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Jffice Correspondence
Governor Ransom

Date March 29,193s

Mr» Wyattj General Counsel*

Tentative Outline of
Kayaking Program*

In accordance with our conversation, I am handing you herewith a
tentative outline of a banking program which Messrs* Thurston, Goldenweiser, Morrill and the undersigned have unanimously agreed to recommend
for your favorable consideration*
We are preparing a discussion of some of the points with respect to
which our recommendations differ from those outlined by the Chairman and
shall submit the discussion to you as soon as we can complete it*

General C


March 29, 1938,


For convenience, each item is typed on a separate
page* Some of the items nvill be discussed in a separate
memorandum to be prepared later*

Section 1 of the Banking Act of 1939 shall read as follows:
All agencies of the Executive branch of the Government shall use the
powers entrusted to them with a view to contributing to economic stability and the greatest sustainable employment of labor and of the
productive resources of the nation*
A section of the Federal Reserve Act should be amended by
adding the following! All the powers of the Federal Reserve System
shall be directed toward the improvement of banking and credit conditions and the regulation of the volume and cost of credit with a view
to economic stability and the fullest sustainable employment of labor
and of the productive resources of the nation, in accordance with the
general objective of the Government stated in Section 1 of the Banking
Act of 1939. The Board of Governors of the Federal Reserve System
shall from time to time recommend to Congress such legislation as in
its judgment will enable the Federal Reserve System better to serve
this purpose•

Ownership of Reserve Banks
Retire all capital stock of Federal Reserve banks, repeal
all provisions relating to such stock, and provide that, after all
expenses have been paid or provided for and after adequate reserves
for losses, depreciation and other contingencies have been created
with the approval of the Board, the remaining net earnings shall be
disposed of annually as follows: l/4 shall be paid to the Treasury
and S/4 shall be added to the surplus, until the surplus amounts to
as much as the capital and surplus as of December 31 next preceding
the date of the enactment of this Act; and thereafter l/2 of such
net earnings shall be paid to the Treasury and l/2 added to the surplus fund^ Retain existing provision that, upon dissolution of Federal Reserve banks, the surplus shall go to the Government•

Membership in the System
Abolish membership in the System as such and repeal all
provisions relating to acquisition and termination of membership;
entitle all insured banks to credit facilities of Federal Reserve
System and all other benefits now enjoyed by member banks; require
all insured banks to maintain reserves on deposit with Federal Reserve banks and to comply with all regulations and restrictions
which Congress has deemed necessary for the creation and preservation of a sound banking system, except (a) those relating to admission to and withdrawal from the System, (b) minimum capital requirements, and (c) as to small banks, the requirement that they remit at
par for checks drawn upon themselves*

Exchange Charges
Permit each existing bank with deposits not exceeding
#1,000,000 and located in a place with a population not exceeding
2500 in which there is now a non-par bank to charge exchange in
remitting for checks drawn upon itself, and grant the same privilege until 1941 to other existing banks not now on the par list*
Permit all insured banks to absorb exchange charges on checks drawn
upon such banks•

Capital Requirements
Require capital adequate in the judgment of the supervisoryauthorities in relation to deposit liabilities and other corporate
responsibilities and repeal all specific statutory requirements as to
minimum capital* This would apply to minimum capital required for
organization of national banks, minimum capital required for insurance
of deposits of State banks, and minimum capital required for branches
of both classes of banks*

Examinations and Reports
Repeal all provisions requiring minimum number of examinations per year and publication of minimum number of reports of condition each year, and provide for such examinations and reports as
supervisory authorities deem necessary*

The program should include a complete revision of existing
reserve requirements to be worked out on a sound and practicable
basis between now and January 1, 1939. In this connection consideration should be given to the question whether the present system of
classifying cities as central reserve, reserve and non-reserve cities
should be abolished or changed* Also whether vault cash should be
counted as reserves and -whether higher reserves should be required
against deposits due to other banks•

Directors of Reserve Banks
Provide for a board of nine directors, four appointed by the
Board of Governors, four elected by insured banks, and one appointed
by the F«D«I«C« All to be actively engaged in their districts in commerce, agriculture or industry and none to be directors, officers or
employees of banks* Group insured banks in each district according to
si&e and let each group elect one director every four years for a term
of four years, the terms being staggered so that only one such director
would be elected each year* Provide that no director shall serve for
more than two full terms in succession*

Presidents and First Vice Presidents
Provide that the board of directors of each Federal Reserve
bank shall nominate to the Board of Governors for a term of three years
a President and a First Vice President "whose nomination as well as salary shall be subject to the Board's approval*

Chairman and Federal Reserve Agent
Separate the offices of Chairman and Federal Reserve Agent,
authorizing the Board to designate one of the directors of each Federal Reserve bank as Chairman and to appoint a different person, who
need not be a director, to serve as Federal Reserve Agent• The Board
of Governors also to designate one of the directors as Deputy Chairman*

Consolidation of Bank Supervisory Functions
Abolish the office of the Comptroller of the Currency, transferring all currency functions to the Treasurer of the United States,
transferring the function of supervising the liquidation of insolvent
banks to the F*D«I#C# and transferring all other functions to the Board
of Governors of the Federal Reserve System* Transfer all bank examination and supervisory functions from the F«D.I«C« to the Board*

Decentralization of Administration
Provide that the Board shall decentralize the administration
of matters affecting individual banks by authorizing the Reserve banks
or representatives of the Board stationed at the Reserve banks to act
upon such matters in accordance with general policies, regulations and
instructions issued from time to time by the Board and subject to appeal
to # or review by, the Board under regulations prescribed by the Board*
For this purpose authorize the Board of Governors to delegate the performance of specific duties and functions, other than determination of
national or System policies and promulgation of regulations, to individual members of the Board, to members of its staff# or to Reserve banksi

Membership of the Board
Provide that the Board of Governors shall consist of the
Chairman of the F.D.I•C. as a member ex officio and six other members
appointed for terms of twelve years, one term expiring every two years*
Provide that the Chairman of the F.D.I.C. may designate another member
of the Board of the F.D.I•€• to serve on the Board of Governors, in
his absence* Provide for assignment of space by Board of Governors in
its building or an annex to be constructed for personnel of F.D.I.C.,
with reimbursement for proportionate share of cost of such space*

Chairman of the Board of Governors
Provide that the Chairman of the Board of Governors may be
appointed from any part of the country, that he shall serve as Chairman at the pleasure of the President, and that he shall be an ex
officio member of the board of directors of the F.D.I.C* Provide that
he may designate another member of the Board to serve on the board of
the F.D.I.C. in his absence.

Open Market Committee
Transfer to the Board of Governors all functions of the
Federal Open Market Committee•

Authorize establishment of branches regardless of State
law anywhere within the State in which the head office is located
and regardless of State lines anywhere within the Federal Reserve
branch or head office zone in which the national bank is located,
provided that, before any such branch is established, the supervisory authorities shall be satisfied that additional banking facilities are needed and that the establishment of the proposed
branch will be consistent with the maintenance of sound banking

Bank Holding Companies
If a bank holding company bill is enacted at this session of
Congress, any desirable amendments to it should be included in the program for 1939* If such a bill is not enacted at this session of Congress,
there should be included in the program for 1939 a complete revision of
the bank holding company legislation*

Eligibility for Rediscount
Strike out all present provisions of sections 13 and 15a of
the Federal Reserve Act relating to eligibility of paper for discount
and substitute provisions of section 10(b) without the penalty rate.

Direct Purchase of Treasury Obligations
Enable Federal Reserve banks to purchase Treasury bills with
maturities not exceeding 90 days directly from the Treasury*

Discount Rates
Provide that discount rates shall be established monthly
(instead of every 14 days), or oftener if deemed necessary by the

Modification of Restrictions on Underwriting
Amend the law so as to permit member banks to underwrite
investment securities of the same character and in the same amount
as they are authorized to purchase* but forbid them to engage in the
distribution of such securities except through dealers or through a
national securities exchange*

T6oh.z3i.cnl Amendments
If a program of banking legislation is proposed along the
lines indicated, there vdll be a number of technical amendments
•which should be included in a portion of the bill corresponding to
Title III of the Banking Act of 1935.