 4 , line 2 4 , a fte r th e w ord “ situ a ted ” in se rt
2
a com m a a n d th e follo w in g : “ if such e stab lish m en t an d
3
o p e ra tio n a re a t th e tim e p e rm itte d to S ta te b an k s b y th e
4
la w of th e S ta te in q u e stio n .”
72
d
CONGRESS
lsi S
S .
e s s io n
IN
T H E
SENATE
4
OF
4
1
T H E
2
UNITED
STATES
M ay 9 (c a le n d a r d ay , M ay 1 0 ) , 1 932
O rd ered to lie on th e tab le an d to be p rin te d
AM ENDM ENT
In te n d e d to be p ro p o sed b y M r.
M
e t c a l f
to th e bill (S . 4 4 1 2 )
to p ro v id e for th e safer a n d m o re effective use of th e assets
of F e d e ra l re se rv e b a n k s an d of n a tio n a l b a n k in g associa
tio n s, to re g u la te in te rb a n k c o n tro l, to p re v e n t th e u n d u e
d iv ersio n of funds in to sp ecu lativ e o p e ra tio n s, a n d for o th e r
p u rp o se s, viz:
1
O n p a g e 3 4 , line 4 , strik e out all of sectio n 1 4 .
S. 4412
72d C O N G R E S S
1s t S e s s io n
IN
T H E
S E N A T E
M
ay
O F
T H E
U N IT E D
S T A T E S
9 (calendar day, M a y 10), 1932
Ordered to lie on the table and to be printed
AM ENDM ENT
In te n d e d
to
to b e p r o p o s e d b y
p r o v id e
fo r th e
M r. M
s a fe r a n d
e t c a l f
m ore
to tb e
e ffe c t iv e
b ill
u se
(S .
o f th e
4412)
a ssets
o f F e d e r a l r e s e r v e b a n k s a n d o f n a tio n a l b a n k in g a s s o c ia tio n s ,
to r e g u la te in te r b a n k
o f fu n d s in to
c o n t r o l, to p r e v e n t th e u n d u e d iv e r s io n
s p e c u la tiv e
o p e r a t io n s ,
and
fo r o th e r p u rp o se s,
v iz :
1
2
On page
lin e
10.
8,
b e g in n in g w it h lin e
5,
s t r ik e o u t a ll t h r o u g h
S. 4412
72d C O N G R E S S
1s t S e s s io n
IN
T H E
S E N A T E
M
O E
T H E
9 (calendar day, M
ay
U N IT E D
S T A T E S
10), 1932
ay
Ordered to lie on the table and to be printed
AM ENDM ENT
In te n d e d
to
to
be proposed
p r o v id e
of
fo r th e
F ederal
by
M r. M
s a fe r a n d
reserve
banks
m ore
and
c ia tio n s , to r e g u la t e in te r b a n k
d iv e r s io n
o f fu n d s
in to
to
e t c a l f
th e
e ffe c tiv e
of
u se
n a tio n a l
c o n t r o l,
s p e c u la t iv e
b ill
to
4412)
(S .
o f th e
a ssets
b a n k in g
asso
p reven t
o p e r a tio n s ,
th e
and
undue
fo r
o th e r
p u rp o se s, v iz :
1
On
4,
page
lin e
20,
2
and
2
d u ty
o f th e
4
tim e
to
5
m em bers,
C
to
7
c h a ir m a n
8
r e c e iv in g su ch r e p o r t ,” ,
in s e r t
th e
in
lie u
s trik e
th ereof
d ir e c to r s
of every
tim e in q u ir e in to
and
F ederal
of
to
rep ort
R eserve
th e
th e
out
th e
w ord
fo llo w in g :
“
“ w henever ”
It
F ed era l reserve
s h a ll
be
bank
to
th e
fr o m
th e u se s o f c r e d it fa c ilitie s b y
any
m is u s e
B oa rd
F ederal
o f su ch
th rou g h
reserve
bank,
th e
c r e d it
th e ir
fa c ilitie s
m e d iu m
W h en ever,
of
th e
upon
fcataha <m\an
kr
J ]>‘i
S. 4412
72d C O N G R E S S
lb x S e s s io n
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IN
T H E
S E N A T E
M
7
ay
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U N IT E D
S T A T E S
9 (calendar day, M a y 10), 1932
f - o p r i < r ' / t a n 5fir«<f MV f‘V'01
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P
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Ordered to lie on the table and to be printed
i-w \tauj:ua
'll lo Jtifjomii Oil) lo :l.hfk>l*fiiro 'gu*;->*»•■ x
lit:
0
AM ENDM ENTS
In te n d e d
to b e
proposed
by
M r. M
e t c a l f
to
tb e
b ill
(S .
4412)
to p r o v id e fo r tb e s a fe r a n d m o r e e ffe c t iv e u s e o f th e a s se ts o f
E ed eral reserve
to r e g u la te
o f fu n d s
banks
and
o f n a tio n a l b a n k in g
a s s o c ia tio n s ,
in te r b a n k c o n t r o l, to p r e v e n t t b e u n d u e
in to
s p e c u la t iv e
o p e r a tio n s ,
and
fo r
d iv e r s io n
oth er p u rp oses,
v iz :
1
On
2
th ro u g h
3
fo llo w in g
4
15,
page
lin e
18
on
b e g in n in g
page
18,
w ith
and
in s e r t
in
have
a
The
1 2 5 , 0 0 0 ,0 0 0 ,
c o r p o r a tio n
s h a ll
5
$
6
S ta tes o f A m e r ic a a n d p a y m e n t fo r w h ic h
7
c a ll
8
c o r p o r a t io n .
s tr ik e
lie u
out
a ll
th e re o f
th e
pa ra grap h s:
“ (c )
in
6,
lin e
w h o le
a ll o f w h ic h
or
in
p a rt
c a p ita l
stock
of
s h a ll b e s u b s c r ib e d b y th e U n it e d
by
th e
boa rd
s h a ll b e s u b je c t to
of
d ir e c to r s
of
th e
2
1
“ There is hereby authorized to be appropriated out of
2
any
3
su m
4
upon
5
United States for or on account of such stock shall be issued
6
b y th e c o r p o r a tio n
7
be evidence of the stock ownership of the United States.
m oney
9
su ch
“ A n y
fo r
not
th e
o th e r w is e
pu rp ose
R e c e ip ts
a p p r o p r ia te d
o f m a k in g
fo r
th e
p a y m e n ts
p a y m e n ts
by
th e
to th e S e c r e t a r y o f th e T r e a s u r y a n d s h a ll
F e d e r a l r e s e r v e b a n k m a y p u r c h a s e a n d h o ld a n ^
debentures or other such obligations of the corporation in
an
11
s u r p lu s fu n d .”
12
On
am ount
w ord
14
not
page
e x c e e d in g
23,
lin e
o n e -fo u r th
11,
change
th e
of
th e
w ord
am ount
“ su m ”
of
to
it s
th e
“ a m o u n t .”
lin e s
12
and
a m o u n t a u th o r iz e d
to
be
On page
15
th e
10
gra p h
T reasu ry
s u b s c r ip t io n .
10
13
th e
1 2 5 ,0 0 0 ,0 0 0
of $
8
in
(c )
23,
o f th is s e c t i o n .”
13,
s tr ik e o u t th e w o r d s “ a n d
a p p r o p r ia te d
p u rsu a n t to
p a ra -
\
72 d C O N G R E S S
1s t S e s s i o n
/
O
A A 1
O
^TT T 1 ^
AM ENDM ENTS
Intended to be proposed by Mr. M e t c a l f to
the bill (S. 4412) to provide for the safer
and more effective use of the assets of
Federal reserve banks and of national
banking associations, to regulate interbank
control, to prevent the undue diversion of
funds into speculative operations, and for
other purposes.
M a y 9 (calendar day, M a y 1 0 ), 1932
Ordered to lie on the table and to be printed
S. 4412
?2d C O N G R E S S
1s t S e s s io n
IN
T H E
S E N A T E
M
at
OE
T H E
U N I T E D
9 (calendar day, M
ay
STATES
10), 1932
Ordered to lie on the table and to be printed
AM ENDM ENT
In te n d e d
to
be
proposed
to
p r o v id e
of
E ederal
tio n s ,
to
d iv e r s io n
fo r th e
reserve
by
M r.
s a fe r a n d
banks
K
m ore
and
r e g u la t e
in te r b a n k
o f fu n d s
in to
ean
of
th e
b ill
u se
n a tio n a l
b a n k in g
to
o f th e
p reven t
o p e r a tio n s ,
4412)
(S .
e ffe c t iv e
c o n t r o l,
s p e c u la t iv e
to
a s s o c ia
th e
and
a ssets
undue
fo r
o th e r
p u rp oses, v iz :
1
2
On
and
(g)
pages
16, 17,
o f s e c tio n
12B
and
.
18,
o m it
s u b d iv is io n s
(e),
(f),
S. 4412
72d C O N G R E S S
1s t S e s s io n
IN
T H E
S E N A T E
M
ay
O E
T H E
U N IT E D
9 (calendar day, M
ay
S T A T E S
10), 1932
Ordered to lie on the table and to be printed
AM ENDM ENT
In te n d e d
to
be
proposed
to
p r o v id e
of
E ederal
tio n s ,
to
d iv e r s io n
fo r th e
reserve
by
M r.
s a fe r a n d
banks
K
m ore
and
r e g u la te
in te r b a n k
o f fu n d s
in to
ean
of
th e
b ill
u se
n a tio n a l
b a n k in g
to
o f th e
p reven t
o p e r a t io n s ,
4412)
(S .
e ffe c t iv e
c o n t r o l,
s p e c u la t iv e
to
a s s o c ia
th e
and
a ssets
undue
fo r
o th e r
p u rp oses, v iz :
On
and
(g)
pages
16, 17,
o f s e c tio n
12B
and
.
18,
o m it s u b d iv is io n s
( e ) ,
( f ) ,
V
CONGRESS
72 d
1s t S e s s i o n
S.
4
4
1
2
IN TH E SENATE OE TH E U N ITED STATES
M ay 9 (c a le n d a r d ay , M ay 1 0 ) , 19 3 2
O rd e red to lie on th e tab le an d to be p rin te d
A M E N D M E N T
Intended to be proposed by Mr. K ean to the bill (S. 4 4 1 2 )
to provide for the safer and more effective use of the assets
of Eederal reserve banks and of national banking associa
tions, to regulate interbank control, to prevent the undue
diversion of funds into speculative operations, and for other
purposes, viz:
1
On page 8, line 10 after the word “ amended ” insert
2
the following: “ :
8
shall be construed to require any bank or trust company to
4
dispose of investment securities or stocks lawfully held by
5
it on the date of the enactment of the Banking Act of 1 9 3 2 .”
P r o v id e d ,
That nothing in this paragraph
SUGGESTED CHANGES IN S. 4412.
1. Affiliates,
Allow five instead of three years for divorce. Pages 8, 37,42, 43*
Make examinations and reports discretionary. Pages 6,39,47,48#
2# Certain Powers of National and State Member Banks# Omit all of Section 14
(pages 34-36) which farther restricts the powers of national banks to
deal in investment securities and especially the portion (page 34, lines
15-21) authorizing national banks to exercise all powers granted by State
law to State banks.
If Section 14 is omitted, omit corresponding portion of 5(b)
relating to State member banks. Page 8, lines 5-10.
3# Onen Market Committee.
Omit all proposed sections 12A; or, if this is
not done limit to operations “for system account.“ Pages 13, 14,
4#
Advances to Member Banks. Omit all of Section 8 and substitute Board*s
recommendations extending maturity to 90 days when secured by elig
ible paper#
5*
itederal
Pages 27-28.
Liquidating Corporation.
Strike out provisions for stock sub
subscriptions by member banks and Federal reserve banKs and substitute
Board*s suggestion of $100,000,000 from Treasury, i. e., strike out
subdivisions (c) to (g), pages 15-18; substitute Board's paragraph (c);
and make change indicated on page 23#
6. Publication of Examination Reports.
Strike.out lines 5-13 on page 49.
(2)
important in the interest of practical administration.
The
changes necessary to accomplish this purpose are as follows:
Page 6, lines 14 and 15, strike out the words wnot
less than three reports during each year** and substitute the words
"such reports as the Board shall deem necessary".
Beginning in
line 19, on page 6, strike out all after the word "reports" down
to and including the word "shown" in line 2 on page 7.
Page 39, lines 10 and 11, strike out the clause "on
dates identical with those fixed for the examination of banks
with which it is affiliated".
Page 47, line 9, strike out the words "not less than
three reports during each year in such form" and substitute the
words "such reports".
In lines 14 to 17, inclusive, strike out
the words "as of dates identical with those for which the Comp
troller shall during such year require the reports of the condi
tion of the association".
In lines 19 to 23, inclusive, strike
out the entire sentence beginning with the word "Each" and ending
with the word "shown".
Page 48, line
20, strike out the word "include" and
substitute therefor the words "have power to make".
2. Certain Powers of National and State Member Banks.
In its unanimous report the Federal Reserve Board recom
mended the omission of all of section 15 of S. 4115, which is con
tained in S. 4412 in modified form as section 14. The modifications
(4)
Therefore, it is recommended that section 14 and the
relevant portion of section 5(h), contained in lines 5 to 10,
inclusive, on page 8, be stricken out entirely.
5. Open Market Committee.
All of the proposed "Section 12(A)" as set forth in
section 7 of the bill should be eliminated for the reasons set forth
in the recommendations of the Federal Reserve Board.
If, however,
the provisions relating to the Open Market Committee are to be
retained in the bill they should be modified by inserting on page
13, in line 16, after the word "operations" the words "for system
account" in order to avoid conferring upon this committee functions
which it does not now possess with respect to the operations of in
dividual banks, the exercise of which would hamper unnecessarily
the ordinary handling of open market purchases by individual banks
under the authority of existing law.
4. Advances to Member Banks.
For the reasons contained in the Board’s recommendations
of March 29, 1932, the restrictions which would be imposed by sec
tion 8 upon advances by Federal reserve banks to member banks should
be eliminated, and there should be substituted the section recom
mended by the Board on page 33A of its report which would enable
Federal reserve banks to make advances to member banks on their
promissory notes for periods up to ninety days when secured by paper
eligible for rediscount or for purchase by Federal reserve banks.
(6)
be substituted.
In this connection, on page 23, in lines 12 and 13,
the words "and the amount authorized to be appropriated pursuant to
paragraph (c) of this section" should be stricken out and the word
"stock" substituted therefor*
6. Publication of Examination Reports.
It is believed that careful consideration should be given
to the elimination of the last two sentences of section 24(a) of the
bill, which appear in lines 5 to 13, inclusive, on page 49, and which
would authorize the Comptroller of the Currency to publish reports of
examinations of member banks and their affiliates in certain circum
stances. This is a drastic power which is inconsistent with the con
fidential nature of reports of examination and which, if exercised,
would have a damaging effect upon the banks involved and their bor
rowers, and perhaps upon general banking conditions. Under other
sections of the bill adequate powers are given to the Comptroller of
the Currency to bring about compliance with his requirements, includ
ing particularly the power to remove officers and directors.
FEDERAL RESERVE B O A R D
WASHINGTON
A D D R E S S O F F IC IA L C O R R E S P O N D E N C E T O
X-7287
TH E FEDERAL RESERVE B O A R D
November 7, 1932.
SUBJECT:
Glass Bill, S. 4412.
Dear Sir:
The Federal Reserve Board has previously forwarded to you
copies of the so-called Glass Bill, S. 4412, which was reported
to the Senate by the Banking and Currency Committee of that body
on April 18, 1932, as well as copies of the accompanying majority
and minority reports of the Committee.
You have also been furnished
with copies of the hearings on the bill which were held before the
Senate Committee in March when the bill was under consideration
as S. 4115.
The Board’s report to the committee was printed in
connection with Governor Meyer’s testimony in these hearings and
was also included in the Federal Reserve Bulletin for April, 1932.
There are inclosed herewith two copies of a memorandum (X-7139)
which presents a comparison of the more important features of
S. 4412 and S. 4115 with the changes recommended by the Federal
Reserve Board*
As the bill may be taken up again at the forthcoming
session of Congress, the Federal Reserve Board will he glad to
receive any suggestions regarding its provisions which you desire
to submit for the Board1s consideration, together with your
reasons for such suggestions.
Very truly yours,
Chester Morrill,
Secretary.
Inclosures.
TO ALL CHAIRMEN AND GOVERNORS
X-7139
S. 4415, INTRODUCED APRIL 18, 1932.
PROVISIONS OP THIS BILL CO'.PARED WITH S. 4115
WITH CHANGES RECOMMENDED BY FEDERAL RE
SERVE BOARD.
There is set forth below a comparison of the more important
features of S. 4412, which was introduced in the Senate and reported
by the Committee on Banking and Currency on April 18, 1932, and S. 4115
with the changes re com .’ended by the Federal Reserve Board in its letter
to Senator Norbeck of March 29, 1932.
S.
as the ”new bill”.
4115 is referred to herein as the "old bill” and S. 4412
Section numbers and page numbers refer to the sec
tions and pages of the new bill, unless otherwise indicated.
Certain
sections of the old bill which have been omitted entirely from the new
bill are treated at the end of this memorandum.
SECTION 1.
Title. - (p. 1)
This section merely provides that the short title of the act
shall be the "Banking Act of 1932.”
SECTION 2 .
Definitions. - (pp. 1, 2 and 3)
The definitions contained in section 2, including those of an
affiliate and of a holding company affiliate, are, in the new bill,
made applicable not only to the provisions of this act but to any pro-
X-7139
visions of law amended by this act.
The several classes of institutions defined as affiliates in the
old hill are subdivided in the new hill so as to make a distinction be
tween "affiliates" generally and "holding company affiliates".
With these exceptions, the definitions contained in the new hill
are substantially in the same form as in the old hill with the changes
recommended by the Board.
SECTION 3 .
(a) Control of Federal reserve hank credit by Federal Reserve Board.(pp.3,4)
On this subject the recommendation of the Federal Reserve Board
is adopted in Section 3 (a) of the new bill.
(b) Voting by groups or chains in elections of Federal reserve bank
directors,
(p. 5)
Section 4 of the old bill prohibited banks that belong to a
group or chain from voting for Federal reserve bank directors , and the
Board recommended the omission of the provision.
The new bill provides
(in Section 3(b) that when two or more member banks are affiliated with
the same holding company affiliate only one of such banks may participate
in the nomination or election of Federal reserve bank directors.
SECTION 4 .
Distribution of earnings of Federal reserve banks, (p. 5 )
The old bill provided (in Section 5) that net earnings of Fed
eral reserve banks after payment of dividends and expenses should be paid
to the Federal Liquidating Corporation.
The Board recommendedthat no
X-7139
-
3 -
changes be made in the present method of the distribution of earnings of
Federal reserve banks but that the Secretary of the Treasury be author
ized in his discretion to use the franchise tax received from Federal re
serve banks for investment in obligations of the Liquidating Corporation.
The new bill provides (in Section 4) that all net earnings of a Federal
reserve bank, after payment of dividend claims and expenses, shall be paid
into the surplus fund of the Federal reserve bank.
SECTION 5.
(a) Branches of State member banks,
(pn. 5, 6)
In connection with Section 21 of the old bill, the Board recommend
ed a new provision to the effect that nothing contained in the bill shall
prevent State member banks from establishing branches either in the United
States or elsewhere upon the same terms and conditions as those applicable
to branches of national banks.
This nrovision as recommended is contained
in Section 5(a) of the new bill,
(The provisions of the new bill with reference to branches of
national banks are contained in Section
(b)
IS.)
Reports of affiliates of State member banks,
(pp. 6, 7)
The old bill (in section 6) required each affiliate of a State
member bank to make three complete reports of condition annually through
the president of the bank to the Federal Reserve Board.
The Board’s recom
mendation was that such reports be required only when deemed necessary by
the Federal Reserve Board.
The new bill provides in Section 5(b) that a
State member bank shall obtain from each of its affiliates and furnish t*
the Federal reserve bank and to the Federal Reserve Board not less than
X-7139
-
4
-
three reports of condition each year and such additional reports as the re
serve hank or the Board may deem necessary.
The provision requiring such re
ports to he made is mandatory; hut they are required to contain only such
information as, in the .judgment of the Federal Reserve Board, shall he neces
sary to disclose fully the relations between such affiliate and such hank
and to enable the Board to inform itself as to the effect of such rela
tions upon the affairs of such hank.
(Substantially the same provisions are contained in Section 23 of
the new hill with reference to reports of affiliates of national hanks.)
Dealings in stocks and investment securities by State member hanks, (u. 8)
.
y
--Section 5(h) of the new hill contains a orovision to the effect
that State member hanks shall he subject to the same limitations and con
ditions as are national hanks with resnect to the purchase, sale, underwrit
ing and holding of investment securities and stock.
There was no such pro
vision in theold hill; and the Board recommended that Section 15 of the old
hill, which restricted dealings in investment securities by national hanks,
he omitted entirely.
(The provisions on this subject regarding national hanks are in
Section 14 of the new hill.)
Divorce of stock of State member hanks from stock of other corporations, (p. 8
Section 5(h) of the new hill contains a provision to the effect
that, after three years from the passage of the act, no certificate of stock
of a State member hank shall represent the stock of any other corporation,
except a member hank, nor shall the ownership or transfer of a stock cer-
X-7139
5
tificate of such a hank he conditioned upon the ownership or transfer of
a certificate of stock of another corporation, except a member hank.
A similar provision regarding stock of national hanks is found
in Section 16 of the new hill.
r
The old hill contained no such provision regarding the stock of
State member hanks; hut Section 17 contained a similar provision regard
ing the stock of national hanks, which would have become effective im
mediately, and the Board recommended that it he retained hut that it he
made effective after three years.
Right of an affiliate of a State member hank to vote stock held by it
in such hank, (-pu. 8 and 9)
Section 5(h) of the new hill provides that the holding com
pany affiliates of State member hanks shall he subject to the provisions
of Section .5L44 of the Revised Statutes (which contains the conditions
under which affiliates may vote stock held in national hanks) and also
provides for the forfeiture of the membership of a State member hank,
in the discretion of the Federal Reserve Board, where a voting permit of
a holding company affiliate of such a hank is revoked.
Under the new
hill, therefore, substantially the same provisions are applicable to hold
ing company affiliates of national hanks and holding company affiliates
of State member hanks.
The Board recommended that the provisions of the old hill with
reference to the conditions under which holding company affiliates of
national hanks might obtain permits to vote stock *wned by them in such
"banks "be revised in a number of particulars and also recommended that sub
stantially the same provisions as those suggested for national "banks "be
made applicable to affiliates of State member banks, suggesting a new sec
tion of the bill for this purpose.
The provisions applicable to affili
ates of national banks in this connection are contained in Section 17 of
the new bill and are discussed hereafter with reference to that section;
but it may be stated briefly at this point that the recommendations of the
Board regarding affiliates of national banks have not been adopted in the
new bill,
Examination of affiliates of State member banks., (to, 9)
The new bill in Section 5(b) requires such examinations of affil
iates of State member banks as shall be necessary to disclose fully the
relations between such banks and their affiliates and the effect of such
relations upon the affairs of the bank; the expense of such examinations
may, in the discretion of the Federal Reserve Board, be assessed against
the bank examined, (instead of against the affiliates as recommended by the
Board); and, in the event of the refusal of the affiliate to give informa
tion requested or to permit such an examination, or in the event of the
failure of the bank to pay the expenses of such an examination, the member
ship of any State member bank affiliated with such an affiliate may be for
feited in the discretion of the Federal Reserve Board.
The old bill contained a provision (in Section 28) requiring exam
inations of affiliates of a State member bank.
The Federal Reserve Board
recommended that such examinations be authorized to be made only when deemed
necessary.
(Provisions of a somewhat similar character are contained in Section
X-7139
-
7 •?.
24 of the new bill with reference to examinations of affiliates of national
banks.)
SECTION 6.
Membership of the Federal Reserve Board.
(pm. 10-12)
The old bill (in Section 7) contained a provision omitting the Secre
tary of the Treasury from the membership of the Federal Reserve Board and omit
ting the provision of the Federal "Reserve Act authorizing the Secretary to
assign quarters to the Federal Reserve Board.
The Board recommended certain
minor amendments to this section and suggested that authority be given the
Board to purchase or erect a building for its offices.
In Section 6 of the
new bill the provisions of the old bill are repeated with the minor changes
recommended by the Board; but the authority for the Federal "Reserve Board to
purchase or erect a building is omitted.
SECTION
7.
Open Market Committee, (pp. 13, 14)
Section 7 of the new bill adds a new Section 12A to the Federal Re
serve Act, which provides for a Federal Open Market Committee along the lines
of the existing Open Market Policy Conference.
The Board recommended that the similar provisions of the old bill
(Section 10) on this subject be stricken out, and that there be substituted
certain amendments to Section 14 of the Federal Reserve Act clarifying the
Board*s powers over open market operations and containing in revised form
one of the provisions of the old bill.
The 5oard*s recommendations were
not adopted in the new bill.
The chief differences between the new bill and the old bill are;
In lieu of the statement in the old bill that no Federal reserve bank may
engage in open market operations "except after approval and authorization
X-7139
“ B by the Committee11, there is a provision in the new bill that no Federal re
serve bank shall engage in such operations 11except in accordance with reso
lutions adopted by the Committee and approved by the Federal "Reserve Board".
This applies to all purchases and sales on the open market under Section 14
of the Federal Reserve Act, whether for system account or for the account
of an individual Federal reserve bank.
The old bill provided that the
Governor of the Federal Reserve Board should be a member of the committee in
addition to the twelve members appointed by the directors of the Federal re
serve banks, but in the new bill the Governor is not made a member of the
committee.
The new bill also omits the provision of the old bill that the
Board's annual report to Congress should include a review of the decisions
of the committee with an explanation thereof.
Federal Liquidating Corporation, (pp. 14-27).
Section 7 of the new bill also contains the proposed new Section 12B
of the Federal Reserve Act providing for a Federal Liquidating Corporation
to expedite the payment of dividends to depositors and creditors of closed
member banks.
The provisions of the new bill on this subject are a compro
mise between the provisions of the old bill and the Board1s proposed
substitute.
The old bill provided (in Section 10) for the creation of a Fed
eral Liquidating Corporation for the purpose of purchasing and liquidat
ing the assets of closed member banks.
The Board recommended a number of
changes in the provisions with reference to this proposed corporation, and
in the new bill some of these changes have been adopted and some have
been omitted.
Without setting forth all of the detailed differences be
tween the old bill, the recommendations of the Board, and the new bill,
X-7139
-
9 -
there axe stated below the mobd important of these differences.
In accordance with the recommendation of the Federal Reserve Board,
the new bill provides for a board of directors of five members, (the Comp
troller of the Currency, a member of the Federal Reserve Board, and three
members selected annually by the Governors of the Federal reserve banks),
instead of a board of fourteen members (the Comptroller of the Currency and
the 13 members of the Federal Open Market Committee) as provided in the old
bill, >
The old bill provided for two classes of capital stock of the
corporation:
-class A stock, to be subscribed by member banks in an amount
equal to one-half of one per cent of their deposits, and class B stock, to
be subscribed by Federal reserve banks in an amount equal to one—fourth of
their surplus; with an additional provision for annual subscriptions by
federal reserve banks in amounts equal to one-fourth of the annual increase
in tneir surplus accounts.
The Board recommended that the capital stock com—
sist of $100,000,000 to be subscribed by the United States.
The new bill
provides for the appropriation by the United States to the corporation of
the sum of $125,000,000, but also provides for two classes of stock; class
A stock, to be subscribed by member banks in an amount equal to one-fourth
of one per cent of their deposits, and class B stock to be subscribed by
jederal reserve banks in an amount equal to one—fourth of their surplus.
One-naif of each class of stock is apparently to be paid in upon the or
ganization of the corporation, and the remainder is subject to call.
The
new bill, however, omits the provision for additional annual subscriptions
by the Federal reserve banks.
The old bill authorized the liquidating Corporation to purchase
X-7139
- 10 -
and liquidate the assets of closed nonmemher State hanks and to make loans
to such hanks, for a limited number of years; and also authorized an appropri
ation #f $200,000.,000 irom the United States Treasury for this purpose.*
In
accordance with the recommendation of the Board, this provision is omitted
from the new hill and its provisions are limited to member banksThe old hill provided for the issuance of debentures by the Liquidat
ing Corporation in amounts aggregating not more than four times its capital.
The Federal Reserve Board recommended that debentures be authorized up to
twice the amount of capital and that Federal reserve banks be given authority
to purchase these debentures up to one-fourth of their surplus-
The new bill
authorizes the issuance of debentures in an amount aggregating not more than
twice the amount of the capital of the corporation and the $125,000,000
appropriation from the Treasury of the United States.
The provision recom
mended by the Board, however, that such debentures be guaranteed by the
United States is omitted
turn
the new bill.
The new bill (p. 20, lines 24, 25; p. 21, lines 1-4) contains
in a
different form the provision for a valuation committee, the elimination of
which was recommended by the Board.
Loans on and purchases of, assets of
closed member banks are to be made ,fon the basis ofn valuations of such
assets made by this committee, which includes the receiver, a representative
■of the insolvent bank, and a third member selected by those two, but does not
include any representative of the corporation,
A number of provisions recommended by the Federal Reserve Board «f a
prohibitive or penal character in connection with the proposed Federal Liquid
ating Corporation and its operations have been adopted in the new bill and cer
tain unnecessary steps regarding the organization of the corporation and in
creases and decreases in its capital have been eliminated.
X-7139
-11-
SECTION B *
'
Loans on member banks1 collateral notes (d p . 27-28)
The old bill (Section 11) provided that the rate at which a
Federal He serve Bank might make advances to its member banks on their
15-day promissory notes should be at a rate 1# higher than the
rediscount rate, and also provided that if a member bank, while
indebted to a Federal reserve bank on such a 15-day note and despite
a warning «f the Federal reserve bank or the Federal Reserve Board,
shoula increase its loans made for the purpose of purchasing or
carrying investment securities (except obligations of the United States),
the note should be immediately due and payable and the member bank
should be ineligible to borrow on such 15-day notes for such periods
as the Federal Reserve Board might determine.
The old bill also pro
vided that the Federal Reserve Board might suspend the provisions of
law with reference to loans to member banks on their 15-day notes for
periods of 90 days*
In lieu of these provisions of the old bill, the Federal Reserve
Board recommended an amendment increasing the maximum maturity of
advances to member banks on their promissory notes secured by eligible
paper from 15 to 90 days*
Section 8 of the new bill (pp. 27,28) does not adopt the recom
mendation of the Board on this point and contains substantially the same
provisions as those in the old bill, except that there have been omitted
the discriminatory rate #f 1$ on such 15—day advances to member banks and
the provisions for the suspension by the Board of the provisions of law
on this subject.
X-7139
-12-
SECTI PIT 9 •
Foreign transactions of Federal reserve banks (p . 29.)
The Federal Reserve Board
s u g g e s t e d
certain changes in the
provisions o f Section 12 o f the old h i l l with reference to the
supervision o f the Board over foreign transactions of Federal
reserve hanks, and the more important of these changes have been
adopted in the corresponding provisions contained in Section 9 of
the new h i l l .
The provisions o f the new h i l l on this su b ject, which
are su b stan tially those o f the old h i l l with the Board’ s suggested
changes, provide that a l l relationships and transactions by Federal
reserve hanks with foreign banters shall he subject to special
supervision and regulation by the Federal Reserve Board; that nego
tia tio n s with foreign hankers sh a ll not he conducted without the
permission of the Board; that the Board may he represented in
any such n egotiation s; and that a f u l l report o f a l l such negotia
tions sh a ll he made to the Board in w riting.
SECTION 10 •
Reserves o f member hanks and r e str ic tio n s on dealings in ’’Federal Funds”
(P. 3 0 ).
Section 13 o f the old h i l l contained a complete revision of
Section 19 o f the Federal Reserve Act with reference to the reserves
required o f member hanks.
Chief among i t s provisions was the require
ment that the percentages of reserve against time deposits he increased
over a period of years to the same percentages as those required against
demand d ep o sits.
Another important provision of the old h i l l prohibited
the transfer o f balances with a Federal reserve hank from one hank to
X-7139
13
another without the authority o f the Federal Reserve Board and except
upon payment o f a fe6 for the p r iv ile g e .
, The Board was also authorized
to suspend a l l dealings in reserve balances fo r such periods as i t might
deem b e st.
The Federal Reserve Board recommended, in lie u of the provisions of
the old b i l l on this su b ject, a revision o f section 19 of the Federal Re
serve Act in accordance with the recommendations of the System Committee
on Reserves with some m odifications; and recommended the omission o f the
lim itation s on the use of balances standing to the credit of member banks
on the books of the Federal Reserve Banks.
The new b i l l (in Section 10) omits e n tire ly any revision or amendment
o f the reserve requirements o f member banks, and also omits the re strictio n s
of the old b i l l on the transfer o f balances in Federal reserve banks.
Member banks as mediums in making loans on c o lla t e r a l. (p . 30)
In accordance with a recommendation of the Federal Reserve Board,
Section 10 o f the new b i l l adds a new paragraph to Section 19 o f the Federal
Reserve Act forbidding a member bank to act as the medium or agent o f any
non-banking corporation or individual in making loans on the security of
stocks, bonds and other investment secu rities to brokers or dealers in such
se c u r itie s, and providing a fine for v io la tio n thereof.
The old b i l l contained a provision fo r a sim ilar purpose but in
d iffe re n t form. SECTION 11.
Loans to or investments in stock o f a f f i l i a t e s ,
(pp. 30-32)
On this subject the new b i l l (in Section 11) adopts su b stan tially
the recommendations of the Federal Reserve Board and provides that no
member banks sh a ll make any loan or extension of credit to , or purchase
X-7139
-14-
se cu ritie s under repurchase agreements from, any of i t s a f f i l i a t e s ,
or invest in the stock or obligations of such a f f i l i a t e s , or accept
such stock or obligations as security for advances, i f the aggregate
amount thereof, in the case of any one a f f i l i a t e , r a i l exceed ten
per cent of the cap ital stock and surplus of the member bank, or
i f , in the case of a l l such a f f i l i a t e s , the aggregate amount thereof w ill
exceed twenty per cent of the capital stock and surplus of such member
bank.
Each loan or extension o f credit to an a f f i l i a t e sh all be
secured by c o lla t e r a l, in the form of stocks, bonds, debentures or other
such ob lig a tio n s, having a market value of at le a st twenty per cent
more than the amount of the loan
or extension of credit or at le a st
ten per cent more than the amount thereof i f secured by State or muni
cipal ob liga tion s.
Loans or extensions of credit secured by obligations
of the United S tates, Federal intermediate credit banks, Federal land
banxs or paper e lig ib le for rediscount by Federal reserve banks are
excepted from the requirement as to marginal c o lla te r a l (but the suggestions
of the Federal Reserve Board that those secured by obligations of the
Reconstruction Finance Corporation be also excepted was not adopted).
The provisions of this section do not apply to an a f f i l i a t e engaged
s o le ly in holding the bank premises of the a f f i li a t e d member bank or
conducting a safe-d ep osit business or the business of an agricultural
credit corporation or liv e stock loan company, or to an a f f i l i a t e in the
cap ital stock of which a national bank is authorized to invest under
Section 25 of the Federal Reserve A ct, or an a f f i l i a t e
Section 25(a) of the Federal Reserve Ac t .
organized under
X-7139
•*16Tiie old "bill (in Section 9) contained some of the provisions
of the new h i l l on th is subject, but the lim itation s prescribed
were applicable only as to a f f i l i a t e s engaged in buying and s e llin g
stocks, bonds, real estate or real estate mortgages or organized to
hold t i t l e to any such property.
The old b i l l did not include
the twenty percent lim it in the case of a l l a f f i l i a t e s , on the
^gS^egate
loans, investments and advances, nor did i t include any
of the above-mentioned exceptions to the lim itation s prescribed.
The old D ill required marginal c o lla te r a l of twenty per cent in a l l
cases except where the security for the loan consisted of paper
e lig io le for rediscount or obligations e lig ib le for investment by
savings banks.
SECTION 12.
Heal estate loans and investments in bank premises (pp. 32, 33)
The old b i l l (in Section 14) contained a number of provisions
with reference to real estate loans and investments of member banlcs.
It would have required a bank to revise the valuations on which
such loans were based at the time of each examination and a ls o , in
e f f e c t , at the time of each report of i t s condition.
The lim itation s
on the amount of such loans would have been changed, and a l l un
secured loans whose eventual safety depends upon the value of real
estate would have been c la s s ifie d as real estate loans.
Time depositors
would have been given a preferred claim on a l l real estate loans and
other assets acquired under th is section of the old b i l l .
X-7139
-16-
The Federal Reserve Board recommended that these provisions
of the old h i l l be omitted and that there be substituted therefor a
provision that no national bank, without the permission of the
Comptroller of the Currency, and no State member bank, without the
permission of the Board, sh all invest in bank premises, or in the stock
or obligations o f , or in loans to , any corporation owning or holding
i t s bank premises a sum exceeding the amount of the cap ital stock of
such bank.
The new b i l l omits the provisions of the old b i l l in accordance
with the recommendation,
of the Board, and adopts in substance the
provision suggested by the Board, although the language of the
provision is somewhat changed, and loans upon the security of the stock
of any such corporation holding bank premises are included within the
investments to which the lim itation a p p lies.
SECTION 13 .
Ju risd iction o f Federal Courts over cases involving foreign banking
transactions,
(pp, 3 3 .3 4 )
This provision, which was not contained in the old b i l l and which
was not the subject of a recommendation by the Federal Reserve Board,
confers upon the d is t r ic t courts of the United States ju r is d ic tio n over
any case to which a corporation organized under the laws of the United
States i s a party and which a rises out of transactions involving in ter
national or foreign banking, either d ir e c tly or through the agency, owner
ship or control of branches or o f lo ca l in stitu tio n s in foreign
countries.
X-7139
-1 7 It is understood that the rule in the Federal courts with reference
to the valuation of foreign currency in transactions of th is kind i s
more favorable to hanks than in the State courts,
and i t is apparently
for this reason that the h i l l contains the above provision.
SECTION 14,
National hanks granted a l l powers of State hanks, (p. 34)
In the old h i l l (Section 15) national banks were granted power to
engage in a l l forms of hanking business permitted by the laws of the
State in which they are located to "hanks of deposit and discount" or
ganized under such State laws, except to the extent that the exercise
of such powers is forbidden by the laws of the United S ta tes.
The Board recommended that th is provision he omitted; hut i t is
contained in the new h i l l in su b stan tially the same form in which i t
appeared in the old h i l l .
Dealings in investment se cu ritie s (pp. 34-36)
The old h i l l (in section 15) contained a number of provisions with
reference to dealings in investment se cu ritie s by national banks and
the Board recommended that a l l these provisions he omitted.
They are,
however, repeated in the new h i l l , with certain changes and ad ditions,
and with the provision (in Section 4) that the same provisions sh a ll
he applicable to State member hanks.
The new h i l l provides in e ffe c t
th at;
Dealings in investment secu rities are lim ited to the purchase and
sa le of such s e c u r itie s , without recourse, so lely upon the order
X-7139
-13- .
and for the account of customers, except that member hanks may purchase
and hold for their own account investment se cu ritie s under lim itation s
and re stric tio n s prescribed by regulation of the Comptroller of the
Currency.
No member bank sh all underwrite any issue of se c u r itie s . .
The to ta l amount of any one issue of investment se cu ritie s of any one
obligor hereafter purchased and held by a member bank for i t s own
account sh all not exceed 10 per cent of the to ta l amount of such
issue outstanding, but th is lim itation does not apply to any issue not
in excess of $100,000 and not in excess of 50 per cent of the cap ital
of the b a:k ; and the to ta l amount of investment se cu ritie s of any one
obligor hereafter purchased and held sh a ll not exceed 15$ of the
cap ital of the bank and 25 per cent of i t s surplus.
(The la tte r
lim ita tio n in the old b i l l was stated in ambiguous terms and might
have been construed to apply to the aggregate amount of a l l invest
ment se cu ritie s held by the bank.)
No member bank may purchase or hold the stock of any corporation, except
as otherwise permitted by law, and except that a bank may invest
not more than 15 per cent of i t s cap ital and surplus in the stock
of safe deposit companies.
These lim itation s do not apply to ob ligations of the United S tates,
to general obligations of any State or any subdivision thereof, or to
obligations issued under the authority of the Federal Farm Loan A ct.
.
X-7139
-
19
-
The defin ition o f investment se cu ritie s contained in existin g
law would apparently have been stricken out by the old b i l l and
the Comptroller of the Currency given unlimited cowers to prescribe
h is own d e fin itio n , except that stocks could not be included.
The
new b i l l , however, in e ffe c t restores the d e fin itio n contained in the
ex istin g law.
S5CTI0IT 15
(a)
Capital required for organization of national banks,
(up. 36, 37)
The old b i l l (in section 16) contained an amendment to Section
5138 o f the “R evised Statutes to provide that no national bank may be
organized with a capital o f le s s than $50,000, except that a national
bank may be formed, in the discretion o f the Comptroller of the Currency,
for the purpose o f succeeding to the business o f an e x istin g bank
with a capital o f not le s s than $25,000.
The old b i l l also eliminated
the e x istin g requirement that the organization o f national banks with
a capital of le s s than $100,000 shall be subject to the approval o f the
Secretary of the Treasury,
The Board recommended the elimination o f the exception in the
old b i l l which permitted the formation of national banks with a cap ital
o f le s s than $50,000 to take over the business of an ex istin g bank.
This recommendation was adopted and with this change the provisions
o f the old b i l l on this subject are repeated in the new b i l l .
X-7139
* 20 (b) Capital requirements o f State member banks. (p, 37)
Section 15(b) o f the new b i l l contains a p rovision ,
not appearing in the old b i l l and not recommended by the Federal
Reserve Board, which amends Section 9 o f the Federal Reserve Act
so as to eliminate the provision o f ex istin g law under which a
State bank is permitted to become a member o f the Federal Reserve
System with a capital equal to only 60$ o f the amount required for
the organization o f a national bank in the place in which i t is
situated.
The cap ital required o f State member banks hereafter
admitted to the System, therefore, would be required in a l l
cases to be equal to that required of national banks located in
places o f lik e s iz e .
SECTION 16.
Shares of stock o f $100 each.
The old b i l l (in Section 17) would have amended section 5139
o f the Revised Statutes so as to provide that the capital stock o f
national banks should be divided into shares o f $100 each, thus
repealing the provision o f the present law for shares o f a le sse r
amount.
In accordance with the recommendation of the Federal Reserve
Board, however, th is provision is omitted in the new b i l l .
Divorce o f stock o f national bank from s tock o f other corporations, (p, 37)
The new b i l l provides (in Section 16) that, a fte r three years
from the date o f i t s passage, no c e r tific a te of stock of a national
X-7139
- 21 -
bank shall represent the stdck of any other corporation except a
member bank, nor shall the ownership or transfer of a stock cer
tificate of a national bank be conditioned upon the ovnership or
transfer of a certificate of stock of another corporation except a
member bank.
Substantially the same provision was included in the old bill
(in Section 17), except that the prohibition apparently was to take
effect immediately and no exception was made as to the stock of another
member bank.
The Board recommended that this provision be made
effective three years after enactment and, as stated, the new bill
includes this change.
Similar provisions regarding certificates of stock of State
member banks are included in section 5(b)
of the new bill.
SECTION 17.
Shares of its own stock held by a national bank as trustee,
(p. 38)
The old bill (in Section 19) provided that no shareholders
of national banks who shall become such through nominal transfer
or ownership on behalf of another shall vote at meetings of share
holders of such banks.
The 3oard recommended that shares of its
own stock held by any national bank as trustee shall not be voted.
The Board’s recommendation was adopted in the new bill, and the
provision of the old bill was not retained.
X-7139
- 22 -
Right of an affiliate of a national tank to vote stock held “by it in
such bank-,
(pp. 38-^43)
The old bill (in Sections 19 and 20) contained provi
sions requiring an affiliate of a national bank to obtain a voting
permit from the Federal Reserve Board before voting any stock held
by it in such national bank.
Such a voting permit might be issued only
upon compliance by the holding company affiliate with a number of
detailed provisions.
The Federal Reserve Board recommended a number
of changes in these provisions of the old bill, but the Board’s recom
mendations on this subject have not been adopted in the new bill.
The salient features of the Board’s recommendations on this
subject were as follows:
Shares owned or controlled by an affiliate
shall not be voted unless such affiliate has filed an agreement with
the Comptroller of the Currency to comply with the provisions of this
section.
Within one year from the date of any such agreement each
nonmember State bank owned or controlled by such affiliate shall apply
for membership in the Federal Reserve System and if not admitted such
affiliate shall divest itself of all interest in such bank.
Each such
affiliate shall hold readily marketable assets, other than bank stocks,
equal to 15 per cent of bank stocks held by it and shall reinvest its
net earnings above 6 per cent in such assets until they amount to
25 per cent of bank shares held by it; with a proviso that credit
shall be given for contributions made during the preceding three
years to b^>nks owned or controlled by the affiliate.
Failure to
comply with the agreement is ground for termination thereof by
the Comptroller,
national bank shall make any loan to., or on
X-7139
*-33**
the security of the stock of, or he the purchaser of the stock of,
any affiliate which owns or controls such hank, unless necessary to
prevent loss upon a debt previously contracted in good faith, and
stock so acquired shall he disposed of within two years,
Officers and
employees of affiliates which have entered into an agreement with the
Comptroller of the Currency, are made subject to certain criminal pro
visions, and a penalty is provided for voting the stock held by affi
liates, unless such an agreement is in effect.
The provisions of the new hill on this subject, which follow
along the.lines of the old hill with certain changes and additions and
which do not contain the provisions as recommended by the Board, are in
brief form set forth in the following paragraphs.
(As hereinbefore
explained under Section 5, the provisions of the new bill on this subject
are applicable also to holding company affiliates of State member banks.)
Shares of a national bank controlled by a holding company af
filiate, including those held by a trustee for the benefit of the share
holders of such affiliate, shall not be voted unless such affiliate shall
have obtained a voting permit from the Federal Reserve Board; and in
acting upon an application for such permit, the Board shall consider the
financial condition of the applicant, the general character of its man
agement and the probable effect of the granting of the permit upon the
*
affairs of such bank. No permit shall be granted except upon the fol
lowing conditions:
(a)
Each such holding company affiliate shall agree: to submit
to examinations, at its own expense, disclosing fully the relationship
X-7139
-24-
between such affiliate
and such hank, that such examinations may he
made of each hank owned or controlled hy the affiliate, and that
publication of statements of condition of such hanks may he required,
(b)
After January 1, 1935, every such holding company af
filiate shall possess unpledged readily marketable assets other than
bank stock in an amount not less than 12$ of the par value of all
hank stocks controlled hy such affiliate, which amount shall he in
creased hy not less than 2$ annually up to 25$ thereof and hy re
investing in such readily marketable assets net earnings in excess of
5$ annually until the 25$ requirement is reached,
(The last of the
requirements of this paragraph was recommended hy the Board,)
(c)
However, where the shareholders of the affiliate
are themselves liable under the double liability provisions on the
hank stock held hy the affiliate, the latter shall he required only
to establish, out of its net earnings in excess of 6$, a reserve of
readily marketable assets equal to 12$ of the par value of hank
stocks controlled hy it, and readier marketable assets required
of such affiliate may he used for replacement of capital in hanks
affiliated with it; hut any deficiency so incurred shall he made
up within such period as the Federal Reserve Board may prescribe.
(d)
That officers, directors, agents and employees of such
a holding company affiliate shall he subject to the same penalties f*r
false entries as officers and employees of member hanks are subject
to under Section 5209 of the Revised Statutes,
X-7139
-25-1
(e)
That every such holding company affiliate shall snow that it
does not have any interest in and is not participating in the management
of any securities company; that, if it has such an interest or partici
pation it will, within three years, divest itself thereof; and that it
will declare dividends only out of actual net earnings.
Ij. any holding company affiliate violates any of the provisions
• #f this act, the Federal Reserve Board may revoke its voting permit
after notice, and thereafter no national hank whose stock is controlled
by sucn affiliate snail receive Government deposits or pay any dividend
to such affiliate.
Where such a voting permit of an affiliate has been revoked, the
francnise of any national bank controlled by such an affiliate shall be
subject to forfeiture.
SECTION 18.
Relationships between llember Banks and Securities Dealers or Corpora
tions making collateral loans, (pp. 43. 44.)
The old bill (in section IS) provided that, after January 1,
~
'
‘
1933, no c.irector, officer or employee of a member bank should be an
i
° ^ i cer or employee of a corporation or association engaged primarily in
the securities business and no such officer, director or employee of
a member banz: should be a director, officer or employee of a corporation
making loans secured by collateral to any one except its own subsidiaries.
Tne old bill also provided that no member bank should have correspondent
relationships with associations or corporations of the xind mentioned.
X-7139
*
26
-
The Board recommencedthat these provisions he omitted and sug
gested substitute provisions.
The new hill provides, in substantial
accordance with the substi
tute provisions recommended by the 3oard, that, after three years, no member
bank shall be affiliated with a securities corporation in the manner
described in Section 2(b) of the bill (where the word "affiliate” is defined
so as not to.include holding company affiliates).
Violations of this provi
sion subjects the member bank to a penalty of $1,000 a day, in the discretion
of the. Federal Reserve Board, and, if the violations continue for six months
after warning from the Board, the bank* s franchise may be forfeited, if a
national bank, or its membership in the Federal Reserve System may be
forfeited, if a State bank,
SECTION 19.
Branches of National bank3. (x>u. 44,45).
The old bill (in Section 21) provided for State-wide branches of
national banks in States where the State law permits State banks to have
branches, with a proviso that, if the usual business of the bank extends
into an adjacent State, the Federal Reserve Board may permit the establish
ment ©f a branch by the bank in such-State not more than fifty miles from
its head office.
In order to have branches outside of the city of its
head office, a capital:tf $500,000 was required.
Furthermore, the aggre
gate capital of a bank and its branches was required to equal the capital
required for an equal number ©f national banks situated where the bank and
its branches are respectively located.
X-7139
-27-
The Federal Reserve Board suggested that, if these provisions
were to he retained, a change oe made which would eliminate the limit
ations of the present law on the number of branches which may he estab
lished in cities of less than 100,000 inhabitants, and the limitation
providing that no branch may be established in a city of less than
25,0C0 inhabitants.
This recommendation of the Board was adopted in
the new bill.
The provisions of the new bill on this subject are substan
tially the same as those contained in the old bill, with the change
recommended by the Board; except that the establishment of State-wide
branches is not limited to those Stokes in ^hich the State law permits
State banks to have branches..
(The provisions of the new bill with reference to branches of
State member banks are contained in Section 5(a),.)
SECT IPIT 20.
Consolidations of national banks with other banks in the same State, (p. 45)
I
The provisions of the Act providing for the consolidation of two
or more national banks or for the consolidation of State banks with nation
al banks T~ould "be amended by the new bill so as to permit such consolida
tions to take place between banks located anywhere in the same 3tate.
section was contained in the same form in the old bill (in Section 22).
s^-£Sestion was made oy the Board on this point.
This
No
X-7139
-28SSCttON 21..
Rate of interest on loans. (pp„ .4 5 .4 6 )
The new hill would amend Section 5 1 9 7 of the Revised Statutes so
that national banks could charge on loans and discounts, (1) the rate
of interest allowed by the State law (or 7$ where the State law fixes
no limit)., or (2) a rate 1$ in excess of the Federal reserve hank
discount rate., which ever
may he the greater*
Tne provision of the new hill on this subject is the same as that
contained in the old Dill (Section 23) with a minor change suggested
hy the Board.
SECT IOH 22.
Limitations on loans to affiliated corporations, (pp.46,47)
The new hill provides an amendment to the first paragraph of Section
5200 of the Revised Statutes, ■'-hich provides that in computing the amount
which a corporation can borrow from a national hank, the corporation and
all of its subsidiaries in ^hich such corporation owns or controls a
majority interest would he treated as a single borrower.
This provision has been adopted from the old bill (Section 25(a))
with a clarifying amendment suggested hy the Board.
In accordance with the Board’s recommendations, the following pro
visions of section 25 of the old hill are omitted from the new hill:
(1)
That the amount which any national hank might lend to any broker
or member of any stock exchange or similar corporation or any finance
company., securities company., investment trust or other similar organization
would he limited to 10$ of the capital and surplus of such national bank.
(2)
that no national bank would he permitted to lend to "an affiliate"
an amount exceeding 10$ of the capital and surplus of such
X-7139
-29-
national bank or exceeding the capital stock of such affiliate,.whichever
may be the smaller.
,
(3) that the aggregate amount which all affiliates of a national bank
could borrow from such national bank (including repurchase agreements)
would be limited to 10$ of the national bank*fe capital and surplus except
that loans secured by Government bonds or by bonds issued by the State in
which such bank is situated or by any political subdivision of such
State would be excluded altogether from the limitations of Section 5200
^--e Revised Statutes, if actually owned by tlie borrower.
(4)
that no national bank might establish or capitalize an affiliate
through cash or stock dividend declarations made from its surplus
or from undivided profits; and "within three years after this section
as amended takes effect", every affiliate should be capitalized through
the sale of its own stock which should be paid for in cash in the same
manner as required in the case of a national bank.
(5)
that for a period of three years, no affiliate of a national
bank might hold, or lend upon, more than 10$ of the shares of
the capital stock of the parent
institution—
X-7139
-30-
SECTION 2 3 .
Hgports of a f f i l i a t e s of national banks (pp. 47, 4 8 ) .
Tne old b i l l (in Section 27) required each a f f i l i a t e of a nation
al hank to make three complete reports of condition annually through
the president of'th e bank to the Comptroller of the Currency, and also
to make such special reports as the Comptroller night require,
The
Board' s recommendation was that such reports be required only when deemed
necessary.
xhe new b i l l provides that every national bank sh a ll obtain from
each oi i t s a f f i l i a t e s , other than member banks, and furnish to the
Comptroller of the Currency not less than three reports of condition
each year and such additional reports as the Comptroller nay deem neces
sary.
The provision requiring such reports is s t i l l mandatory; but they
are required to contain only such information as in the judgment of the
Comptroller sh all be necessary to d isc lo se fu lly the relatio n s between
such a f f i l i a t e and such bank and to enable the Comptroller to inform
him self as to the e ffe c t of such relation s upon the a ffa ir s of such bank.
The bank is subject to a penalty for fa ilu r e to render such reports.
Provisions of the old b i l l requiring an a f f i l i a t e under certain
stated conditions to publish i t s entire p o r tfo lio are omitted from
tne new b i l l .
(Substantially the sane provisions are contained in Section
5(b) of the new b i l l with reference to reports of a f f i l i a t e s of State
member banks) .
.
X-7139
-31SECTION 24.
Examinations of a f f i l i a t e s of national banks» (pp» 48-50)
The new h i l l requires such exaninations of a f f i l i a t e s
(other
than member banks) of a national bank as sh all be necessary to d isclo se
fu lly the relations between such bank and such a f f i l i a t e s ard the e ffe c t
of such relations upon the a ffa ir s of such bank, and authorizes the
forxeiture of the franchise of the bank in the event of refu sal of the
a f f i l i a t e to give information or to permit such examination.
Publication of the examination report of a national bank or o f an a f
f i l i a t e is authorized i f the bank or a f f i l i a t e f a i l s to comply with
recommendations of the Comptroller of the Currency based on such examin
ations-.
The old b i l l contained a provision (in Section 28) requiring
examinations of a f f i l i a t e s of national banks and member banks.
The Feder
al Reserve Board recommended that this section provide for examination o f
a f f i l i a t e s of national banks only (as examinations of a f f i l i a t e s of State
member banks are provided for elsewhere in the b i l l ) and that such ex
aminations be authorized to be made only when deemed necessary.
(
*
In accordance with certain other suggestions of the Federal Re
serve Board on th is su b je ct, the new b i l l has added certain provisions
to authorize examiners making an examination of an a f f i l i a t e of a nation
al bank to administer oaths and to examine o ffic e r s and employees under
oath; to provide that the expenses of such examination
may be assessed
against the a f f i l i a t e and, i f not paid by the a f f i l i a t e , then against
X-7139
■* 33
the hank; and to provide a penalty o f $100 per day to he paid hy the
hank for refu sa l o f the a f f i l i a t e
to give information required or to
permit such an examination*
While examinations of a f f i l i a t e s o f national hanks in the old
h i l l were lim ited to a period of three years a ft e r it s passage,, the new
h i l l , in accordance with the B o a rd s suggestion on this p o in t, contains
no lim it of th is kind,
(Provisions o f a somewhat sim ilar character with reference to
examinations o f a f f i l i a t e s of State member hanks are contained in Sec
tion 5(h) of the new h i l l . )
SECTION 35.
Removal of hank directors or o ffic e r s from o f f i c e . ( u p . 50-52)
On this subject, the new h i l l follow s su b stan tially the recom
mendation of the Board and provides a procedure fo r the removal of a
director or o ffic e r o f a member hank who has continued to v io la te the
law •r;has continued unsafe or unsound practices in conducting the
business of the hank with which he is connected, a fte r being warned hy
the Comptroller of the Currency (as to a national hank) or the Federal
Reserve Agent o f his d is t r ic t (as to a State member hank) to d is
continue such v io la tio n s or such p r a c tic e s.
A fter a hearing hy the
Federal Reserve Board estab lish in g such fa c ts ,, the Board may order
the removal of such director nr...*fficer and a copy of such order sh all
he served upon him and upon the hank with which he is connected.
Such
order and fin din gs of fa ct may not he made public or d isclosed except
X-7139
*-* 3 3 •*
to such director or o ffic e r and the d irectors of his hank, ‘’other
wise than in connection with proceedings fo r a v io la tio n of this
s e c tio n ,”
P articip ation by such o ffic e r or director in the manage
ment of such hank a fte r having heen removed is punishable hy fine or
imprisonment.
The old h i l l placed the power of removal in a committee
consisting of the Governor of the Federal Reserve Board, the Comptroller
o f the Currency and the Federal Reserve Agent, instead of in the Fed
eral Reserve Board as provided in the new h i l l .
The old h i l l did not
contain the provision prohibiting the making public or d isc lo sin g the
*'#rder of removal or findings « f f a c t ,
SECTION 26,
Saving clause and reservation of right to amend, (p. 5 2 ) .
Section 26 contains the usual provisions (which were also
in the old h i l l )
reserving the right to a lt e r , amend or repeal the
act and lim itin g decisions holding parts of the act to he in valid ,
to the sp e c ific sections dealt with in such d ecision s.
X-7139
34
-
SECTIONS OF OLD BILL SMTIRELY OMITTED FROM FEW BILL.
In addition to a number o f other provisions o f the old h i l l
which have been omitted from the new b i l l but which have been treated
above in connection with certain related topics contained in the cor
responding sections o f the new b i l l ,
(such as the provisions regarding
reserves and regarding real estate loans and investments o f member
banks), there have also been omitted from the new b i l l the follow ing
p rovision s, each o f which constituted an entire separate section of
the old b i l l .
Lim itation upon amount o f loans on c o lla te r a l security by member banks.
Section 8 o f the old b i l l authorized the Federal Reserve 3oard
to f ix the percentage o f the cap ital and surplus o f a member bank which
mignt oe represented by loans on c o lla te r a l security.
The purpose o f
th is section apparently was to prevent the undue use o f bank loans for
speculation in s e c u r itie s, which is f u lly covered in Section 3.
In
accordance with the recommendation o f the Eoard, therefore, the provi
sions o f Section 8 o f the old b i l l have been omitted from the new b i l l .
In terest on deposits.
Section 24 o f the old b i l l would have lim ited the rate of
in terest which national and State member banks would be permitted to
pay on deposits as follow s;
(1)
in terest on balances due to banks would
have been lim ited to 2 1 /2 ^ or 11the current rate o f discount o f the
Federal reserve bank", whichever is the sm aller;
(2) on a l l other
deposit balances, the rate would have, been lim ited to one-half the
rate o f in terest which national banks are permitted to charge on loans.
X-7139
-
35 -
In accordance with a recommendation of the Federal Reserve
Board th is section is omitted from the new b i l l .
Lim itations on c o lla te r a l loans to single borrowers*
Section 26 o f the old b i l l nrovided that no member bank
sh all lend to any individual or corporation *'upon c o lla te r a l security”
an amount exceeding 10$ o f it s own capital and surplus, or an amount
exceeding the percentage fix e d by the Federal Reserve Board, which
ever is the smaller.
In accordance with the recommendation o f the Federal Re
serve Board th is section is omitted from the new b i l l (as was also
Section 8 o f the old b i l l which also provided for lim itin g c o lla te r a l
loans*)
swam&i Pi
fluauMi
glass
nr a i % n ^
bux*
s« *dia* aus
*A8*848f t | 9 1933*
si s n m
S t riko out all of U n o 6 20 to 2$ Inclusive oik page 44
and all of lla*e 1 to 8 iasle^ivo <m page 40 and insert in
lieu thereof the following!
H o ) 4 national banking association any* eith the
approval of the eowptrollwr of the Carreasy, eetablish end
a
• /
o p e ra te
nee
v illa g e *
b ra n o h o *
w ith in
th e
lim
it *
p o in t w it h in
th e
S ta te
o r
a t
any
a s s o c ia t io n
ie
a H e a te d *
a re
a t
th e
t i .*
le w
o f
th e
s ta te
aa
to
ho
such
o ity *
a
lo c a t io n
p a id * io
;SOO*OOC.
th e n
a
o s p r c e e ly
«e^
s h a ll
X*OCO*OO0f
and
T h a t
e h io h
u n s e e d in g
than £200»090«*
le w
w h ic h
e
1 0 0 ,0 0 0 ,
o ity *
w h ic h
s ta te
th e
a
is
s ta c k
s ta te s
h e re
to
o f
i t
p ita l
in
in
s W b j& o t t o
e s t a b lis h
in
u a J ja p & lr e d
and
th e
th e
no
net
o f
w ith
a
th e
r e s t r ic t io n *
on
S ta te
m l* m
le s s
s h a ll
o f
i t
banhs*
th e
has
th e n
p o p u la t io n
lo c a t e d
c a p ita l
h r
o u t s id e
s it u a t e d
O ltie a
th o
‘t a t e
o r
o p e r a t io n
banks
th e
b ra n c h
to w n *
s a id
e s t s f e lt s t is a e n t a n d
a u t h o r is e d
im p o s e d b y
p r o v id e d ,
each
q p a w t is a
o r V illa g e
p o p u la t io n
in
a s s o c ia t io n
to w n *
i f
o f
o f
t h e r e in
b e
n o t
le e *
w ith
le e s
AMSMDlltfHT PdQPQS&D 3Y X 'M IQ H GLAS3, VA. TO
GLASS BAKING -5ILL, 3. 4412, AMD APPBUVSD BY SSSfATbi
JANUARY 23, 1933.
On page 15, strike out all of line 6 to 13, Inclusive,
and insert In lieu thereof the following *
**(c) There is hereby authorised to be appropriated,
out of uny money in the Treasury not otherwise appropriated, the
sun of $125,000,000, which shall be available for payment by the
Secretary of the Treasury for capital stock of the corporation
In an equal amount, which shall be subscribed for by him on be
half of the United States.
Payments upon such subscription shall
be subject to call in whole or in part
by the board of directors
of the corporation. Such stock shall be in addition to the
amount of capital stock required to be subscribed for by
federal reserve banks and uem. er banks as hereinafter provided
and the United States shall be entitled to the payment of divi
dends on such stock to the sane extent ae member banks ore en
titled to each payment on the Class A stock of the corporation
held
by them*
Beoeipts for payments
by the United States for or
on account of such stock dhall be issued
by the corporation to
the Secretary of the Treasury and shall be evidence of the stock
ownership of the United States. *
AummtRTc m o m « m t i m x K t s t t h .
Paco
37*
?S 8 t r i !f out th 0 m r & *Ben«ral"|
Paco '*'•
xino 17, os-rik© out the x w r d *throe**
a n d lnoert In lieu thoroof tho word •ftvo”i
Pag© 4 *5® -ino IS*
strike out tho word •three*
and insert in liou thoroof tho word °flv©«*
Pag©
*
1 1 # Ctrl’:o out tho word * t h x x & a
and insert In lieu thoroof the word *fivoRi
Pag© 45, lino lo, strike out tho words *of
Pag©
' ®* H n o strike out the word "horeafter*
and after tho word "purchased® insert the
6°otlon a0 amended taken
GiiOOt"!
-*afl© 35, line 14, Btrlko out the wort "horoaftor"
wopd °r'urch'us<*i" innort the
S f ^ c t " j^ 10" tn ta B° e tlo n m aaoi*la<1 takes
Fag©
^ ’ end"* 3 * 8triIt0 ° Ut th0 worda “or h o l d in g ,
Pago
38, U n o 34, after the word "dlroetore* ino«jrt
*■ '
m i queeti ona at
nootinea of shareholders® f
TU IHS 0*433 108**88 M U .
iPPivOViSU JAHUAaf 26th,
W X i M W l Z
Page
m e m b e rs
2 ,
o f
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In
6 ,
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3 ,
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as
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banks*
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A
r e q u ir e
and
to
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4 0 ,
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page
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an
a g re e
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B o a rd
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w o rd
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it a
n a t io n a l
w ith
o f m e m b e r s h ip
th e
h o lo in g
S ta tu te s ,
aeo b er
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s h a ll
t im e
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F e d e ra l
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w o rd
*2 a c h
c o n d itio n s
th e
be
o f a
th e
such
a f filia t e s
a f filia t e
it o
and
w o rd s
com pany
o f
s h a ll
th e
33
th e
w ith in
sam e
6144
f a ilu r e
com pany
and
a g re e m e n t
com pany
a g re e m e n t
th e
31
h o ld in g
to
h o ld in g
s t r ik e
w o rd s " o r
s to c k
th e re o f
a f f ilia t e ,
p r e s c r ib e d ,
as
th e
th o
in
s h a ll
bank
th e
in s e r t
in
“ a m o u n t .*
th e
5 ,
b e g in n in g
w o rd
s t r ik e
w o rd s
IS ,
4 ,
in
s e c t io n
and
in s e r t
h o ld in g
p r e s c r ib e ,
Upon
o u t
th e
lin e
d a te
lin e s
w ith
s u rre n d e r
s y s te m
lin e
o f
r ig h t s
lin e
th e re o f
and
“J a n u a ry
y e a rs
th e
s u b je c t
such
in c lu d in g
Page
** 1 9 3 2 * *
be
so
to
a ll
th e
3 3 ,
and
page
in
3 3 ,
th a re o :
Page
dow n
t im e
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and
s a m e ."
o f
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bunk
f o r fe it
Page
lie u
th e
b a n k 1* ,
“such4 and
d a te
p e r io d
com pany
case
each
a
m em ber
“such*
* fiv e
th e
in s e r t
a h u ll
B o a rd *
w ith
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o u t a ll
s h a ll
o f
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a f filia t e d
th e
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m e n t w it h in
to
and
B o a rd
re s e rv e
a f filia t e d
o r
a p p lic a b le
in
w o rd
“ f iv e
w o rd s
b e fo re
h o liin g
a f filia t e
as
o u t
s t r ik e
so
33
bonk
such
"o f a
m e m b e r b a n k * 1*
w o rd
w o rd s
th e
2 5 ,
s t r ik e
F e d e ra l H e s e rv e
com pany
th e
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lin e
ox' th e
1933* *
lin e
8 ,
in
th e
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1 9 ,
s h a r e h o ld e r s
"am en d ed "
r a a jo r it y
1 9 3 3 u*
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In s e r t
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3 ,
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In s e r t
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th e
w o rd #
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3 3 ,
e x e c u t iv e
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w ith
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w o rd
“a n d *,
lin o
1 3 .
in
and
lin e
1 3 ,
w o rd s
“ th e
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in s e r t
*2 5 *
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“s u c h *.
in
lie u
th e re o f
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f ig u r e
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*1 9 3 3 *
and
in s e r t
January 83th ©on* *
i 'a g e
GO*
• S i# © *
a fte r
la
o f
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C n rro n c ry *
o a e a o u ro d
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b ean
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and
3 0 *
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r © p r e h e a t in g
c r e d it
(g )
fro m
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an
a fte r
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I f
an y
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is
fo r
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an
o r
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S h a ll b e
p r is o n e d
b e th t
any
n o t
and
any
s e c t io n
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(h )
a
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th e
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in d . f e t e d * * * * *
e f
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s h a ll
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o f
la
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th e re o f
it *
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be
s e t
a s a o t ie t le a e * *
s e c t io n !
tre a d e d *
new
i t
s u b s e c t io n ®
o r
s h a ll b o rro w
a re
to
lin e
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b *
and
used#
th e
p r o v is io n s
e f
a
s is t e r #
a
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and
p r o v is io n s
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and
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re p o rt
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e ta * f t t o m
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5 *0 0 0 *
and
aen b o r
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e
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sub*
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s h a ll
im *
M tt« :td e d »
to m ob ,
am ount
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sab *
num ber bank
c e n t e r fc a n fc
used#
m et c o re
t h is
lin e a l
w r it t e n
p u rp o s e
% OGO#
no
an y
In d e b t e d
e f th e
a ie d w ia e a a o r
o u t
a
o f
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t h is
any b e
o f f ic t ije f
o f
s h a ll b e
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anke
bo
o f
and
n e t m o re
o r
th e
th e
bank
re p o rt
ab sen t
Any
f in e d
o r
o r
fro m
a * .b a r
w r it t e n
and
p r o w ls t e a *
le .v ie d
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ssenber b a n k
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a
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th e re fo r*
o r
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and
to
o n * y e a r
o f
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o th e r
so
s h a ll
of
s h a ll c a k e
than 10*G00
d ir e c to r *
a
1 1 *
th e
t h is
as
© b o ll m a k e
o r becew e
o f
w o rd
o r
a n . e x e c u t iv e
v io la t in g
g u ilt y
each
c o n s tru e d
w a is r
o f
beak
& a ls d e s c s A o r
v io la t in g
s e c u r it y
been
ho
n c o ttr tiy
y $ a r
o f f ic e r
th «
any
bank
s t a t in s
b ro th e r*
e f
o f
fee®* o r o r e
v i o l e t mg t h e
am ount
a
aay aeaber
o f d ir e c to r s
o f f ic e r « s t a t in g
h e r*
to ta l
to
now
n o t*
tw o
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any
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32
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i'age 36* at the sed e f lias 15 insert t h e words "this t'ection
hall take affect five year* after the data ef the a, prove! of thia
act#9
I
L~14
January
I
27,
1933.
.SUMMARY OF AMENIMENTS TO GLASS BILL ADOPTED ON FLOOR OF SENATE.
Section regarding tranches of national banks amended so as to require
approval of Comptroller of Currency instead of Federal Reserve Board, so
as to permit such branches only in States where the State laws expressly
authorize State banks to establish such branches and so as to permit
national banks with a capital of $250,000 (instead of $500,000) to
establish out of town branches in States having a population of less than
1,000,000 and having no cities with a population exceeding 100,000. (p. 44,
line 20 through p. 45, line 8—
Section regarding
January 21)
Liquidating Corporation changed so as to pro
vide for issuance of stock to Treasury Department and for payment of
dividends to Treasury at same rate as to member banks.
Also corresponding
change in provision regarding amount of obligations which may be issued
by Liquidating Corporation,
(p. 15, lines 6-13; p. 23, lines 11 and 13-
January 23, 25).
Various provisions regarding affiliates, holding company af
filiates, security affiliates and dealings in investment securities
made effective 5 years, instead of 3 years, after date of enactment.
(p. 8, line 11; p, 36, line 15; p. 37, line 17; p. 40, lines 3 and 19;
p. 42, line 11; p. 43, line 18; — January 24, 25.)
Provision regarding holding company affiliates of member
banks changed so as to require State member banks to obtain agreements
from their holding company affiliates subjecting them to provisions of
-
2
-
L-14
law regarding holding company affiliates of national hanks - in lieu of
law subjecting them directly to such provisions without such agreements,
(p. 8, lines 20-23— January 25),
Amendments to section regarding holding company affiliates
of national hanks so as to require them to obtain permits in order to
vote on any matter decided at meetings of shareholders of member banks
cr to authorize trustees holding stook for the benefit of the share
holders to vote the same, as well as requiring such permits in order
to vote at elections of directors, (p. 38, lines 24 and 25— January 24
and 25)
Change in phraseology of provision regarding total amount
of any one issue of investment securities which may be purchased here
after by any national bank, (p, 35, lines 7, 14— January 24)
Amendment striking out language preventing national banks
from holding stocks heretofore acquired, (p. 36, line 3— January 24)
Striking out word "general” modifying word "obligation"
so as to permit national banks to deal in special as well as general
obligations of States and political subdivisions thereof, (p. 36, line
6— January 24),
New section added forbidding executive officers of member
banks to borrow from or become indebted to their own banks and requiringthem to report to the chairman «f the board of directors of their
own banks if they borrow from or become indebted to any other bank or
if their relatives borrow from their own banks, (p, 30 between lines 13
and 14— January 25).
-
3 -
L*-14
New section authorizing Comptroller of Currency to permit reopen
ing of closed national banks when the owners of at least 85$ deposits and
other unsecured claims consent in writing to permit banks to retain deposits
for a reasonable period to be prescribed by the Comptroller, (p. 50, between
lines 18 and 19— January 25).
Technical amendment permitting national banks to charge rate of in
terest allowed by State law for any State bank instead of that allowed by
State law only for "banks of issue",
(p. 46, line 10-- January 24)
Slight changes in definitions of "affiliate"
and "holding com
pany affiliates", (p. 2, lines 23 and 24; p. 3, lines 2, 9 and 11-January
25)
r
L~14
January
27,
1933.
SUMMARY OF AMENBTOrS TO GLASS BILL ADOPTED ON FLOOR OF SENATE.
Section regarding branches of national banks amended so as to require
approval of Comptroller of Currency instead of Federal Reserve Board, so
as to permit such branches only in States where the State laws expressly
authorize State banks to establish such branches and so as to permit
national banks with a capital of $250,000 (instead of $500,000) to
establish out of town branches in States having a population of less than
1,000,000 and having no cities with a population exceeding 100,000. (p. 44,
line 20 through p. 45, line 8—
Section regarding
January 21)
Liquidating Corporation changed so as to pro
vide for issuance of stock to Treasury Department and for payment of
dividends to Treasury at same rate as to member banks.
Also corresponding
change in provision regarding amount of obligations which may be issued
by Liquidating Corporation,
(p. 15, lines 6-13; p, 23, lines 11 and 13-
January 23, 25).
Various provisions regarding affiliates, holding company af
filiates, security affiliates and dealings in investment securities
made effective 5 years, instead of 3 years, after date of enactment.
(p. 8, line 11; p, 36, line 15; p. 37, line 17; p. 40, lines 3 and 19;
p. 42, line 11; p. 43, line 18; — January 24, 25.)
Provision regarding holding company affiliates of member
banks changed so as to require State member banks to obtain agreements
from their holding company affiliates subjecting them to provisions of
-
2 -
L-14
law regarding holding company affiliates of national hanks - in lieu of
law subjecting them directly to such provisions without such agreements*
(p. 8, lines 20-23— January 25),
Amendments to section regarding holding company affiliates
of national banks so as to require them to obtain permits in order to
vote on any matter decided at meetings ef shareholders of member banks
®r to authorize trustees holding sto#k for the benefit of the share
holders to vote the same, as well as requiring such permits in order
to vote at elections of directors, (p, 38, lines 24 and 25— January 34
and 25)
Change in phraseology of provision regarding total amount
of any one issue of investment securities which may be purchased here
after by any national bank, (p, 35, lines 7, 14— January 24)
Amendment striking out language preventing national banks
from holding stocks heretofore acquired, (p, 36, line 3— January 24)
Striking out word "general" modifying word "obligation"
so as to permit national banks to deal in special as well as general
obligations of States and political subdivisions thereof, (p, 36, line
6— January 24),
New section added forbidding executive officers of member
banks to borrow from or become indebted to their own banks and requiringthem to report to the chairman «f the board of directors of their
own banks if they borrow from or become indebted to any other bank or
if their relatives borrow from their own banks, (p, 30 between lines 13
and 14— January 25) .
New section authorizing Comptroller of Currency to permit reopen
ing of closed national "banks when the rwners of at least 85$ deposits and
other unsecured claims consent in writing to permit hanks to retain deposits
for a reasonable period to he prescribed by the Comptroller, (p. 50, between
lines 18 and 19— January 25).
Technical amendment permitting national banks to charge rate of in
terest allowed by State law for any State bank instead of that allowed by
State law only for "banks of issue",
(p. 46, line 10-- January 24)
Slight changes in definitions of "affiliate"
and "holding com
pany affiliates", (p. 2, lines 23 and 24; p. 3, lines 2, 9 and 11-January
25)
72d CONGRESS
2d Session
IN
S.
4
4
1
2
T H E H O U S E O F R E P R E S E N T A T IV E S
Ja n u a r y 30,1933
Referred to the Committee on Banking and Currency
AN ACT
T o p ro v id e for th e safer a n d m o re effective use of th e assets of
F e d e ra l re se rv e b a n k s a n d of n a tio n a l b a n k in g asso ciatio n s,
to re g u la te in te rb a n k c o n tro l, to p re v e n t th e u n d u e d iv e r
sion of funds in to
sp ecu lativ e o p e ra tio n s, a n d for o th e r
p u rp o se s.
1
B e it enacted b y the S en a te and H o u s e o f B ep resen ta -
2
tives o f the U n ited S ta tes o f A m e r ic a in C on g ress assem bled,
3
T h a t tb e sh o rt title of th is A c t sh all be tb e “ B a n k in g A c t
4
of 1 9 3 3 . ”
n
0
S e c . 2 . A s used in th is A c t a n d in a n y p ro v isio n of
la w a m e n d e d b y th is A c t—
3
1
(a) The terms “ bank,” “ national bank,” “ national
2
banking association,” “ member bank,” “ board,” “ district,”
3
4
5
1
(c) The term “ holding company affiliate ” shall include
2
any corporation, business trust, association, or other similar
and “ reserve bank ” shall have the meanings assigned to
3
organization—
them in section
of the Federal Reserve Act, as amended.
4
( 1 ) Which owTns or controls, directly or indirectly,
(b) Except where otherwise specifically provided,
5
either a majority of the shares of capital stock of a member
6
bank or more than 50 per centum of the number of shares
7
voted for the election of directors of any one bank at the
8
preceding election, or controls in any manner the election
of a majority of the directors of any one bank; or
1
6
the term “ affiliate ” shall include any corporation, business
7
trust, association, or other similar organization—
8
(1 ) Of which a member bank, directly or indirectly,
9
owns or controls either a majority of the voting shares or
9
10
more than 50 per centum of the number of shares voted for
10
11
the election of its directors, trustees, or other persons exer-
11
all or substantially all the capital stock of a member bank
12
cising similar functions at the preceding election, or con-
12
is held by trustees.
13
trols in any manner the election of a majority of its directors,
13
Sec . 3.
14
trustees, or other persons exercising similar functions; or
14
“ Eighth ” of section 4 of the Federal Reserve Act, as
amended, is amended to read as follows:
(2 ) For the benefit of whose shareholders or members
(a) The fourth paragraph after paragraph
15
(2 ) Of which control is held, directly or indirectly,
15
16
through stock ownership or in any other manner, by the
16
“ Said board of directors shall administer the affairs
17
shareholders of a member bank who own or control either
17
of said bank fairly and impartially and without discrimma-
18
a majority of the shares of such bank or more than 50 per
18
tion in favor of or against any member bank or banks and
19
centum of the number of shares voted for the election of
19
may, subject to the provisions of law and the orders of
20
directors of such bank at the preceding election, or by
20
the Federal Reserve Board, extend to each member bank
21
trustees for the benefit of the shareholders of any such
21
such discounts, advancements, and accommodations as may
22
bank; or
22
be safely and reasonably made with due regard for the
23
(3 ) Of which a majority of its directors, trustees, or
23
claims and demands of other member banks, the maintc-
24
other persons exercising similar functions are directors of
24
nance of sound credit conditions, and the accommodation of
25
any one member bank.
25
commerce, industry, and agriculture.
The Federal Reserve
.
5
4
1
Board may prescribe regulations further defining within the
1
Federal Reserve Board shall classify ” is amended by insert-
2
limitations of this Act the conditions under which discounts,
2
ing before the period at the end thereof a colon and the
3
advancements, and accommodations may be extended to
3
following: “ Provided, That whenever any two or more
4
member banks.
Each Federal reserve bank shall keep
4
member banks within the same Federal reserve district are
5
itself informed of the general character and amount of the
5
affiliated with the same holding company affiliate, participa-
6
loans and investments of its member banks with a view to
6
tion by such member banks in any such nomination or
7
ascertaining whether undue use is being made of bank credit
7
election shall be confined to one of such banks, which may
8
for the speculative carrying of or trading in securities,
8
be designated for the purpose by such holding company
9
real estate, or commodities, or for any other purpose incon-
9
affiliate.”
. .
«
^
10
sistent with the maintenance of sound credit conditions; and,
10
Sec . 4. The first paragraph of section 7 of the Federal
11
in determining whether to grant or refuse advances, redis-
11
Reserve Act, as amended, is amended, effective July
12
counts or other credit accommodations, the Federal reserve
12
1932, to read as follows:
13
bank shall give consideration to such information.
The
13
“After all necessary expenses of a Federal reserve bank
14
chairman of the Federal reserve bank shall report to the
14
shall have been paid or provided for, the stockholders shall
15
Federal Beserve Board any such undue use of bank credit
15
be entitled to receive an annual dividend of
16
by any member bank, together with his recommendation.
16
on the paid-in capital stock, which dividend shall be
17
Whenever, in the judgment of the Federal Reserve Board,
17
cumulative.
18
been fully met, the net earnings shall be paid into the
19
surplus fund of the Federal reserve bank.”
6
1,
per centum
After the aforesaid dividend claims have
A,
18
any member bank is making such undue use of bank credit,
19
the board ma}^, in its discretion, after reasonable notice and
20
an opportunity for a hearing, suspend such bank from the use
20
21
of the credit facilities of the Federal reserve system and may
21
the Federal Reserve Act, as amended, is amended by adding
22
terminate such suspension or may renew it from time to
22
at the end thereof the following: “ Provided, however, That
23
time.”
23
nothing herein contained shall prevent any State member
*
Sec.
5
. (a) The second paragraph of section 9 of
24
(b) The paragraph of section 4 of the Federal Reserve
24
bank from establishing and operating branches in the United
25
Act, as amended, which commences with the words “ The
25
States or any dependency or insular possession thereof or in
7
6
1
any foreign country, on the same terms and conditions and
1
between such affiliate and such bank and to enable the board
2
subject to the same limitations and restrictions as are appli-
2
to inform itself as to the effect of such relations upon the
3
cable to the establishment of branches by national banks.”
3
affairs of such bank.
4
(b) Section 9 of the Federal Reserve Act, as amended,
4
be published by the bank under the same conditions as
5
is further amended by adding at the end thereof the follow-
5
govern its own condition reports.
6
mg new paragraphs:
6
“Any such affiliated member bank may be required to
The reports of such affiliates shall
7
“ Each bank admitted to membership under this section
7
obtain from any such affiliate such additional reports as
8
shall obtain from each of its affiliates other than member
8
in the opinion of its Federal reserve bank or the Federal
9
banks and furnish to the Federal reserve bank of its district
9
Reserve Board may be necessary in order to obtain a full
10
and to the Federal Reserve Roard not less than three reports
10
and complete knowledge of the condition of the affiliated
11
during each year.
Such reports shall be in such form as
11
member bank.
12
the Federal Reserve Board may prescribe, shall be verified
12
to the Federal reserve bank and the Federal Reserve Board
13
by the oath or affirmation of the president or such other
13
and shall be in such form as the Federal Reserve Board
14
officer as may be designated by the board of directors of such
14
may prescribe.
15
affiliate to verify such reports, and shall disclose the infor-
15
“Any such affiliated member bank which fails to
16
mation hereinafter provided for as of dates identical
16
obtain from any of its affiliates and furnish any report
17
with those fixed by the Federal Reserve Board for
17
provided for by the two preceding paragraphs of this section
18
reports of the condition of the affiliated member bank.
18
shall be subject to a penalty of
19
Each such report of an affiliate shall be transmitted
19
which such failure continues, which, by direction of the
20
as herein provided at the same time as the corresponding
20
Federal Reserve Board, may be collected, by suit or other-
21
report of the affiliated member bank, except that the Fed-
21
wise, by the Federal reserve bank of the district in which
22
eral Reserve Board may, in its discretion, extend such time
22
such member bank is located.
23
for good cause shown.
Each such report shall contain such
23
paragraph and the two preceding paragraphs of this section,
24
information as in the judgment of the Federal Reserve
24
the term ‘ affiliate ’ shall include holding company affiliates
25
Board shall be necessary to disclose fully the relations
25
as well as other affiliates.
Such additional reports shall be transmitted
$100
for each day during
For the purposes of this
9
8
1
“ State member banks shall be subject to the same
1
obtain such an agreement within the time so prescribed, the
2
limitations and conditions with respect to the purchasing.
2
Federal Reserve Board shall require such bank to surrender
3
selling, underwriting, and bolding of investment securities
3
its stock in the Federal reserve bank and to forfeit all rights
4
and stock as are applicable in the case of national banks
4
and privileges of membership in the Federal reserve system
5
under paragraph ‘ Seventh ’ of section 5136 of the Revised
5
as provided in this section.Whenever the Federal Reserve
6
Statutes, as amended.
6
Board shall have revoked the voting permit of any such
7
“After five years from the date of the enactment of
7
holding company affiliate, the Federal Reserve Board may,
8
the Banking Act of 1933, no certificate representing the
8
in its discretion, require any or all State member banks
9
stock of any State member bank shall represent the stock
9
affiliated with such holding company affiliate to surrender
10
of any other corporation, except a member bank, nor shall
11
the ownership, sale, or transfer of any certificate represent-
11
rights and privileges of membership in the Federal reserve
12
ing the stock of any such bank be conditioned in any manner
13
system as provided in this section.
13
whatsoever upon the ownership, sale, or transfer of a cer-
13
“ In connection with examinations of State member
14
tificate representing the stock of any other corporation,
14
banks, examiners selected or approved b}^ the Federal
15
except a member bank.
15
Reserve Board shall make such examinations of the affairs
their stock in the Federal reserve bank and to forfeit all
16
“ Each State member bank affiliated with a holding
16
of all affiliates of such banks as shall be necessarv
«/ to disclose
17
company affiliate shall obtain from such holding company
17
fully the relations between such banks and their affiliates
18
affiliate, within such time as the Federal Reserve Board shall
18
and the effect of such relations upon the affairs of such banks.
19
prescribe, an agreement that such holding company affiliate
19
The expense of examination of affiliates of any State member
20
shall be subject to the same conditions and limitations as are
20
bank may, in the discretion of the Federal Reserve Board,
21
applicable under section 5144 of the Revised Statutes, as
21
be assessed against such bank and, when so assessed, shall
22
amended, in the case of holding company affiliates of national
32
be paid by such bank.
23
banks.
23
any information requested in the course of the examination
24
the Federal Reserve Board.
Upon the failure of a State
24
of any such affiliate, or in the event of the refusal to permit
25
member bank affiliated with a holding company affiliate to
25
such examination, or in the event of the refusal to pay
A copy of each such agreement shall be filed with
In the event of the refusal to give
11
1
any expense so assessed, the Federal Reserve Board may,
1
together with actual necessary traveling expenses, and the
2
in its discretion, require any or all State member banks
2
Comptroller of the Currency, as ex officio member of the
3
affiliated with such affiliate to surrender their stock in the
3
Federal Reserve Board, shall, in addition to the salary now
4
Federal reserve bank and to forfeit all rights and privileges
4
paid him as Comptroller of the Currency, receive the sum
5
of membership in the Federal reserve system, as provided
5
of $7,000 annually for his services as a member of said
6
in this section.”
6
board.”
(a) The first paragraph of section 10 of the
7
(b) The second paragraph of section 10 of the Fed-
8
Federal Reserve Act, as amended, is amended to read as
8
eral Reserve Act, as amended, is amended to read as follows:
9
follows:
9
“ The Comptroller of the Currency shall be ineligible
7
Sec . 6.
10
“A Federal Reserve Board is hereby created which
10
during the time he is in office and for two years thereafter
11
shall consist of seven members, including the Comptroller of
11
to hold any office, position, or employment in any member
12
the Currency, who shall be a member ex officio, and six
12
bank.
13
members appointed by the President of the United States,
13
Board shall be ineligible during the time they are in office
14
by and with the advice and consent of the Senate.
In
14
and for two years thereafter to hold any office, position, or
15
selecting the six appointive members of the Federal Reserve
15
employment in any member bank, except that this restric-
16
Board, not more than one of whom shall be selected from
16
tion shall not apply to a member who has served the full
17
any one Federal reserve district, the President shall have
17
term for which he was appointed.
18
due regard to a fair representation of the financial, agricul-
18
the term of any appointive member of the Federal Reserve
19
tural, industrial, and commercial interests, and geographical
19
Board in office when this paragraph as amended takes effect,
20
divisions of the country, and at least two of such members
20
the President shall fix the term of the successor to such
21
shall be persons of tested banking experience.
The six
21
member at not to exceed twelve years, as designated by the
22
members of the Federal Reserve Board appointed by the
22
President at the time of nomination, but in such manner as
23
President and confirmed as aforesaid shall devote their entire
23
to provide for the expiration of the term of not more than one
24
time to the business of the Federal Reserve Board and shall
24
appointive member in any two-year period, and thereafter
25
each receive an annual salary of $1 2 ,0 0 0 , payable monthly,
25
each appointive member shall hold office for a term of twelve
The appointive members of the Federal Reserve
Upon the expiration of
12
13
1
years from the expiration of the term of his predecessor.
Of
2
the six persons thus appointed, one shall be designated by
3
the President as governor and one as vice governor of the
4
Federal Eeserve Board.
5
Eeserve Board, subject to its supervision, shall be its active
6
executive officer.
The governor of the Federal
the President as above provided, a successor shall be
2
appointed by the President, by and with the advice and
3
consent of the Senate, to fill such vacancy, and when
4
appointed he shall hold office for the unexpired term of
5
his predecessor.”
Each member of the Federal Eeserve
7
Board shall within fifteen da}'S after notice of appointment
8
make and subscribe to the oath of office.”
9
1
(c) The fourth paragraph of section
10
6
Sec . 7. The Federal Eeserve Act, as amended, is
7
amended by inserting between sections 12 and 13 thereof
8
the following new sections:
of the Federal
9
10
11
12
Eeserve Act, as amended, is amended to read as follows:
shall preside as chairman, and, in his absence, the vice gov-
14
ernor shall preside.
15
and the vice governor, the board shall elect a member to act
16
as chairman pro tempore.
17
serve Board shall be an officer or director of any bank, bank-
18
ing institution, trust company, or Federal reserve bank or
19
hold stock in any bank, banking institution, or trust com-
20
pany; and before entering upon his duties as a member of
21
22
In the absence of both the governor
No member of the Federal Ee-
Whenever a
24
vacancy shall occur, other than by expiration of term, among
25
the six members of the Federal Eeserve Board appointed by
hereby created a Federal
committee), which shall consist of as many members as
12
there are Federal reserve districts.
13
bank by its board of directors shall annually select one
14
member of said committee.
15
mittee shall be held at Washington, District of Columbia,
16
at least four times each year, upon the call of the governor
17
of the Federal Eeserve Board or at the request of any
18
three members of the committee, and, in the discretion of
19
the board, may be attended by the members of the board.
20
“ (b) No Federal reserve bank shall engage in open
21
market operations under section 14 of this Act except in
22
accordance with resolutions adopted by the committee and
23
approved by the Federal Eeserve Board as hereinafter pro-
24
vided.
25
to the several Federal reserve banks resolutions relating to
he has complied with this requirement and such certification
shall be filed with the secretary of the board.
is
11
the Federal Eeserve Board he shall certify under oath that
23
(a) There
Open Market Committee (hereinafter referred to as the
At meetings of the board the governor
13
12A .
10
“ The principal offices of the board shall be in the District of Columbia,
“ Se c .
Each Federal reserve
The meetings of said com-
The committee shall consider, adopt, and transmit
15
14
1
the open market transactions of such banks and the relations
2
of the Federal reserve system with foreign central or other
3
foreign banks.
4
the Federal Reserve Board and be subject to its approval.
5
(c) The time, character, and volume of all purchases
6
and sales of paper described in section 14 of this Act as
7
eligible for open market operations shall be governed with
8
a view to accommodating commerce and business and with
9
regard to their bearing upon the general credit situation of
10
11
Every such resolution shall be reported to
“ (b) The management of the corporation shall be
2
vested in a board of directors consisting of five members,
3
one of whom shall be the Comptroller of the Currency, one
4
a member of the Federal Reserve Board designated by the
5
board for the purpose, and three selected annually by the
6
governors of the twelve Federal reserve banks under such
7
procedure as may be prescribed by the Federal Reserve
S
Board.
9
any additional compensation for his services as such member.
10
“ (c) There is hereby authorized to be appropriated,
11
out of any money in the Treasury not otherwise appropriated,
12
the sum of $125,000,000, which shall be available for pay-
13
ment by the Secretary of the Treasury for capital stock of
14
the corporation in an equal amount, which shall be sub-
15
scribed for by him on behalf of the United States.
10
ments upon such subscription shall be subject to call in whole
17
or in part by the board of directors of the corporation.
18
stock shall be in addition to the amount of capital stock
19
required to be subscribed for by Federal reserve banks and
20
member banks as hereinafter provided and the United States
21
shall be entitled to the payment of dividends on such stock
22
to the same extent as member banks are entitled to such pay-
23
ment on the class A stock of the corporation held by them.
24
Receipts for payments by the United States for or on account
25
of such stock shall be issued by the corporation to the Secre-
the country.
“
(d) If any Federal reserve bank shall decide not to
12
participate in open market operations recommended and ap
13
proved as provided in paragraph (b) hereof, it shall file
14
with the chairman of the committee within thirty days a
15
notice of its decision, and transmit a copy thereof to the
16
Federal Reserve Board.
17
1
“ S
e c
.
1 2 B.
(a) There is hereby created a Federal
18
Liquidating Corporation
(hereinafter referred to as the
19
corporation), whose duty it shall be to purchase, hold,
20
and liquidate as hereinafter provided, the assets of national
21
banks which have been closed by action of the Comptroller
22
of the Currency, or by vote of their directors, and the assets
23
of State member banks which have been closed by action
24
of the appropriate State authorities, or by vote of their
25
directors.
No
member of such board of directors shall receive
Fay-
Such
16
1
tary of the Treasury and shall he evidence of the stock
2
ownership of the United States.
3
“ (d) The capital stock of the corporation shall be
4
divided into shares of $100 each.
Certificates of stock of
5
the corporation shall be of two classes, class A and class B.
6
Class A stock shall be held by member banks only and they
7
shall be entitled to payment of dividends out of net earnings
8
at the rate of six per centum per annum on the capital stock
9
paid in by them, which dividends shall be cumulative, or to the
10
extent of 30 per centum of such net earnings in any one year,
11
whichever amount shall be the greater, but such stock shall
12
have no vote at meetings of stockholders.
13
shall be held by Federal reserve banks only and shall not
14
be entitled to the payment of dividends.
15
reserve bank shall subscribe to shares of class B stock in
16
the corporation to an amount equal to one-fourth of the
17
surplus of such bank on July
18
shall be accompanied by a certified check payable to the
19
corporation in an amount equal to one-half of such subscrip-
20
tion.
21
to call from time to time by the board of directors upon
22
ninety days’ notice.
23
1
Class
B stock
Every Federal
, 1932, and its subscriptions
The remainder of such subscription shall be subject
“ (e) Every member bank shall subscribe to the class
24
A capital stock of the corporation in an amount equal to
25
one-fourth of
1
per centum of its total net outstanding time
17
1
and demand deposits on July
2
accordance with regulations of the Federal Reserve Board
3
governing the computation of reserves.
4
subscription shall he paid in full within ninety days after
5
receipt of notice from the chairman of the board of directors
6
of the corporation, and the remainder of such subscription
7
shall be subject to call from time to time by the board of
8
directors of the corporation.
1
, 1932, as computed in
One-half of such
9
“ (f) The amount of the outstanding class A stock of
10
the corporation held by member banks shall be annually
11
adjusted as hereinafter provided as of the last preceding
12
call date as member banks increase their time and demand
13
deposits or as additional banks become members, and such
14
stock may be decreased in amount as member banks reduce
15
their time and demand deposits or cease to he members.
16
Shares of the capital stock of the corporation owned by
17
member banks shall not be transferred or hypothecated.
18
When a member bank increases its time and demand
19
deposits, it shall, at the beginning of each calendar year,
20
subscribe for an additional amount of capital stock of the
21
corporation equal to one-fourth of
22
increase in deposits.
23
tional stock shall be paid for at the time of the subscription
24
therefor and the balance shall be subject to call by the board
S. 4412----- 2
1
per centum of such
One-half of the amount of such addi
19
18
1
of directors of the corporation.
A bank admitted to mem-
1
without impairment of the liability of such bank, and all
2
bership in the Federal reserve system at any time after the
2
cash-paid subscriptions on such stock, with its proportionate
0
3
organization of the corporation shall be required to sub-
3
share of dividends not to exceed one-half of 1 per centum
4
scribe for an amount of class A capital stock equal to
4
per month from the period of last dividend on such stock
5
one-fourth of 1 per centum of the time and demand
5
shall be first applied to all debts of the insolvent bank or
6
deposits of the applicant bank as of the date of such ad-
‘ 6
the receiver thereof to the corporation, and the balance, if
7
mission, paying therefor its par value plus one-half of 1
7
any, shall be paid to the receiver of the insolvent bank.
8
per centum a month from the period of the last dividend on
8
“ (h) Upon the date of enactment of the Banking Act
9
the class A stock of the corporation.
When a member bank
9
of 1933, the corporation shall become a body corporate and
10
reduces its time and demand deposits it shall surrender, not
10
11
later than the 1st day of January thereafter, a proportionate
11
“
12
amount of its holdings in the capital stock of the corporation,
12
"Second. To have succession until dissolved by an
13
and when a member bank voluntarily liquidates it shall sur-
13
14
render all its holdings of the capital stock of the corporation
14
“ Third. To make contracts.
15
and be released from its stock subscription not previously
15
“
16
called.
The shares so surrendered shall be canceled and
16
17
the member bank shall receive in payment. therefor, under
17
“ Fifth. To appoint by its board of directors such offi-
18
regulations to be prescribed by the Federal Eeserve Board,
18
cers and employees as are not otherwise provided for in this
19
a sum equal to its cash-paid subscriptions on the shares
19
section, to define their duties, fix their compensation,
20
surrendered and its proportionate share of dividends not to
20
require bonds of them and fix the penalty thereof, and to
21
exceed one-half of 1 per centum a month, from the period
21
dismiss at pleasure such officers or employees.
22
of the last dividend on such stock, less any liability of such
22
this or any other Act shall be construed to prevent the
23
member bank to the corporation.
23
appointment and compensation as an officer or employee
24
of the corporation of any officer or employee of the United
24
“ (g) If any member bank shall be declared insolvent,
25
the stock held by it in the corporation shall be canceled,
as such shall have power—
First. To adopt and use a corporate seal.
Act of Congress.
Fourth. To sue and be sued, complain and defend,
in any court of law or equity, State or Federal.
Nothing in
21
20
1
States in any board, commission, independent establishment,
1
ments of the Government.
The corporation with the con-
2
or executive department thereof.
2
sent of any Federal reserve bank or of any board, commis-
3
“ Sixth. To prescribe by its board of directors, by-laws
3
sion, independent establishment, or executive department
4
not inconsistent with law, regulating the manner in which
4
of the Government, including any field service thereof, may
5
its general business may be conducted, and the privileges
5
avail itself of the use of information, services, and facilities
6
granted to it by law may be exercised and enjoyed.
6
thereof in carrying out the provisions of this section.
7
“ Seventh. To exercise by its board of directors, or duly
7
“ (j) Whenever any member bank shall have been
8
authorized officers or agents, all powers specifically granted
8
closed by action of its board of directors, the Comptroller of
9
by the provisions of this section and such incidental powers
9
the Currency, or the appropriate State authority, as the case
10
as shall be necessary to cany out the powers so granted.
10
may be, the receiver may tender the assets of such bank to
The board of directors shall administer the
11
the corporation which may purchase the same, or make a loan
12
affairs of the corporation fairly and impartially and without
12
on the security thereof, in whole or in part, as in the deter-
13
discrimination in favor of or against any member bank or
13
mination of its board of directors the prompt and economical
14
banks and may, subject to the provisions of law, extend to
14
liquidation of the assets of such bank may require, on the
15
each national bank which is closed by action of the Comp-
15
basis of such valuations as may be agreed upon by a valuar
16
troller of the Currency, or by vote of its directors, and to
16
tion committee of three members consisting of the receiver
17
each State member bank which is closed by action of the
17
of such bank, a member to be named by the board of direc-
18
appropriate State authorities, or by vote of its directors, such
18
tors of such bank, and a person to be chosen by the receiver
19
accommodations as may be safely and reasonably made
19
and the member named by such board of directors.
20
with due regard for the claims and demands of other mem-
20
shall 'be the duty of the corporation to proceed to
21
ber banks.
The board of directors of the corporation shall
21
realize as rapidly as possible, having due regard to the
22
determine and prescribe the manner in which its obligations
22
condition of credit in the district in which such bant
23
shall be incurred and its expenses allowed and paid.
The
23
is located, upon any assets so purchased, and if the net
24
corporation shall be entitled to the free use of the United
24
amount realized from the sale or other disposition of such
25
States mails in the same manner as the executive depart-
25
assets exceeds the sum paid therefor, the corporation shall
11
“ (i)
It
23
22
1
make an additional payment to the receiver of the bank
1
Currency, or by vote of their directors, or to State member
2
equal to the amount of such excess, if any, after deducting a
2
banks closed by action of the appropriate State authorities,
3
liquidation fee of 8 per centum of the sum thus realized; but
3
or by vote of their directors, or from entering into negotia-
4
any income derived by the corporation from such assets shall
4
tions to secure the reopening of such banks.
5
be the property of the corporation.
Money of the corpora-
5
“ (1) Receivers or liquidators of member banks which
6
tion not otherwise employed shall be invested in securities
6
are now or may hereafter become insolvent or suspended
7
of the Government of the United States, except that for
7
shall be entitled to offer the assets of such banks for sale to
8
temporary periods, in the discretion of the board of directors,
8
the corporation or as security for loans from the corporar
9
funds of the corporation may be deposited subject to check
9
tion, upon receiving permission from the appropriate State
10
in any Federal reserve bank or with the Treasurer of the
10
authority in accordance with express provision of State law
11
United States.
When designated for that purpose by the
11
in the case of State member banks, or from the Comptroller
12
Secretary of the Treasury, the corporation shall be a deposi-
12
of the Currency in the case of national banks.
13
tary of public moneys, except receipts from customs, under
13
ceeds of every such sale or loan shall be utilized for the same
14
such regulations as may be prescribed by the said Secretary,
14
purposes and in the same manner as other funds realized
15
and may also be employed as a financial agent of the Govem-
15
from the liquidation of the assets of such banks.
16
ment.
It shall perform all such reasonable duties as deposi-
16
troller of the Currency may, in his discretion, pay dividends
17
tary of public moneys and financial agent of the Government
17
on proved claims at any time after the expiration of the
18
as may be required of it.
18
period of advertisement made pursuant to section 5285 of
19
the Revised Statutes, and no liability shall attach to the
IQ
“
f
'
(k) The corporation may, in its discretion, purchase
r
The pro-
The Comp-
20
the assets of banks m the hands of receivers on.the date of
20
Comptroller of the Currency or to the receiver of any
21
its organization, hut on the same conditions and teims as aie
21
national bank by reason of any such payment for failure to
22
applicable in the case of assets of banks which may fail or
22
pay dividends to a claimant whose claim is not proved at
23
be closed after such date.
Nothing herein contained shall
23
the time of any such payment.
24
be construed to prevent the corporation fiom making loans
24
“ (m) The corporation is authorized and empowered to
25
to national banks closed by action of the Comptroller of the
25
issue and to have outstanding at any one time in an amount
24
25
1
aggregating not more than twice the amount of its capital, its
1
subject to State, Territorial, county, municipal, or local tax-
2
notes, debentures, bonds, or other such obligations, to be re-
2
ation to the same extent according to its value as other real
3
deemable at the option of the corporation before maturity in
3
property is taxed.
4
such manner as may be stipulated in such obligations, and to
4
“ (o) In order that the corporation may be supplied
5
bear such rate or rates of interest, and to mature at such time or
5
with such forms of notes, debentures, bonds, or other such
6
times as may be determined by the corporation: P r o v i d e d , That
6
obligations as it may need for issuance under this Act, the
7
the corporation may sell on a discount basis short-term obli-
7
Secretary of the Treasury is authorized to prepare such
8
gations payable at maturity without interest.
The notes,
8
forms as shall be suitable and approved by the corporation,
9
debentures, bonds, and other such obligations of the corpora
9
to be held in the Treasury subject to delivery, upon order
ls
tion may be secured by assets of the corporation in such
10
of the corporation.
11
manner as shall be prescribed by its board of directors. Such
11
and other material executed in connection therewith shall
12
obligations may be offered for sale at such price or prices
12
remain in the custody of the Secretary of the Treasury.
13
as the corporation may determine.
13
The corporation shall reimburse the Secretary of the Treas-
<?
The engraved plates, dies, bed pieces,
14
“ (n) All notes, debentures, bonds, or other such obliga-
14
ury for any expenses incurred in the preparation, custody,
15
tions issued by the corporation shall be exempt, both as to
15
and delivery of such notes, debentures, bonds, or other
16
principal and interest, from all taxation (except estate and
16
such obligations.
17
inheritance taxes) now or hereafter imposed by the United
17
“ (p) The corporation shall annually make a report of
18
States, by any Territory, dependency, or possession thereof,
18
its operations to the Congress as soon as practicable after
19
or by any State, county, municipality, or local taxing author-
19
the 1st day of January in each year.
20
ity.
20
21
reserves, and surplus, and its income, shall be exempt from
21
from the corporation, or any extension or renewal thereof,
22
all taxation now or hereafter imposed by the United States,
22
or the acceptance, release, or substitution of security there-
23
by any Territory, dependency, or possession thereof, or by
23
for, or for the purpose of inducing the corporation to pur-
24
any State, county, municipality, or local taxing authority,
24
chase any assets, or for the purpose of influencing in any
. 25
except that any real property of the corporation shall be
25
way the action of the corporation under this section, makes
The corporation, including its franchise, its capital,
“ (q) Whoever, for the purpose of obtaining any loan
27
1
any statement, knowing it to be false, or wilfully overvalues
1
individual, or to deceive any officer, auditor, or examiner
2
any security, shall be punished by a fine of not more than
2
of the corporation, makes any false entry in any book,
3
$5,000 or by imprisonment for not more than two years, or
3
report, or statement of or to the corporation, or without
4
both.
4
being duly authorized draws any order or issues, puts forth
5
“ (r) Whoever (1) falsely makes, forges, or counter-
5
or assigns any note, debenture, bond, or other such obliga-
6
feits any obligation or coupon, in imitation of or purporting
6
tion, or draft, bill of exchange, mortgage, judgment, or
7
to be an obligation or coupon issued by the corporation, or
7
decree thereof, shall be punished by a fine of not more than
8
(2) passes, utters, or publishes, or attempts to pass, utter,
8
$10,000 or by imprisonment for not more than five years,
9
or publish, any false, forged, or counterfeited obligation or
9
or both.
10
coupon purporting to have been issued by the corporation,
10
“ (t) No individual, association, partnership, or cor-
11
knowing the same to be false, forged, or counterfeited, or
11
poration shall use the words ‘ Eederal Liquidating Corpora-
12
(3) falsely alters any obligation or coupon issued or pur-
12
tion/ or a combination of these three words, as the name
13
porting to have been issued by the corporation, or (4)
13
or a part thereof under which he or it shall do business.
14
passes, utters, or publishes, or attempts to pass, utter, or
14
Every individual, partnership, association, or corporation
15
publish, as true, any falsely altered or spurious obligation or
15
violating this subdivision shall be punished by a fine of not
16
coupon, issued or purporting to have been issued by the cor-
16
exceeding $1,000 or by imprisonment not exceeding one
17
poration, knowing the same to be falsely altered or spurious,
17
year, or both.
18
shall be punished by a fine of not more than $10,000 or by
18
19
imprisonment for not more than five years, or both.
19
116, and 117 of the Criminal Code of the United States
“ (s) Whoever, being connected in any capacity with
20
(U. S. C., title 18, ch. 5, secs. 202 to 207, inclusive), in
21 "
the corporation, (1) embezzles, abstracts, purloins, or will-
21
so far as applicable, are extended to apply to contracts or
22
fully misapplies any moneys, funds, securities, or other
22
agreements writh the corporation under this section, which for
23
things of value, whether belonging to it or pledged, or
23
the purposes hereof shall be held to include loans, advances,
24
otherwise intrusted to it, or (2) with intent to defraud the
24
extensions, and renewals thereof, and acceptances, releases,
25
corporation or any other body, politic or corporate, or any
25
and substitutions of security therefor, purchases or sales of
20
“
(u) The provisions of sections 112, 113, 114, 115,
29
28
1
assets, and all contracts and agreements pertaining to the
1
debentures, or other such obligations, or loans made to mem-
2
same.
2
bers of any organized stock exchange, investment house,
3
or dealer in securities, upon any obligation, note, or bill,
8
“ (y) The Secret Service Division of the Treasury
4
Department is authorized to detect, arrest, and deliver
4
secured or unsecured, for the purpose of purchasing and/or
5
into the custody of the United States marshal having
5
carrying stocks, bonds, or other investment securities (ex-
6
jurisdiction any person committing any of the offenses
6
cept obligations of the United States) such advance shall be
7
punishable under this section.”
7
deemed immediately due and payable, and such member
The seventh paragraph of section 13 of the
8
bank shall be ineligible as a borrower at the reserve
Federal Deserve Act, as amended, is amended to read as
9
bank of the district under the provisions of this para-
10
graph for such period as the Federal Deserve Board shall
determine.”
8
9
10
Sec .
8.
follows:
11
“Any Federal reserve bank may make advances to
11
12
its member banks on their promissory notes for a period
12
13
not exceeding fifteen days at rates to be established by
13
amended, is amended by adding at the end thereof the
14
such Federal reserve bank, subject to the review and
14
following new paragraph:
15
determination of the Federal Deserve Board, provided such
15
16
promissory notes are secured by such notes, drafts, bills of
16
supervision over all relationships and transactions of any
17
exchange, or bankers’ acceptances as are eligible for redis-
17
kind entered into by any Federal reserve bank with any
18
count or for purchase by Federal reserve banks under the
18
foreign bank or banker, or with any group of foreign banks
19
provisions of this Act, or by the deposit or pledge of bonds
19
or bankers, and all such relationships and transactions shall
20
or notes of the United States.
If any member bank to
20
be subject to such regulations, conditions, and limitations as
21
which any such advance has been made shall, during the
21
the board may prescribe.
22
life or continuance of such advance, and despite an official
22
tive of any Federal reserve bank shall conduct negotiations
23
warning of the reserve bank of the district or of the Federal
23
of any kind with the officers or representatives of any
24
Deserve Board to the contrary, increase its outstanding
24
foreign bank or banker without first obtaining the permis-
25
loans secured by collateral in the form of stocks, bonds,
25
sion of the Federal Deserve Board.
Sec . 9. Section 14 of the Federal Deserve Act, as
“
(g) The Federal Deserve Board shall exercise special
No officer or other representa-
The Federal Deserve
31
30
1
Board shall have the right, in its discretion, to be represented
1
“ (g) No executive officer of any member bank shall
2
in any conference or negotiations by such representative or
2
borrow from or otherwise become indebted to any member
3
representatives as the board may designate.
A full report
3
bank of which he is an executive officer, and no member
4
of all conferences or negotiations, and all understandings or
4
bank shall make any loan or extend credit in any other man-
5
agreements arrived at or transactions agreed upon, and all
5
ner to any of its own executive officers.
6
other material facts appertaining to such conferences or
6
officer of any member bank borrow from or if he be or
7
negotiations, shall be filed with the Federal Reserve Board
7
become indebted to any bank other than a member bank of
8
in writing by a duly authorized officer of each Federal reserve
8
which he is an executive officer, he shall make a written
9
bank wThich shall have participated in such conferences or
9
report to the chairman of the board of directors of the mem-
10
ber bank of which he is an executive officer, stating the date
10
negotiations.”
If any executive
11
Sec . 10. Section 19 of the Federal Reserve Act, as
11
and amount of such loan or indebtedness, the security there-
12
amended, is amended by inserting after the sixth paragraph
12
for, and the purpose for which the proceeds have been or
13
thereof the following new paragraph:
13
are to be used.
Any executive officer of any member bank
24
“ No member bank shall act as the medium or agent of
14
violating the provisions of this subsection shall be deemed
15
any nonbanking corporation, partnership, association, busi-
15
guilty of a misdemeanor and shall be imprisoned not exceed-
10
ness trust, or individual in making loans on the security of
16
ing one year or fined not more than $5,000, or both; and
17
stocks, bonds, and other investment securities to brokers or
17
any member bank violating the provisions of this subsection
18
dealers in stocks, bonds, and other investment securities.
18
shall be fined not more than $10,000 and may be fined a
19
Every violation of this provision by any member bank shall
19
further sum equal to the amount so loaned or credit so
20
be punishable by a fine of not more than $100 per day during
20
extended.
21
the continuance of such violation; and such fine may be col-
21
“ (h) If a spouse, a brother, or a sister, a lineal ances-
22
lected, hy suit or otherwise, by the Federal reserve bank
22
tor, or a direct descendant of an executive officer of any
23
of the district in which such member bank is located.”
23
member bank borrow from or if he or she be or become
of the Federal Reserve Act, as
24
indebted to such member bank, such executive officer shall
25
amended, is further amended by adding at the end thereof
25
make a written report to the chairman of the board of
26
two new subsections (g) and (h) reading as follows:
24
Sec . 11. Section
22
32
1
directors
of the member bank
of
which he
is
an
2
executive officer, stating the date and amount of such loan
3
or indebtedness, the security therefor and the purpose for
4
which the proceeds have been or are to be used. Any execu-
5
tive officer of any member bank violating the provisions of
6
this subsection shall be deemed guilty of a misdemeanor
7
and shall he imprisoned not exceeding one year or fined not
8
more than $5,000, or both.”
9
Sec . 1 2 . The Federal Reserve Act, as amended, is
10
amended by inserting between sections 23 and 24 thereof
11
the following new section:
12
“ Sec . 23A. No member bank shall (1) make any loan
13
or any extension of credit to, or purchase securities under
14
repurchase agreement from, any of its affiliates, or (2) invest
15
any of its funds in the capital stock, bonds, debentures, or
16
other such obligations of any such affiliate, or (3) accept the
17
capital stock, bonds, debentures, or other such obligations of
18
any such affiliate as collateral security for advances made
19
to any person, partnership, association, or corporation, if, in
20
the case of any such affiliate, the aggregate amount of such
21
loans, extensions of credit, repurchase agreements, invest-
22
ments, and advances against such collateral security will
23
exceed 10 per centum of the capital stock and surplus of
24
such member bank, or if, in the case of all such affiliates,
25
the aggregate amount of such loans, extensions of credits,
33
1
repurchase agreements, investments, and advances against
2
such collateral security will exceed 20 per centum of the
3
capital stock and surplus of such member hank.
4
“ Within the foregoing hmitations, each loan or exten-
5
sion of credit of any kind or character to an affiliate shall be
6
secured by collateral in the form of stocks, bonds, debentures,
7
or other such obligations having a market value at the time
8
of making the loan or extension of credit of at least 20 per
9
centum more than the amount of the loan or extension of
10
credit, or of at least 10 per centum more than the amount of
11
the loan or extension of credit if it is secured by obligations
12
of any State, or of any political subdivision or agency
13
thereof: P r o v i d e d , That the provisions of this paragraph
14
shall not apply to loans or extensions of credit secured by
15
obligations of the United States Government, the Federal
16
intermediate credit banks, or the Federal land banks, or by
17
such notes, drafts, bills of exchange, or bankers’ acceptances
18
as are eligible for rediscount or for purchase by Federal
19
reserve banks.
20
officer, clerk, or other employee or any representative of
21
any such affiliate shall be deemed a loan to the affiliate to
22
the extent that the proceeds of such loan are used for the
23
benefit of, or transferred to, the affiliate.
A loan or extension of credit to a director,
24
“ For the purposes of this section the term ‘ affiliate ’
25
shall include holding company affiliates as well as other
S. 4412-----3
34
35
1
affiliates, and the provisions of this section shall not apply
2
to any affiliate (1) engaged solely in holding the bank
3
premises of the member bank with which it is affiliated,
4
(2) engaged solely in conducting a safe-deposit business or
5
the business of an agricultural credit corporation or livestock
6
loan company, (3) in the capital stock of which a national
7
banking association is authorized to invest pursuant to
8
section 25 of the Federal Eeserve Act, as amended,
9
or (4) organized under section 25 (a) of the Federal
10
Eeserve Act, as amended; but as to any such affiliate, mem-
11
ber banks shall continue to be subject to other provisions of
12
law applicable to loans by such banks and investments by
13
such banks in stocks, bonds, debentures, or other such
14
obligations.”
15
Sec. 13. The Federal Eeserve Act, as amended, is
16
amended by inserting between section 24 and section 25
17
thereof the following new section:
18
“ Sec. 24A. Hereafter no national bank, without the
19
approval of the Comptroller of the Currency, and no State
20
member bank, without the approval of the Federal Eeserve
21
Board, shall (1) invest in bank premises, or in the stock,
22
bonds, debentures, or other such obligations of any corpora-
23
tion holding the premises of such bank, or (2) make loans
24
to or upon the security of the stock of any such corporation,
1
if the aggregate of all such investments and loans will
2
exceed the amount of the capital stock of such bank.”
3
Sec.
14. The Federal Eeserve Act, as amended, is
4
further amended by inserting after section 25 (a) thereof
5
the following new section:
6
Sec. 25. (b) Notwithstanding any other provision
7
of law all suits of a civil nature at common law or in equity
8
to which any corporation organized under the laws of the
9
United States shall be a party, arising out of transactions
10
involving international or foreign banking, or banking in
11
a dependency or insular possession of the United States,
12
or out of other international or foreign financial operations,
13
either directly or through the agency, ownership, or control
14
of branches or local institutions in dependencies or insular
15
possessions of the United States or in foreign countries,
16
shall be deemed to arise under the laws of the United States,
17
and the district courts of the United States shall have
18
original jurisdiction of all such suits; and any defendant in
19
any such suit may, at any time before the trial thereof,
20
remove such suits from a State court into the district court
21
of the United States for the proper district by following the
22
procedure for the removal of causes otherwise provided by
23
la w .”
37
36
Seventh ” of section 5136 of
1
as the Comptroller of the Currency may by regulation prc-
2
the Revised Statutes, as amended, is amended to read as
2
scribe, but in no event (1) shall the total amount o! any
3
follows:
3
issue of investment securities of any one obligor or maker
1
Se c .
15. Paragraph
“
4
“ Seventh. To exercise by its board of directors or
4
purchased after tin’s section as amended takes effect and held
5
duly authorized officers or agents, subject to law, all such
5
bv the association for its own account exceed at any time 10
6
incidental powers as shall be necessary to carry on the busi-
6
per centum of the total amount of such issue outstanding, but
7
ness of banking; by discounting and negotiating promissory
7
this limitation shall not apply to any such issue the total
8
notes, drafts, bills of exchange, and other evidences of debt;
8
amount of which does not exceed $100,000 and does not
9
by receiving deposits; by buying and selling exchange, coin,
9
exceed 50 per centum of the capital of the association, nor
10
and bullion; by loaning money on personal security; and
10
(2) shall the total amount of the investment securities of
11
by obtaining, issuing, and circulating notes according to
11
any one obligor or maker purchased after this section as
12
the provisions of this title; and generally by engaging in all
12
amended takes effect and held by the association for its own
13
forms of banking business and undertaking all types of
13
account exceed at any time 15 per centum of the amount of
14
banking transactions that may, by the laws of the State
14
the capital stock of the association actually paid in and un-
15
in which such bank is situated, be permitted to banks of
15
impaired and 25 per centum of its unimpaired surplus fund.
16
deposit and discount organized and incorporated under the
16
As used in this section the term ‘ investment securities ’
17
laws of such State, except in so far as they may be for-
17
shall mean marketable obligations evidencing indebtedness
18
bidden by the provisions of any Act of Congress.
The busi-
18
of any person, copartnership, association, or corporation in
19
ness of dealing in investment securities by the association shall
19
the form of bonds, notes and/or debentures commonly
20
be limited to purchasing and selling such securities without
20
known as investment securities under such further definition
21
recourse, solely upon the order, and for the account of,
21
of the term ‘ investment securities ’ as may by regulation
22
customers, and in no case for its own account, and the asso-
22
be prescribed by the Comptroller of the Currency.
23
ciation shall not underwrite any issue of securities: Pro-
23
as hereinafter provided or otherwise permitted by law, noth-
24
vided,
That the association may purchase for its own account
24
ing herein contained shall authorize the purchase by the asso-
25
investment securities under such limitations and restrictions
25
ciation of any shares of stock of any corporation.
i
e
Except
The linu-
39
38
1 tations herein contained as to investment securities shall not
1
capital of $100,000 or less, national banking associations
2
apply to obligations of the United States, or obligations of
2
now organized or hereafter organized may, with the approval
3
any State or of any political subdivision thereof, or obliga-
3
of the Comptroller of the Currency, have a capital of not
4
tions issued under authority of the Federal Farm Loan Act,
4
less than $100,000.”
5
as amended:
That in carrying on the business
5
(j commonly known as the safe-deposit business the associa-
6
7
tion shall not invest in the capital stock of a corporation
7
“ No applying bank shall be admitted to membership
S organized under the law of any State to conduct a safe-
8
in a Federal reserve bank unless it possesses a paid-up unim-
11 deposit business in an amount in excess of 15 per centum
9
paired capital sufficient to entitle it to become a national
10
banking association in the place where it is situated under
11 unimpaired and 15 per centum of its unimpaired surplus.”
11
the provisions of the National Bank Act, as amended.”
1-
12
Sec. 17. Section 5139 of the Eevised Statutes, as
13
amended, is amended by adding at the end thereof the fol-
14
lowing new paragraph:
10
Provided,
of the capital stock of the association actually paid in and
(b) The tenth paragraph of section 9 of the Federal
Eeserve Act, as amended, is amended to read as follows:
i
13
14
15
This section shall take effect five years after the date
of the approval of this Act.
Sec. 16. (a) Section 5138 of the Eevised Statutes, as
amended, is amended to read as follows:
15
“ After five years from the date of the enactment of
16
“ Sec. 5138. After this section as amended takes effect,
16
the Banking Act of 1933, no certificate representing the
17
no national banking association shall be organized with a
17
stock of any such association shall represent the stock of
18
less capital than $100,000, except that such associations
18
any other corporation, except a member bank, nor shall the
19
with a capital of not less than $50,000 may be organized
19
ownership, sale, or transfer of any certificate representing
20
in any place the population of which does not exceed
20
the stock of any such association be conditioned in any
21
six thousand inhabitants.
No such association shall be
21
manner whatsoever upon the ownership, sale, or transfer
22
organized in a city the population of which exceeds
22
of a certificate representing the stock of any other corpora-
23
fifty thousand persons with a capital of less than $200,000,
23
tion, except a member hank.”
24
except that in the outlying districts of such a city where the
24
25
State laws permit the organization of State banks with a
25
Sec. 18. Section 5144 of the Eevised Statutes, as
amended, is amended to read as follows:
40
1
41
5144. In all elections of directors and in de-
1
or for the benefit of its shareholders so to vote the same.
2
tiding all questions at meetings of shareholders, each share-
2
The Federal Eeserve Board may, in its discretion, grant or
3
holder shall be entitled to one vote on each share of stock
3
withhold such permit as the public interest may require.
4
held by him; except (1) that shares of its own stock held
4
In acting upon such application, the board shall consider
5
by a national bank as trustee shall not be voted, and (2)
5
the financial condition of the applicant, the general character
6
shares controlled by any holding company affiliate of a
6
of its management, and the probable effect of the granting
< national bank shall not be voted unless such holding com-
7
of such permit upon the affairs of such bank, but no such
8
8
permit shall be granted except upon the following conditions:
“ Se c .
pany affiliate shall have first obtained a voting permit as
•
9
hereinafter provided, which permit is in force at the time
9
t
.
“ (a) Every such holding company affiliate shall, in
10
such shares are voted.
Shareholders may vote by proxies
10
making the application for such permit, agree
11
duly authorized in writing; but no officer, clerk, teller, or
11
receive, on dates identical with those fixed for the examina-
12
bookkeeper of such bank shall act as proxy; and no share-
12
tion of banks with which it is affiliated, examiners duly
13
holder whose liability is past due and unpaid shall be allowed
13
authorized to examine such banks, who shall make such
14
to vote.
14
examinations of such holding company affiliate as shall be
,
(1)
to
15
“ For the purposes of this section shares shall be
15
necessary to disclose fully the relations between such banks
16
deemed to be controlled by a holding company affiliate
16
and such holding company affiliate and the effect of such
17
if they are owned or controlled directly or indirectly by
17
relations upon the affairs of such banks, such examinations
18
such holding company affiliate, or held by any trustee for
18
to be at the expense of the holding company affiliate so
19
the benefit of the shareholders or members thereof.
19
examined; (2) that the reports of such examiners shall
20
“ Any such holding company affiliate may make appli-
20
contain such information as shall be necessary to disclose
21
cation to the Federal Eeserve Board for a voting permit
21
fully the relations between such affiliate and such banks
22
entitling it to cast one vote at all elections of directors and
22
and the effect of such relations upon the affairs of such
23
in deciding all questions at meetings of shareholders of such
23
banks; (3) that such examiners ma}^ examine each bank
24
bank on each share of stock controlled by it or authoriz-
24
owned or controlled by the holding company affiliate, both
25
ing the trustee or trustees holding the stock for its benefit
25
individually and in conjunction with other banks owned or
43
42
1 controlled by such holding company affiliate; and (4) that
1
respectively, in addition to amounts invested therein, for
2
publication of individual or consolidated statements of con-
2
all statutory liability imposed on such holding company
3
dition of such banks may be required;
3
affiliate by reason of its control of shares of stock of banks,
4
“ (b) After five years after the enactment of the
4
shall be required only to establish and maintain out of net
5
Banking Act of 1933, every such holding company
5
earnings over and above 6 per centum per annum on the
6
affiliate (1) shall possess, and shall continue to possess
6
book value of its own shares outstanding a reserve of readily
7
during the life of such permit, free and clear of any lien,
7
marketable assets in an amount not less than 12 per centum
8
pledge, or hypothecation of any nature, readily marketable
8
of the aggregate par value of bank stocks controlled by it,
9
assets other than bank stock in an amount not less than
9
and (2) the assets required by this section to be possessed
10
12 per centum of the aggregate par value of all bank stocks
10
by such holding company affiliate may be used by it for
11
controlled by such holding company affiliate, which amount
11
replacement of capital in banks affiliated with it and for
12
shall be increased by not less than 2 per centum per annum of
12
losses incurred in such banks, but any deficiency in such
13
such aggregate par value until such assets shall amount to 25
13
assets resulting from such use shall be made up within such
14
per centum of the aggregate par value of such bank stocks;
14
period as the Federal Keserve Board may by regulation
15
and (2) shall reinvest in readily marketable assets other than
15
prescribe;
16
bank stock all net earnings over and above 6 per centum
16
“ (d) Every officer, director, agent, and employee of
17
per annum on the book value of its own shares outstanding
17
every such holding company affiliate shall be subject to the
18
until such assets shall amount to such 25 per centum of the
18
same penalties for false entries in any book, report, or
19
aggregate par value of all bank stocks controlled by it;
19
statement of such holding company affiliate as are applicable
20
“ (c) Notwithstanding the foregoing provisions of this
20
to officers, directors, agents, and employees of member
21
section, after five years after the enactment of the Bank-
21
banks under section 5209 of the Revised Statutes, as
22
ing Act of 1933, (1) any such holding company affiliate
22
amended; and
23
the shareholders or members of which shall be indi-
23
“ (e) Every such holding company affiliate shall, in its
24
vidually and severally liable in proportion to the number
24
application for such voting permit, (1) show that it does not
25
of shares of such holding company affiliate held by them
25
own, control, or have any interest in, and is not participating
44
45
1
in the management or direction of, any corporation, business
1
of the provisions of the Banking Act of 1933 or of any
2
trust, association, or other similar organization formed for
2
agreement made pursuant to this section, the Federal Ee-
3
the purpose of, or engaged principally in, the issue, flota-
3
serve Board may, in its discretion, revoke any such voting
4
tion, underwriting, public sale, or distribution, at wholesale
4
permit after giving sixty days’ notice by registered mail of
5
or retail or through syndicate participation, of stocks, bonds,
5
its intention to the holding company affiliate and affording
6
debentures, notes, or other securities of any sort (here-
6
it an opportunity to be heard.
7
inafter referred to as securities company) ; (2) agree that
7
serve Board shall have revoked any such voting permit, no
8
during the period that the permit remains in force it will
8
national bank whose stock is controlled by the holding com-
9
not acquire any ownership, control, or interest in any such
9
pany affiliate whose permit is so revoked shall receive deposits
10
securities company or participate in the management or
10
of public moneys of the United States, nor shall any such
11
direction thereof; (3) agree that if, at the time of filing
11
national bank pay any further dividend to such holding com-
12
the application for such permit, it owns, controls, or has an
12
pany affiliate upon any shares of such hank controlled by
13
interest in, or is participating in the management or direc-
13
such holding company affiliate.
14
tion of, any such securities company, it will, within five
14
“ Whenever the Federal Eeserve Board shall have re-
15
years after the filing of such application, divest itself of its
15
voked any voting permit as hereinbefore provided, the
16
ownership, control, and interest in such securities company
16
rights, privileges, and franchises of any or all national banks
17
and will cease participating in the management or direction
17
the stock of which is controlled by such holding company
18
thereof, and will not thereafter, during the period that the
18
affiliate shall, in the discretion of the Federal Eeserve Board,
19
permit remains in force, acquire any further ownership,
19
be subject to forfeiture in accordance with section 2 of the
20
control, or interest in any such securities company or par-
20
Federal Eeserve Act, as amended.”
21
ticipate in the management or direction thereof; and (4)
21
22
agree that thenceforth it will declare dividends only out of
22
ment of this Act, no member bank shall be affiliated in any
23
actual net earnings.
23
manner described in section 2 (b) hereof with any corpo-
S
e c
.
Whenever the Federal Ee-
19. After five years from the date of the enact-
24
“ If at any time it shall appear to the Federal Eeserve
24’
ration, association, business trust, or other similar organiza-
25
Board that any holding company affiliate has violated any
25
tion engaged principally in the issue, flotation, underwriting,
46
1
public sale, or distribution at wholesale or retail or through
1
or village, or at any point within the State in which said
2
syndicate participation of stocks, bonds, debentures, notes,
2
association is situated, if such establishment and operation
3
or other securities.
3
are at the time expressly authorized to State banks by the
4
For every violation of this section the member bank
4
law of the State in question and subject to the restrictions as
5
involved shall be subject to a penalty not exceeding $ 1 ,0 0 0
5
to location imposed by the law of the State on State banks.
6
per day for each day during which such violation continues.
6
No such association shall establish a branch outside of the
7
Such penalty may be assessed by the Federal Eeseive Board,
7
city, town, or village in which it is situated unless it has a
8
in its discretion, and, when so assessed, may be collected by
8
paid-in and unimpaired capital stock of not less than
9
the Federal reserve bank by suit or otherwise.
^
$500,000:
Provided,
That in States with a population of
10
If any such violation shall continue for six calendar
10
less than one million, and which have no cities located therein
11
months after the member bank shall have been warned by
11
with a population exceeding one hundred thousand, the
12
the Federal Eeserve Board to discontinue the same, (a) in
12
capital shall be not less than $250,000.”
13
the case of a national bank, all the rights, privileges, and
13
14
franchises granted to it under the iSational Bank Act may
14
15
be forfeited in the manner prescribed in section
of the Fed-
15
“ (d) The aggregate capital of every national banking
16
eral Eeserve Act, as amended, or, (b) in the case of a State
16
association and its branches shall at no time be less than the
17
member bank, all of its rights and privileges of membership
17
aggregate minimum capital required by law for the estab-
13
in the Federal reserve system may be forfeited in the maimer
18
lishment of an equal number of national banking associations
19
prescribed in section 9 of the Federal Eeserve Act, as
19
situated in the various places where such association and
20
amended.
20
its branches are situated.”
21
Sec .
22
2
20. Paragraph (c) of section 5155 of the Eevised
Statutes, as amended, is amended to read as follows.
Paragraph (d) of section 5155 of the Eevised Statutes,
as amended, is amended to read as follows:
21
Sec. 21. Sections 1 and 3 of the Act entitled “An Act
22
to provide for the consolidation of national banking associa-
23
“ (c) A national banking association may with the
23
tions,” approved November 7, 1918, as amended, are
24
approval of the Comptroller of the Currency establish and
24
amended by striking out the words “ county, city, town, or
25
operate new branches within the limits of the city, town,
25
village ” wherever they occur in each such section, and
48
1
inserting in lieu thereof the words “ State, county, city,
2
town, or village.’’
3
4
Sec. 22. The first two sentences of section 5197 of the
Kevised Statutes are amended to read as follows:
5
“ Any association may take, receive, reserve, and charge
6
on any loan or discount made, or upon any notes, bills of
7
exchange, or other evidences of debt, interest at the rate
8
allowed by the laws of the State, Territory, or District where
9
the bank is located, or at a rate of 1 per centum in excess
10
of the discount rate on ninety-day commercial paper in effect
11
at the Federal reserve bank in the Federal reserve district
12
where the bank is located, whichever may be the greater,
13
and no more, except that where by the laws of any State
14
a different rate is limited for banks organized under State
15
laws, the rate so limited shall be allowed for associations
16
organized or existing in any such State under this title.
17
When no rate is fixed by the laws of the State, or Territory,
18
or District, the bank may take, receive, reserve, or charge a
19
rate not exceeding 7 per centum, or 1 per centum in excess
20
of the discount rate on ninety-day commercial paper in
21
effect at the Federal reserve bank in the Federal reserve
22
district where the bank is located, whichever may be the
23
greater, and such interest may be taken in advance, reckon-
24
ing the days for which the note, bill, or other evidence of
25
debt has to run.”
.
.- /
49
1
Sec. 23. The second sentence of the first paragraph
2
of section 5200 of the Eevised Statutes, as amended,
3
is amended by inserting before the period at the end thereof
4
the following: “ and shall include in the case of obligations
5
of a corporation all obligations of all subsidiaries thereof in
6
which such corporation owns or controls a majority
7
interest.”
8
Sec. 24. Section 5211 of the Eevised Statutes, as
9
amended, is amended by adding at the end thereof the fol-
10
lowing new paragraph:
11
“ Each national banking association shall obtain from
12
each of its affiliates other than member banks and furnish
13
to the Comptroller of the Currency not less than three
14
reports during each year, in such form as the Comptroller
15
may prescribe, verified by the oath or affirmation of the
10
president or such other officer as may be designated by the
17
board of directors of such affiliate to verify such reports,
18
disclosing the information hereinafter provided for as of
19
dates identical with those fo r which the Comptroller shall
20
during such year require the reports of the condition of the
21
association.
22
‘ affiliate 9 shall include holding company affiliates as well
23
as other affiliates.
24
be transmitted to the Comptroller at the same time as the
For the purpose of this section the term
S. 4412------ 4
Each such report of an affiliate shall
51
50
1
corresponding report of the association, except that the
2
Comptroller may, in his discretion, extend such time for
3
good cause shown.
4
information as in the judgment of the Comptroller of the
5
Currency shall be necessary to disclose fully the relations
6
between such affiliate and such bank and to enable the
7
Comptroller to inform himself as to the effect of such rela-
8
tions upon the affairs of such bank.
9
affiliates shall be published by the association under the same
10
conditions as govern its own condition reports. The Comp-
11
troller shall also have power to call for additional reports
12
with respect to any such affiliate whenever in his judgment
13
the same are necessary in order to obtain a full and com-
14
plete knowledge of the conditions of the association with
15
which it is affiliated.
16
transmitted to the Comptroller of the Currency in such form
17
as he may prescribe.
18
to obtain and furnish any report required under this section
19
shall be subject to a penalty of $100 for each day during
20
which such failure continues.”
21
Se c .
Each such report shall contain such
The reports of such
Such additional reports shall be
Any such affiliated bank which fails
25. (a) The first paragraph of section 5240 of the
22
Bevised Statutes, as amended, is amended by inserting before
23
the period at the end thereof a colon and the following pro-
24
viso: “ Provided, That in making the examination of any
25
national bank the examiners shall include such an examina-
1
tion of the affairs of all its affiliates other than member banks
2
as shall be necessary to disclose fully the relations between
3
such bank and such affiliates and the effect of such relations
4
upon the affairs of such bank; and in the event of the refusal
5
to give any information required in the course of the exami-
6
nation of any such affiliate, or in the event of the refusal
7
to permit such examination, all the rights, privileges, and
8
franchises of the bank shall be subject to forfeiture in aceord-
9
ance with section 2 of the Federal Beserve Act, as
10
amended.
The Comptroller of the Currency shall have
11
power, and he is hereby authorized, to publish the report
12
of his examination of any national banking association or
13
affiliate which shall not within one hundred and twenty
14
days after notification of the recommendations or suggestions
15
of the comptroller, based on said examination, have com-
16
plied with the same to his satisfaction. Ninety days’ notice
17
prior to such publicity shall be given to the bank or
18
affiliate.”
19
(b) Section 5240 of the Bevised Statutes, as amended,
20
is further amended by adding after the first paragraph
21
thereof the following new paragraph:
22
“ The examiner making the examination of any affiliate
23
of a national bank shall have power to make a thorough
24
examination of all the affairs of the affiliate, and in doing
25
so he shall have power to administer oaths and to examine
53
52
1
any of the officers, directors, employees, and agents thereof
1
of the depositors and unsecured creditors of any national
2
under oath and to make a report of his findings to the
2
banking association whose business has been closed, for such
3
Comptroller of the Currency.
The expense of examinations
3
association to resume business upon the retention by the
4
of such affiliates may be assessed by the Comptroller of the
4
association, for a reasonable period to be prescribed by the
5
Currency upon the affiliates examined in proportion to assets
5
Comptroller, of all or any part of its deposits, the Comp-
6
or resources held by the affiliates upon the dates of examina-
6
troller is authorized, in his discretion, to permit the associa-
7
tion of the various affiliates.
If any such affiliate shall
7
tion to resume business if depositors and unsecured creditors
8
refuse to pay such expenses or shall fail to do so within
8
of the association representing at least 85 per centum of its
9
sixty days after the date of such assessment, then such
9
total deposit and unsecured credit liabilities consent in writing
10
expenses may be assessed against the affiliated national bank
10
to such retention of deposits.
11
and, when so assessed, shall be paid by such national bank:
11
be construed to affect in any manner any powers of the
12
Promded, however,
That, if the affiliation is with two or
12
Comptroller under the provisions of law in force on the date
13
more national banks, such expenses may be assessed against,
13
of enactment of this Act with respect to the reorganization
14
and collected from, any or all of such national banks in such
14
of national banking associations.
15
proportions as the Comptroller of the Currency may
15
16
prescribe.
If any affiliate of a national bank shall refuse
16
troller of the Currency, any director or officer of a national
17
to permit an examiner to make an examination of the affiliate
17
bank, or of a bank or trust company doing business in the
18
or shall refuse to give any information required in the course
18
District of Columbia, or whenever, in the opinion of a Fed-
19
of any such examination, the national bank with which it is
19
eral reserve agent, any director or officer of a State member
V
?
r
Sec .
Nothing in this section shall
27. Whenever, in the opinion of the Comp-
f
20
affiliated shall be subject to a penalty of not more than $100
20
bank in his district shall have continued to violate any law
21
for each day that any such refusal shall continue.
Such pen-
21
relating to such bank or trust company or shall have con-
22
alty may be assessed by the Comptroller of the Currency and
22
tinued unsafe or unsound practices in conducting the business
23
collected in the same manner as expenses of examinations.”
23
of such bank or trust company, after having been warned
24
Sec. 26. In any case in which, in the opinion of the
24
by the Comptroller of the Currency or the Federal reserve
25
Comptroller of the Currency, it would be to the advantage
25
agent, as the case may be, to discontinue such violations
V
54
55
1
of law or such unsafe or unsound practices, the Comptroller
1
tors of the bank involved, otherwise than in connection with
2
of the Currency or the Federal reserve agent, as the case may
2
proceedings for a violation of this section.
3
be, may certify the facts to the Federal Reserve Board.
3
or officer removed from office as herein provided who there-
4
In any such case the Federal Reserve Board may cause
4
after participates in any manner in the management of such
5
notice to be served upon such director or officer to appear
5
bank shall be fined not more than $5,000 or imprisoned for
6
before such board to show cause why he should not be
6
not more than five years, or both, in the discretion of the
7
removed from office. A copy of such order shall be sent to
7
court.
I
8
each director of the bank affected, by registered mail.
9
after granting the accused director or officer a reasonable
10
opportunity to be heard, the Federal Reserve Board finds
10
or the application thereof to any person or circumstances,
11
that he has continued to violate any law relating to such
11
is held invalid, the remainder of the Act, and the application
12
bank or trust company or has continued unsafe or unsound
12
of such provision to other persons or circumstances, shall
13
practices in conducting the business of such bank or trust
13
not be affected thereby.
14
company after having been warned by the Comptroller of
15
the Currency or the Federal reserve agent to discontinue
16
such violation of law or such unsafe or unsound practices,
17
the Federal Reserve Board, in its discretion, may order
18
that such director or officer be removed from office. A copy
19
of such order shall be served upon such director or officer.
20
A copy of such order shall also be served upon the bank of
21
which he is a director or officer, whereupon such director or
22
officer shall cease to he a director or officer of such bank:
23
Provided,
24
which it is based shall not be made public or disclosed to
25
anyone except the director or officer involved and the direc-
If
Any such director
That such order and the findings of fact upon
8
T
9
Se c .
28. The right to alter, amend, or repeal this Act
is hereby expressly reserved.
If any provision of this Act,
Passed the Senate January 10 (calendar day, January
25), 1933.
Attest:
EDWIN P. THAYER,
Secretary.
X
72dCONGRESS)
2 d S e s s io n
O
/
AA1 O
4
4
A
m
A N A C T
To provide for the safer and more effective
use of the assets of Federal reserve banks
and of national banking associations, to
regulate interbank control, to prevent the
undue diversion of funds into speculative
operations, and for other purposes.
January
30,1933
Referred to the Committee on Banking and Currency
@FedFRASER