Full text of Marriner S. Eccles Papers : [Summary of Proposed "Banking Act of 1935"], Box 51, Folder 4, Item 7

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The following is a "brief running summary of proposed banking
legislation* The bill is to "be known as the "Banking Act of
1935J1 Its principal provisions are:
Title I - Federal Deposit Insurance Corporation
Amendments.
l f Existing Temporary Funds are merged into the Permanent
Insurance Planf which becomes operative immediately upon enactment
of the "Banking Act of 1535*!t
2. $5f000 continues to be the maximum insurance protection
f?r each depositor in any bank* Trust funds are insured up to
$5f000 for each trust estate.
3. Maximum limit of assessment of l/l2 of 1$ of total deposits
is substituted for obligatory stock subscription amounting to 1$
of total deposits with liability for repeated assessments thereafter.
A uniformly lower assessment may be fixed by the Board of Directors
for mutual savings banks •
4. Banks not members of the Federal Eeserve System are permitted to withdraw from insurance after notice to their depositors
and to the Corporation* Similarly, after adequate notice and
after a hearing the Corporation may terminate the insured status
of any bank*
5. The Corporation^ present right to buy assets of closed
member banks is extended until July 1, 1936f to open banks when
it will facilitate mergers and avert loss. For this purpose, the
Corporation may also make loans to insured banks or guarantee other
insured banks against loss in assuming liabilities of insured
banks.
6% The proceeds derived from the sale of capital stock of
the Corporation may be allocated between capitaLand surplus in
such amounts as the Board of Directors may prescribe, so that in
the event of losses exceeding the proceeds of the annual assessments




-2the Corporation will not "be forced to operate with impaired
capital* Dividends on capital stock of the Corporation are eliminated*
7* Detailed administrative and technical changes, which seem
advisable in the light of the experience of the Corporation, include
the following;
(a) Certain important terms used in the Act have "been defined;
(b) Mechanics of pay-offs have been revised and clarified;
(c) The Corporation is given the right to require insured
"banks to maintain adequate fidelity and "burglary
insurance;
(d) The standards for determining whether or not "banks should
"become insured are set forth;
(e) Insured banks not members of the Federal Reserve system
are required to make reports of conditions, and the
Corporation may order publication of such reports;
(f) Corporation approval is required "before a merger ot
consolidation of insured banks with non-insured banks,
wr before a reduction of capital of non-member banks
takes place;
(g) Other miscellaneous changes:
!• The use of the words !lDeposit Insurance11 in
the name of a bank is prohibited;
ii* Examiners of the Corporation are prohibited
from borrowing from insured "banks;
iii* Criminal provisions are extended to protect
all insured banks •
Title II ~ Federal Reserve Act Amendments*
With respect t« Federal Reserve Banks:
1* Combine offices of Chairman of the Board of Directors
and Governor at each of the Federal Reserve banks, appointments to
be made annually by the directors of the bank, after approval by
the Federal Reserve Boards Vice-Governors are to be selected in
the same manner*
2* No members of the Board of a Federal Reserve bank, except
Governor and Vice-Governor, shall hold office for more than six
consecutive years*
With respect to the Federal Reserve Board:
3* Change qualifications for future appointive members of
the Federal Reserve Board by providing that they shall be persons




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well qualified by education or experience or both to participate
in the formulation of national economic and monetary policies# The
present geographical limitation shall rot apply to selection of
future Governors.
The Governor's membership on the Board shall expire when he is no longer designated as Governor by the President,
4. Increase the salaries of future appointive members tp
$15,000 per annum, with compulsory retirement at 70 on $12,000
pension. Present members to be eligible for retirement at 70. Proportionate pensions will be allowed for service of less than twelve
years.,
5. The Board shall be empowered to., delegate specific powers
and duties not involving the determination of national or System
policies to individual members of the Board or its representatives.
With respect to credit control:
6. Change Section 12A of the Federal Reserve Act so as to
provide for an open-market committee to consist of the Governor and
two members of the Board elected annually by the Board, and two
governors of Federal Reserve banks elected annually by the governors
of the Federal Reserve banks.
This committee shall make recommendations about discount rate policies and shall formulate the System's
open market policies which shall be binding on the Federal Reserve
banks.
With respect to collateral requirements:
7. Any sound asset of a member bank shall be eligible for
discount at a Reserve bank, subject to regulations of the Federal
Reserve Board, and the Board shall also have authority to prescribe
limitations on maturity of advances to member banks.
8# Section 14 is amended so that obligations the principal
and interest of which are *£uaranteed by the United States shall be
eligible for purchase by Federal Reserve banks without regard to
maturity.
9. Collateral requirements for Federal Reserve notes shall be
repealed, and the office of Federal Reserve Agent shall be abolished.
With respect to reserve requirements:
10. In order to prevent injurious credit expansion or contraction, the Federal Reserve Board may change reserve requirements




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as to any or all Federal Reserve districts and/or any or all classes of
cities, and as to time and/or demand deposits.
With respect to capital requirements;
11. At any time prior to July 1, 1937, the Federal Reserve Board may
admit any insured non-member bank to membership in the Federal Reserve
System; and may waive the capital requirements for admission; provided that
such "bank shall comply with all of the regular requirements of members within such time as the Federal Reserve Board shall prescribe.
With respect to real estate loans:
12. Section 24 of the Federal Reserve Act is amended to permit loans
to be made on amortization basis for periods of 20 years and up to 75 per
cent of value of property.
The geographical limitation as to location of
real estate is removed.
The aggregate amount of real estate loans plus
other real estate (except bank premises) is not to exceed 61 per cent of
time deposits or 100 per cent of capital and surplus, whichever is the
greater. All real estate loans are to be secured by first liens, but second
and subsequent liens may be taken to secure debts previously contracted in
good faith. The limitations of Section 24 are made applicable to State
member banks.
Title III - Technical Amendments.
Section 301 exempts "accidental" holding company affiliates from voting permit requirements where not engaged as a business in holding bank
stock.
Section 302 provides that member banks need not divorce securities
affiliates which are in formal liquidation.
Section 303 (a) makes it clear that the prohibition against security
dealers accepting deposits does not prevent banking institutions from dealing in, underwriting, purchasing and selling investment securities to the
extent permitted to national banks and does not prevent banking institutions
from selling mortgages without recourse. (National banks are limited, in
dealing in and underwriting, to Government obligations, general obligations
of States or political subdivisions, obligations issued under authority of
Federal Farm Loan Act, by Federal Home Loan Board or Home Owners1 Loan
Corppration,) (b) Exempts business institutions accepting deposits solely
from their employees, from examination and publication of reports of condition; and requires private banks to bear expense of their examination when
made by Federal authorities.
Section 304 terminates double liability of shareholders of national
banks on Juljr 1, 1937.
Section 305 corrects omission of national banks in Alaska and Hawaii
from benefit of amendment repealing law requiring directors of national
banks to increase their shareholdings.




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Section 306 gives Federal Reserve Board power to control con-*
nections of officers, directors, and employees of "banks with
securities companies by regulation rather than by issue of individual
permits•
Section 307 (a) eliminates any question of power of member "banks
to "buy or sell stocks solely for the account of their customers and
permits national "banks to purchase for their own account investment
securities not to exceed 10 per centum of unimpaired capital and
surplus* (b) Restates existing prohibition against national "banks
purchasing stock for their own account•
Section 308 requires new national "banks to have paid-in surplus
equal to 20 per cent of capital, subject to waiver as to Sta.te "bank
converting into national bank.
Section 309 eliminates possibility that present law prevents
corporations other than a bank from conditioning transfer of their
shares on transfer of bank stock.
Section 310 (a) permits holding company to vote to place bank
in voluntary liquidation without obtaining voting permit. (b)#
Since shares held by bank as sole trustee cannot be voted, same are
excluded from determination whether resolution adopted by requisite
number of shares* (c) Eliminates any doubt that holding company
with voting permit may cumulate its shares as may other shareholders*
Section 311 gives Comptroller discretion to permit converting
State bank to carry over sound assets not conforming to requirements
as to assets held by national banks*
Section 312 allows Comptroller to delegate manual labor of
countersigning bond transfer.
Section 313 permits national bank branches located outside
United States to charge interest rate permitted by local law*
Section 314 provides for national banks gradually increasing
surplus out of earnings, until equal to capital.
Section 315 extends criminal provisions applicable to member
banks to include insured banks*
Section 316 gives Comptroller closer supervision over banks in *'
voluntary liquidation.




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Section 317 extends present prohibition on use of word*
"national", "by "banks other than national "banks, to include combinations
of such word*
Section 318 corrects oversight "by requiring member "banks to
reduce stockholdings in Federal Reserve bank: upon a reduction of
surplus •
Section 319 requires State member banks to publish reports of
condition*
Section 320 places State member banks on parity with national
banks as regards loans on government obligations.
Section 321 permits Federal Reserve bank direct loans to private
business to be made on adequate indorsement or security, instead of
requiring both as under present law*
Section 322* Reference to par value of Federal Deposit Insurance
Corporation stock in the "Loans to Industry" Act changed to "amount
paid for said stock."
Section 323 (a) authorizes Federal Reserve Board to define
"deposit" and related terms for reserve and interest requirements
respecting deposits* (b) Permits amounts due from other banks to
be deducted from gross deposits, instead of amounts due to banks,
in determining reserve requirements* (c) Extends power to regulate
payment of interest by member banks to include all insured banks,
except mutual savings and Morris Plan banks not members of system*
(d) Requires member banks to maintain same reserves against government deposits as against other deposits*
Section 324 permits waiver of reports and examinations of bank
affiliates where deemed unnecessary fully to disclose relationship*
Section 325 (a)* Extends prohibition against loans and
gratuities, to examiners of all insured banks* (b) Extends prohibition against disclosure of confidential information to Federal
Deposit Insurance Corporation examiners* (c) Corrects impractical
feat-pres of law prohibiting loans to executive officers, by vesting
certain discretion in the Federal Reserve Board, substituting power
of removal fron office for present criminal provisions, and extending
time within which existing loans must be paid*
Section 326*- Excepts affiliates from existing requirements on
loans whore affiliation arose out of foreclosure by bank on collateral,
and excludes affiliate engaged solely in operating property acquired
for bank purposes controlled by bank in fiduciary capacity*




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Section 327 exempts loans for industrial purposes made with
Federal Reserve Bank or Beconstruction Finance Corporation from
existing restrictions on real estate loans "by national "banks.
Section 328 amends Clayton Act to permit Federal Reserve Board
to supervise matter of interlocking directorates throi3gh general
regulations instead of "by individual permit s»
Sections329 and 330 bring law governing consolidation of
national "banks into conformity with that governing consolidations of
State and national banks, offer additional protection to dissenting
shareholders, but require notice of dissent to be given when vote
to consolidate is had*
Sections 331 and 332 extend to Federal Deposit Instirance
Corporation protection now given other Federal institutions against
misleading use of name and extend to all insured banks law making
robbery of member banks a Federal offense•