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f 6. 19*5 Honorable Dunoaa U. Flotohor, Chai Comnittoe on Banking ana Cmrroney, Unitod Statos N o Washington, D. C. 1 ofod My doar Senator Fletcheri I am inolooing for tho consideration of your Oommittoe a memorandum oontalnlng oortain suggested amendments to H. R. 7617 in tho font in which it paasod tho House of Ropresontatires. Tho —limraiid— oontaina a briof oxplanatioa of tho purposo and offoot of oaoh aaondaonti but I iooiro to inrlto tpeoial attontion to tho otatoaont whioh I aade boforo tho Svbooomittoo and which appears on pagos 801 and 101 of tho transoript of tho Soaato hearing! euggoiting a oompromiao proTision with regard to tho compulsory — • o n h l p in tho ; ederal loiorro Sytmm of banka vhoao dopoait* are inanroa Vy tho Fodoral Dopooit Inauranoo Corporation* Tho firot aaomdnomt in tho inoloood •onoraniwja would «ffactuate tho compromise on this subject whioh I suggested. For ooiiioalomoo, tho inolosed monorandum also oontaina tho substitntos for aootiona 107 and 829 of tho hill roviaing aootion It of the Banking aot of 1911 and tho prorloiomo of the Clayton Antitrust Act routing to Utorlooking bank dirootoratoa, whioh woro approved by tho } ederal Booorvo Board some tino ago and trananlttod to yon oy Yioo Governor Thcmmo during my absonoo from tho city this morning* I sincerely hope that yowr Committee will givo favorable consideration to tho amendments to H.R. 7tl7 suggested in tho ineloaod Ii to ponding a similar lettor w Class* of tho inoloaod Tory truly yours, U 1. Booloo, Inol HVtkp cc sent to Hon. Henry B. Steagall 3 FKOPOSED BY OOVERKOk RCCLE8. TO H. R. 761? A8 P1S8FP BY THE liOUfE 01 RFJPKfS^TATIVES, Sub«ltt«d to S«nat« CoHnitt«« on Banking and Currency I1Pago g t •(y) (1) botwooa lias IB aad lino 14, insort tho following l o Stats bank orgsnisod sftor tho offset IT* dato aha1! bo tun Imsurod bank or aantlnuo to nawo any part •f i t s dopoaita Inaurod aitor July 1, 1MT, unloaa iuch bank •hall bo ft ttoahor of tho todoral Rssorvs Syitoou So tato bonk organUo<i on or boforo tho offoetivo dato which during tho oolondor yoojr 1986 or any avxoooalng oaloaomr yoar shall haTa rrorago dopotit* of $ftOOtOOO or »oro ohall bo an inaurod bank or oontinuo to ha^o any P»rt of l t t dopooits inaurod af tor July 1 of tho yoar following amy iuch oalondar yomr during whiah i t shall ha-vo had auoh a»ount of avorago dopoaita, unTosa tuoh bank shall bo s Doo&or of tho >odoral Koaorpo yatostt ?r<yrldoda That for tho purpoaoa of this paragraph tho torn 'Stato bank' ahsll not laoludo (a) a mutual saTinga bank, or (b) a Morris Flan Bank, or (o) a bank looatod in tho orritory of or Alaska,* (lotsi This omondiBont la intondod only as s eonpromieo la tho oront that it is lapoaalblo to rotain tho proriaions sf satiating law or tho prorlsloaa of tho original bill (p« 17, lino 18), which roquira noawonbor b * n « to bocomo noabors of tho >odsral Roaorto Systsa by July 1, 1837 in ordor to rotain tho boasfits of dopoalt Intura&oo* Tho abOTO oonproalao SKOMfatsnt would oasmpt from thia roquirs* wont banks having a^orags dopoaita oi loaa than £(00,000, thus slininatlng tho ohlsf ground for oppoaitlon to ths sovpulsory MOMborshlp rtq iromont* It would oxonpt 5,644 banks and would only roquiro S,088 of tho praaont inanrod banks to bocoms raaiboM sf tho * adore 1 Heaorre v^tew.) •ft- Pago Um lias 14, strike out "(1)" and substitute "(£)*. Pago 4J« lino tl # strike out "(«)• tod aubutitute "(»)". Scotloa tOl(a) Pago 44 a linos t to 14, inoluslve, strike out tho sentence beginning with tho ward "fcech" in lias 9 and ending with tho words "Vice Governor" ia lias 14 and iaeort la lieu thereof tho followingi "The tor* sf off ioo of each elaas C dirootor shall bo three jrsars but tho Governor shall eeaso to bo a class C dirootor when ho oeases to bo Ceverner of tho bank ovea though ho way aot have served his e tire torsi aa class C dirootor and, If tho las Govwrnor bo dealfnated aa a class C director,ho shal1 aoaso to bo a alass C director whoa ho oeases to bo Vloo Governor ovoa though ho nay aot have served his entire torsi as class C dirootor*" (Xotet This is merely a clarifying aaendnent In* tended to remove any ambiguity as to tho tens oi office of a Governor or a Vice Governor appointed to fill a vacancy* At present the seotion provides that the Governor's tora as e class C director "shall expire11 whoa he oeases te bo overnor of tho beak* Tho section also providee that a person a., pointed to fill a vacancy la tho off loo of Governor shall held office until the expiration of the tern of hie predecease?* inse the sectlea provides that tho Governor9a tons as a alass C director "shall expire" whoa he eeaasa to be Governor, it c© Id be argued that there would be no unexpired tern for his successor te fill* This sjMoidaent charges ••he provision that the Governor's tern aa a class G director "shall expire" whoa he oeases to bo Governor to a provision that he "shall eeass te be a class C director" when he ceases to be Governor* The aawe previsions are applicable to the tens of the vice Governor.) Pago *4« linos 10 and 81, strike out tho words • "Fffeetive ninety days after tho enactment of tho ranking Aot of 1935" and substitute) tho words "J ffeetive January 1 # 1936% 44 « linos t and 10, make tho same ehange* (Motet Tho purposo of these ehanges it to postpone tho effective ditto oi tho combination of tho off loos of Governor and Chairman so as to a1 low ample time for the director! of the banks to galoot the person* to bo appointed to tho combined off loo a d to obtain tho Federal leservo Board's approval of such appointwonte.) Page *** lino 1», insert after tho word "ofteh* and before tho ooono, the foil owing t "(exolu ing any serrioo prior thereto for an unexpired portion of a torn as the result of a vaeenoy)" (Kotoi The purpose of this amendment is to Hake it clear that tho two oonaooutlTO terms of throe ;>oars each which a dlrootor nay servo do not include prior service during an unexpired portion of a tors as tho result of a •aeeney* Thus, a dlrootor who had served during tho last year of a torn as tho rosult of a vaoancy would bo eligible to serve teroafter two throe ywar terns, or a total service of •even years.) Section 101 Pago 4*m after lino 18, insert tho following! "(1) •/ adding at the and of tho first paragraph tho followingi *Boglaming with tho date upon whloh tho person who is first hereafter a pointed or rwappolntod as an appointive monbsr of tho Federal fceeorve Board makes and subsorlbes to tho oath of offloe, tho appointive members of tho hodonml Reserve Board shall oeeh roeeivo a salary at tho same rote as that of tho heads of fcateutlve 1 epartrentg who are •slurs of tho * President's Cabinet* together with actual neeesaar traveling expenses, in lieu of the salary provided lor such appointive members la the preceding eentenee* I* eh appointive memfemr of ths Federal Reserve oerd heretofore appointed m«> retire from servl e up on reaehiag the age of seventy or at any tine thereafter, and all nembc s hereafter appointed shall retire upon reaaMmg: the age of seventy. F,:©h Member of the Board •e retired fro# service who shall have served for as leaf as twelve years s h « U , <!urlng the remainder of hit life, reeelvs aa annual retirsnsnt pay in am amount equal to the annual salary heretofore paid te appointive sent erst provided, That, if he shall have served for as lsec as :lve years, but lass than twelve years, his annual retirement pay shall be st the rate of one-t*elfth of the annual salary heretofore paid to appointive member* fer each :ear serve* end for any fraction of an additional year •f sioh eerTioei Provided further. That an; leember ^ o s e term •spires and who is not raappolnted shall reeelv* retirerent pay upon the sane basis as if ha had e*n retired oad«< the provisions of this paragraph, except trat. If his term expire before he reaches the age of slxtyflve and he be offered and decline to aeoe t reappolntn*? t, he shall mot receive any retirement pay* The fundt naeessary for suek rstirerent pay shall be provided by the Federal Reserve banks ia suoh manmer as the Federal Reserve Board thall prooorlbo. lothiag *» t h l i ooctlon aha 11 provant tho Prooidont from roawp>lntUg ony i w * i r of tho Federal I t m r n Board holding off iwo Mi tho ditto of onaotBOBt of the Banking Aet of 1M6.» (Wotoi ft* flrot portion of thio awondnont would roitore tho nrwrl alamo of tho original M i l ahieh would have lneroaeod the aalarloo of tho •oabori of tko Fodortl looorvo Sooxd %m mm omount o^ ml to thot paid tho miifcoro of tho Prooidont'o Coblaot sad would wmk* tho OKO ojtnt oppliooiilo to MOibort borot foro appolatod mm wo 11 as to MMbors horoftftor Appointed* Tbo roaaindor of tho profoood •••nojmit would r^storo to tho b i l l tho proTltlont tmt tbo rotlromtnt of aonboro of tho >>dorol tooorvo domrd la too fom approved by tho Cosvittoo OB &anklnf and Curronoy of tho So oo of ftepro*o-t*ti TBO proTioioB for inoroaoinc tho •alarios of tho Board BOBbori « M otriokom o«t by the Mouoo CoBBlttoo OB fiOBkiBc «Bd Curronoy* Tbo pronriaioa for rotlrowont of Board Hatboro wao appro^od by tho Uouao CoBBittoo on Bonkin( and Curronoy. but i t wao otrlokaa out by OB of - O' od frooi tho floor of tho H U M of an^ ado tod by a Toto of 9t to 81*) 4Mm lino 19» ohango tho figuro I in tho paronthooot to tho fifuro S. (Rotot This aaondnottt noroly ehangoi tho BBnborlnf of tho para raph,) Pago 40a line I4 # ehant;o the comma following tho word "Preeidont* to a period and strike out everything from that point through tho period following tho word "Governor" on ago 49* lino 1* (Kotoi Thli i t a perfecting aaottd»etit ?etlgnod to bring thii ooetioB into oomformlty with the proriiion that tho Governor may continue to serve at a mamber of tho ~o rd aftor the torBlnatlom of his designation at Governor* By restoring tho applloabillty e* tho t ird oontOBOO 1of ftootlam 10 of tho ©-oral lUeorvo Act, tho Governor * torn at a mombor of tho Board will romaln fixed at 12 yoaro*) i f , lino t , ehaaco the figuro 1 la th§ parentheaea to the figure 4« (liet«i This eaondnont merely ehsnfoe the numbering •f tho paragraph.) 8 etlan Page) M. line IX, Immediately after tho word* *Soe. to«." laacrt the words "Kffoetiwa 90 day* aftrr tha •aaetMntt of the Baakia Aot of m e f i (Ilotai This la iatendad to allow roaaoaablo tin* far tha Board to laauo roguUt ona rofardln^ tho issu* • B O O ol Fa<!oral Raaonro notsa and for tha aarotary of tho rror aury to pr«a ribo t*-o fori of auci aotaa aof era tho anondod provision* of law bacoaa affactl^a.) Saotlom 110 bit lino tl, strike out tha aantanoe boglnalng with tho wards "Ko bank shall" sad ondlafr. with tho word "creator" la lino 1 oa p*go 57* Pago 57, lino 1£, insert aftor tho period and before tho quotation aarka tho followingt "On and after the data oa which tha regulations first adopted iav$or this saatlaa shall beeano efteetlTe, no tata beak or trust aoapaay which la a womber of tho >edoral Rreerve System shall neJka now real estate loans exeept to tho seae extant and under MM sama regulations and limitations as national banking astoaia* tlona are permittd to do ao«" (Votei These anenofconta would restore soetioa 210 to the fern reeosnended by Governor Sajajlae to tha house Coanittoo on ^aaklng and C rreney by strikin, out the limitation oa the tLggrocate aao'.nt of real estate loans -7- which any national bank my h*To outstanding and by restoring tho provision requiring -tato meaber banks to e< fly with tho saeo regulations and l i n i ations regarding real estate loans mm aro applicable to national basks*) Seotloa iO7 Pago 61. liao 3 , strlko a l l of •action 507 and subitlt^to tho followingi "Sao* SOT. fcffootiTo Fobruary |g 1036, sootlon 31 of tho Banking Aot of I6S3 la anondod to r«ao ao followai "98oo« 31* *o offloor, alroetor, or omploye' of any corporation or uaiiioorporat«4 astoelfttion 9 mo partner or amp'oyoe of any partnership, and mm ind rldual, en^a^ed In tho ISSJO, flotation, «n<or«rltln£, publio oalo, or distribution, at tsholoaalo or retail, or through syndioato p«rtlelpatioa, of stocks, bonds, or othor siailar secur-ties, •hall srrro at tho sasio tijso as sa off leer, director, or employee of any o*b«r bank* tho i odorml Heierro Board i t aathorisod and dlreotod to eniorce co»plianoe with this oootion, and t4 presoribo auoh rules and regulations ao i t dsraa nooooaary for that purpose.•* (Kotoi This) askssdnont salts tho prorislom that tho : edoral fieserve board »ay, by onoral regulations la Halted classes of oases, make exceptions to tho prohibition of tho section against interlocking iirootoratoo betwoon •ember banks and dealers in sesurltlos, avd add tho provision that tho Board U authorltod and dirootod to enforce coax llanoo with tho ••otloa* Tho word "pri•arily" before tho word "engaged" in liao • la also osjlttod by tho O M ) »>otlo» W Fags Stm llm* 14, striVs a l l of Motion 889 and substitute tho followingi •Soo. 329. tffootli* January Ig 1W6. soetloa 26 of tho Padsral Keaorro Act, as amondod, la farther avocdod by striklmg out tho loot para*r« ph of such sootleni tho paragraph of ooetion 26(a) of tho iodsral *o*or»o A t , AS •mondod, which oow^noos with tho WMPdi fA •aj rity of tho •horot of tho ©•! itol otook of any oueh cor oration* io anondod by •trlkiif ovt a l l of n< id paragraph xoopt tho fir i t •ontonco thoroof j and tho Aot ontltlod •Am Aot to ouyr loownt oaclotlac I*"* •caintt ual«wfal restraints and moaopolloa, and for othor purpo«oo« (S8 Stat, 7S0)# appronod Ootobor 16, 1»14, as anondod, i t furthor OJi«ai#d (a) by striking out soetlon tA thorwof and (b) by s.bstitutiag for tho f i r s t throo paragraphs of oootaoa i th roof tho followingi " 9 iostion •• So dirootor, of loor, or on^loyoo of any •ombor bank of tho >«doral Eosonro syotom or any braaoh thoroof shall bo at tho samo tl«o a prl^at^ bankor or a dirootor, ffloor, or SKploywo of any otfeor bank, banking association, savin s bank, or trust oosroany organlsod u«do? tho "ational ^nk Aot or organitod undor tho la«s of any Stats or of tho Bistrlot of Colwnbia, or any branch t oroof, sasopt any ono or asro of tho following or any branch thoroofg "•(1) A bank, bonking association, sayings bank, or trust eonpeny, «ore than 90 per cent of the stock of which i t owned directly or indirectly by tho serporation of which tho nited Spates or b any nlt#d States dirootly or indirectly owns laoro than 90 p#r cent of tho stock* ••(I) A bank, banking aooooiation, taTin^o bank or trust cor any which has bo«n plaooct formally l a liquidation or which i s in th« hands of a roo»ivor # conservator or othor o f i i o l a l oxoreisin^: similar functions* "•(8) A oorpcrafeion principally engaged in international or foreign banking or tanking in a dependency or insular possession of tho United States which has entered into an a. reeKent with the >od«ral R«sorvo Board purs\iant to section 25 of the federal I eserre Act* *•(4) A tank, banking association, savinfs bank, or tr t t company, more than 60 i-«r cent of the stock of whic i s owned directly or indirectly by pern^ns who own Urectly or indirectly wore t a n 60 par oent of the otock of s ch member ank* "•The Kodrral ieserve enforce ooiapliajee wit oard i s a u t o r i s e ' an directed t o t h i s sect i n , and t o prescribe such rules and regulations as 5t toems neceso ry for that i urp-se.'" / / ' •10- (Notei This immAmmat enumerates the l i r i t o d e l t i a e i of eauos la which th«re nay be interlocking d i r e c t >rs between rceaber banks and other banV* \m er M e t ten 3 of the Clapton Act# I t eliwinatoo the : r e v i s i o n that the Board nay allow Interlocking d i r e c t o r a t e s by general regulations where banVe are not la mibrtantial co»petiti n$ and proTldea that the -oard la authorir*1* md directed t o enforce eo»plla ee with the • • e t l o n arid t o prea ribe aueh rules and regulations as It dee»* neo«>s»»ry for s.ch pvir-.ose. ( o n J l l o t i n f provisions of t e o t l o n tb an•'. rectlon 26(a) r e l a t i n g t o foreign or international banking corpora t i o n s are repealed. The provision repealing section &A of t o Clay%o« is/1 i s not charged by t h i s anend»*nt») Additional section At the and of the b i l l add a new s e c t i o n reading as followsi "SKC, The r i g h t t o a l t e r 0 anend, or repeal t h i s Aet i s hereby expressly res«rTed* If any pro-vision of t h i s Act, or the application thereof to any person or elreunctance, i s held i n v a l i d , the reminder of the Act t and t h e application of such prevision to other *r*o s or cire^icstt noes, s *11 not bo affected t ereby," (Notet This i s sternly the usual saving clause a t ached to b i l l s of t h i s character and i s bel5ev*«3 t o be desirable in view of the large number ol technical o»end>on-s t o the e x i s t i n g law contained in t h i s b i l l * ) '
@FedFRASER