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L-87 AMENIIMENTS PROPOSED BY GOVERNOR ECCLES* TO H, R, 7617 AS PASSED BY THE HOOSE OF REPRESENTATIVES. Submitted to Senate Committee on Banking and Currency L-87 Page 45, between line 13 and line 14, insert the following paragraph: 1 1 (y) (1) No State bank organized after the effective date shall be an insured bank or continue to have any part of its deposits insured after July 1, 1937, unless such bank shall be a member of the Federal Reserve System. No State bank organized on or before the effective date which during the calendar year 1936 or any succeeding calendar year shall have average deposits of $500,000 or more shall be an insured bank or continue to have any part of its deposits insured after July 1 of the year following any such calendar year during which it shall have had such amount of average deposits, unless such bank shall be a member of the Federal Reserve System: Provided, Th&t for the purposes of this paragraph the term fState bank1 shall not include (a) a mutual savings bank, or (b) a Morris Plan Bank, or (c) a bank located in the Territory of Hawaii or Alaska." (Note: This amendment is intended only as a compromise in the event that it is impossible to retain the provisions of existing law or the provisions of the original bill (p. 37, line 18), which require nonmember banks to become members of the Federal Reserve System by July 1, 1937 in order to retain the benefits of deposit insurance• The above compromise amendment would exempt from this requirement banks having average deposits of less than $500,000, thus eliminating the chief ground for opposition to the compulsory membership requirement. It would exempt 5,644 banks and would only require 2,038 of the present insured banks to become members of the Federal Reserve System*) ~ 2 ~ L-87 Page 45. line 14, strike out "(1)" and substitute "(2)". Page 43, line 21, striks out «(£)" and substitute "(3)". Section 201 (a) Page 44. lines 9 to 14, inclusive, strike out the sentence beginning with the word "Each" in line 9 and ending with the words "Vice Governor11 in line 14 and insert in lieu thereof the following: "The term of office of each class C director shall be three years but the Governor shall cease to be a class C director when he ceases to be Governor of the bank even though he may not have served his entire term as class C director and, if the Vice Governor be designated as a class C director, he shall cease to be a class C director when he ceasos to be Vice Governor even though he may not have served his entire term as class C director*" (note: This is merely a clarifying amendment intended to remove any ambiguity as to the term of office of a Governor or a Vice Governor appointed to fill a vacancy. At present the section provides that the Governorfs term as a class G director "shall expire" when he ceases to be Governor of the bank. The section also provides that a person appointed to fill a vacancy in the office of Governor shall hold office until the expiration of the term of his predecessor• Since the section provides that the Governorfs term as a class C director "shall expire" when he ceases to be Governor, it could be argued that there would be no unexpired term for his successor to fill. This amendment changes the provision that the Governor's term as a class C director "shall expire" when he ceases to be Governor to a provision that he "shall cease to be a class C director" when he ceases to be Governor. The some provisions are applicable to the term of the Vice Governor.) - 5 Page 44« lines 20 and 21, strike out the words? L-87 "Effective ninety days after the enactment of the Banking Act of 1935" and substitute the words "Effective January 1, 1956"• Page 46« lines 9 and 10, make the same change. (Kote: The purpose of these changes is to postpone the effective date of the combination of the offices of Governor and Chairman so as to allow ample time for the directors of the banks to select the persons to be appointed to the combined office and to obtain the Federal Reserve Board!s approval of such appointments*) Page 46, line 30', insert after the word "each" and before the comma the following: "(excluding &xrj service prior thereto for an unexpired portion of a term as the result of a vacancy)" (Note: The purpose of this amendment is to make it clear that the two consecutive terms of three years each which a director may serve do not include prior service during an unexpired portion of a term as the result of a vacancy. Thus, a director who had served during the last year of a term as the result of a vacancy would be eligible to serve thereafter two three year ..terms, or a total service of seven years.) Section 205 Page 48, after line 18, insert the following: "(2) By adding at the end of the first paragraph the following: f Beginning with the date upon which the person who is first hereafter appointed or reappointed as an appointive member of the Federal Reserve Board makes and subscribes to the oath of office, the appointive members of the Federal Reserve Board shall each receive a salary at the same rate as that of the heads of Executive Departments who are members of the - 4 - L-87 Presidents Cabinet, together with actual necessary traveling expenses, in lieu of the salary provided for such appointive members in the preceding sentence• Each appointive member of the Federal Reserve Board heretofore appointed may retire from service upon reaching the age of seventy or at a#y time thereafter, and all members hereafter appointed shall retire upon reaching the age of seventy. Each member of the Board so retired from service who shall have served for as long as twelve years shall, during the remainder of his life, receive an annual retirement pay in an amount equal to the annual salary heretofore paid to appointive members: Provided% That, if he shall have served for as long as five years, but less throi twelve years, his annual retirement pay shall be at the rate of one-twelfth of the annual salary heretofore paid to appointive members for each year served and for any fraction of an additional year of such service: Provided further« That any member whose term expires and who is not reappointed shall receive retirement pay upon the same basis as if he had been retired under the provisions of this paragraph, except that, if his term expire before he reaches the age of sixty-five and he be offered and decline to accept r©appointment, he shall not receive any retirement pay* The funds necessary for such retirement pay shall be provided by the Federal Reserve banks in such manner as the Federal Reserve - 5 - L-87 Boarcl shall prescribe. Nothing in this section shall prevent the President from reappointing any member of the Federal Reserve Board holding office on the date of enactment of the Banking Act of 1935.'" (Note: The first portion of this amendmsnt would restore the provisions of the original bill which would have increased the salaries of the members of the Federal Reserve Board to an amount equal to that paid the members of the President's Cabinet and would make the amendment applicable to members heretofore appointed as well as to members hereafter appointed. The remainder of the proposed amendment would restore to the bill the provisions for the retirement of members of the Federal Reserve Board in the form approved by the Committee on Banking and Currency of the House of Representatives. The provision for increasing the salariea of the Board members was stricken out by the House Committee on Banking and Currency. The provision for retirement of Board members was approved by the House Committee on Banking and Currency, but it was stricken out by an amendment offered from the floor of the House of Representatives and adopted by a vote of 92 to 81.) Page 48, line 19, change the figure 2 in the parentheses to the figure 5. (Note: This amendment merely changes the numbering of the paragraph.) Page 48. line 24, change the comma following the word "President" to a period and strike out everything from that point through the period following the vrord "Governor" on page 49, line 1. (Note: This is a perfecting amendment designed to bring this section into conformity with the provision that the Governor may continue to serve as a member of •fche Board after the termination of his designation as Governor. By restoring the applicability of the third sentence of section 10 of the Federal Reserve Act, the Governor's term as a member of the Board will remain fixed at 12 years.) Pago 49 1 lino 9, change tho figure 3 in the parentheses to the figure 4* (Note: This amendment merely changes tho numbering of tho paragraph.) Sectipn 308 Pa^o 53, line 11, immediately aft or the words "Soc, 208.w insert tho words "Effective 90 days after tho enactment of tho Banking Act of 1935,«. (Vote; This is intended to allow reasonable time for the Board to issue regulations regarding tho issuance of Federal Reserve notes and for the Socretary of the Treasury to proscribe tho form of such notes before tho omondod provisions of law become offective.) Section 310 Pago 56^, line 21, strike out tho sontonco beginning with tho words "No bank shall* and onding with tho word wgreater« in line 1 on pago 57. Paffe 57, lino 12, insert aftor tho period and before tho quotation marks the following: w 0n and aftor tho date on which the regulations first adoptod tinder this section shall become effective, no Stato bask or trust company which is a member of the Federal Reserve System shall maico new real estate loans oxcept to tho same extent and under the some regulations and limitations as national banking associa~ tions are permitted to do so#tt (Hote: Those amendments would restore section 210 to tho form recommended by Governor Socles to tho House Committee on Banking and Currency by striking out tho limitation on the aggregate amount of real estate loans Ir-87 which any national bank may have outstanding and by restoring the provision requiring State member banks to comply with the same regulations and limitations regarding real estate loans as are applicable to national banks.) Section 307 Page 61, line 3, strike all of section 307 and substitute the following: NSoc. 307. Effective February 1, 1936, section 32 of the Banking Act of 1933 is amended to read as follows: "'Sec, 32. No officer, director, or employee of any corporation or unincorporated association, no partner or employee of any partnership, and no individual, engaged in the issue, flotation, underwriting, public sale, or distribution, at wholesale or retail, or through syndicate participation, of stocks, bonds, or other similar securities, shall serve at the same time as an officer, director, or employee of any member bank. Tho federal Reserve Board is authorized and directed to enforce compliance with this section, and to prescribe such rules and regulations as it dooms necessary for that purpose. IW (Note: This amendment omits the provision that the Federal Reserve Board may, by general regulations in linited classes of cases, make exceptions to the prohibition of the section against interlocking directorates between member banks and dealers in securities, and adds the provision that the Board is authorized and directed to enforce compliance with the section. The word "primarily" before the word wongagedn in line 8 is also omitted by the amendnent.) L~87 Section 329 Page 82, lino 14f strike all of section 329 and substitute the following; "Sec. 329. Effective January 1, 1936, section 25 of the Federal Reserve Act, as amended* is further amended by striking out the last paragraph of such section; the paragraph of section 25(a) of the Federal Reserve Act, as amended, which coonencos with the words •& majority of the shares of the capital stock of any such corporation1* is amended by striking out all of said paragraph except the first sentence thereof; and the Act entitled 'An Act to supplement existing laws against unlawful rostraints and monopolies, and for other purposes1 (38 Stat. 730), approved October 15, 1914, as amended, is further amended (a) by striking out section 8A thereof and (b) by substituting for the first three paragraphs of section 8 thereof the following: «'Section 8. Mo director, officer, or employee of any nember bank of the Federal Reserve Systen or any branch thereof shall be at the same tine a private banker or a director, officer, or employee of any other bank, banking association, savings bank, or trust company organized under the Rational Bank Act or organized under the laws of any State or of the District of Columbia, or any branch thereof, except any one or more of the following or any branch thereof: L-87 A bank, "banking association, savings bank, or trust company, nore than 90 per cent of the stock of which is owned directly or indirectly "by the United States or "by any corporation of which the United States diroctly or indirectly owns noro than 90 per cent of the stock. W! (2) A bank, "banking association, savings bank or trust company which has boon placed formally in liquidation or which is in the hands of a receiver, conservator or other official exorcising similar functions • Wf (3) A corporation principally engaged in international or foreign banking or banking in a dopendency or insular possession of the United States which has entered into an agreement with tho Federal Reserve Board pursuant to section 25 of the Federal Beserve Act« W! (4) A bank, banking association, savings bank, or trust conpany, nore than 50 por cent of tho stock of which is owned directly or indirectly by persons who otm diroctly or indirectly noro than 50 per cent of the stock of such nenbor bank. wt fhe fcdoral Hosorvo Board is authorized and directed to enforce compliance T7ith this section, and to proscribo such rules and regulations as it dooms necessary for that purpose•* -10- L-87 (Note: This anondnont enumerates tho limited classes of cases in which there nay "be interlocking directors between mentor "banks and other banks under section 8 of the Clayton Act. It elininates the provision that the Board may allow interlocking directorates "by general regulations where banks are not in substantial competition, and provides that the Board is authorized and directed to enforce compliance with the section and to prescribe such rules and regulations as it deens necessary for such purpose. Conflicting provisions of section 25 and section 25(a) relating to foreign or international banking corporations are repealed. *Ehe provision repealing section 8A of the Clayton Act is not changed by this amendment.) Additional section At the end of tho bill add a now section reading as follows* wSec. The right to altor, amend, or repeal this Act is hereby expressly reserved. If any provision of this Act, or the application thereof to any persdn or circumstance, is held invalid, the reminder of the Act, and tho application of such provision to other persons or circumstances, shall not be affected thereby.* (Note: This is merely the usual saving clause attached to bills of this character and is believed to be desirable in view of the large number of technical amendments to the existing law contained in this bill.)