View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

October 22, 19146.


One cannot expect to find definite and specific statutory
authority for all actions taken by the Board or by any other Government agency* Much of the legislation enacted by Congress necessarily
is written in more or less general terras because it would be impossible for the members of Congress or for anyone else to anticipate
and to deal expressly with all questions which might arise concerning
the application of a law to particular situations* As to many mattery
Congress has considered it necessary or advisable to vest in administrative agencies broad discretionary powers, with only vague statutory
guides* Examples of this are the laws administered by the Federal
Trade Commission and the Interstate Commerce Commission* Even though
it were otherwise possible and practicable to draft legislation expressly covering every contingency, the legislative process is such
that complete and carefully drafted legislation is the exception rather
than the rule* Thus, questions of interpretation inevitably arise with
respect to laws affecting the authority of Government agencies, just as
they do in case of other laws* As to many of these questions, there
may be grounds for reasonable differences of opinion*
In these circumstances, in order to properly discharge its
responsibility for the administration of a law, the Government agency
(in the absence of court decisions) must decide what it believes to be
the correct interpretation and proceed accordingly* Government agencies would be derelict in the performance of their duties, laws would
be inadequately and unfairly administered, and the intent of Congress
would be defeated if such agencies acted only in those instances in
which they could point to statutory language which dealt with the precise situation and left not a shadow of a doubt as to the authority to
take the proposed action*
The provisions of law relating to the Federal Reserve System
are much more detailed -than some other Federal statutes, yet there are
a number of instances in which the statutory provisions are in general
terms and even after many years it would be difficult to determine precisely how they should be made more explicit, as for examplet
1* Open Market Operations» The law provides that no Federal
Reserve Bank shall engage or decline to engage in open market operations
except in accordance with the directions of and regulations adopted by
the Open Market Committee* The principles governing the C admit tee are
stated to be that the time, character and volume of the purchases and
sales shall be governed with a view to accommodating commerce and business and with regard to their bearing upon the general credit situation
of the country* The Ccramittee must determine for itself how it should
operate under these broad provisions*


Removal of officers and direotors of member banks*


-2statute does not specifically define the term "unsafe and unsound practices11 nor is it believed that it would be feasible for Congress to
attempt to specify every case that would be deemed to be covered by
these terms• Bat the Board should not be charged with exceeding its
powers when it does interpret these terms as applying to a practice
which is not specifically mentioned in the law and therefore removes
an officer or director for continuing the practice* In other words,
Congress manifestly intended that the Board should exercise its
3* Holding company affiliates# While the law is explicit
to a certain extent in its definition of a holding company affiliate
as applying to a case where the company owns or controls a majority
of the shares of capital stock of a member bank or more than 50 percentum of the number of shares voted for the election of directors
of any one bank at the preceding election, even these terms have
given rise to questions of interpretation, and whan the law goes on
to provide that such a company includes one that "controls in any
manner the election of a majority of the directors of any one bank11,
the problem becanes much more difficult* Yet " h Board cannot escape
the responsibility for determining *hat this provision means in a
given case and applying it according to its best judgment*
k* Conditions of membership* The law prescribes a number
of limitations upon admission of banks to membership in the System,
but within these limitations it leaves considerable latitude for the
exercise of judgment when it provides that in acting upon an application the Board shall consider the financial condition of the applying
bank, the general character of its management, and whether or not the
corporate powers exercised are consistent with the purposes of the Act,
and farther provides that the admission of the bank to the System shall
be subject to such conditions as the Board may prescribe pursuant to
the provisions of the Act* Biere are, of course, differences of opinion as to what conditions may properly be prescribed, and differences
of opinion have existed over the whole period of the administration of
the law* On ihe other hand, it would be very difficult to arrive at
any specific formula which could be written into the statute to cover
all cases, unless, for example, it were provided simply that all commercial banks be members of the Federal Reserve System* Even then there
would no doubt be unforeseen questions*
Many other illustrations could be given but these would seem
to be sufficient to make the point clear•