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Ir-75
SUKMAEX OF PROPOSED
"BANKING ACT OF 1955"
(H. R. 5357, S. 1715)
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OP CONTJi;TS
OF SJMikiiY OF PROPOSED BAMKIMG ACT OF 1955
TITLE I. FEDERAL DEPOSIT INSURANCE AMENDMENTS.
IN PLAN OF DEPOSIT INSURANCE
Cost of Insurance to Banks
Amount of Deposits Insured
,
?• 2
p» 3
UHAT BANK3 -ARE INSURED; TERMINATION OF INSURED STATUS
Transfer of Members of Temporary Fund to
Permanent Insurance Plan
Insurance of Banks Entering Federal Reserve System
Insurance of Additional Nonmember Banks
Insurance Terminated for Certain Banks June 30^ 1935
Termination of Insurance by Expulsion
Voluntary Termination of Insurance
Termination of Insurance by Assumption of Deposits
Termination of Insurance by Termination of
Federal Reserve Membership
Insurance of Nonmember Banks Terminated July 1, 1937
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GENERAL CONTROL OF INSURED BANKS
Examination of Insured Banks
Publication of Examination Reports
Condition Reports of Insured JJonmember Banks
Merger #f Insured Bank m t h Non-insured Bank
Burglary and Fidelity Insurance
Insurance of Deposits to be Stated in Advertisements
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CHANGES IN PROCEDURE FOR PAYING INSURED DEPOSITS
Organization of "New Bank"
Investigation af Claims for Insured Deposits
Discharge of Federal Deposit Insurance Corporation
Liability for Insured Deposit
Participation of Federal Deposit Insurance
Corporation in Assets of Closed Bank
Criminal Provisions
Federal Deposit Insurance Corporation as National
Bank Receiver
GENERAL CHANGES; PORBKS AtiD OkG^IIZATION OF THE FEDERAL
DEPOSIT INSURANCE CORPORATION; UTC.
Powers of Federal Deposit Insurance Corporation
Directors
3
4
4
5
5
7
7
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p. 8
8
9
9
10
10
10
p* 11
p* IE
p* 12
p« 13
p* 13
p* 13
P* 14
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Acting or Deputy Comptroller of tho Currency
Investigation of Banking Conditions
Capital Structure of the Federal Deposit
Insurance Corporation
Bonds and Other Obligations oi 7f>deral Deposit
Insurance Corporation
Purchase of Closed Bank Assets by Federal
Deposit Insurance Corporation
Loans to Operating Basics
Use of Other ExamihatiJin and Condition Repots
Expenses of the Federal Dbposit Insur&tice Corporation
Jurisdiction of Federal Courts
Definitions
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17
17
17
18
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TITLE II • AMEHDMENTG iiuPliICIALLY AFFECTING Fjfl/fifeii, HSSEfitS 3YSIEM
SEC. 201
SEC- 202
SEC. 203
Governor of Federal Reserve Bank. Appointment - Qualifications - Duties
Abolition of Office of Federal Reserve Agent
Vice-Governor of Federal Reserve Banks
Limitation on Federal Reserve Bank
Directors' Continuous Service
Capital Requirements for Admission td
Federal Reserve System
Qualifications of Governor and Members of
Federal Reserve Board
Salaries and Retirement of Members of
Federal Reserve Board
Term of Governor of Board Subject to
President's Pleasure
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F
*. 20
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SEC. 204
Assignment of Duties by Federal Reserve Board
p« 23
SEC. 205
Federal Open Market Committee. - Membership
and Powers
Open Market Committee to Lake Re conrnier.de tions
Regarding Discount "Rates
p« S3
SEC. 206
SEC. 207
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Requirements as to Eligibility *f Paper for
Rediscount
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Obligations Guaranteed by United States
Eligible for Purchase by Federal Reserve
Banks
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SEC* 208
Federal Reserve Note Issue Requirements
Federal Reserve Notes a First Lien
Reserves to be Maintained by Federal
Reserve Banks
p. 25
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SEC. 209
Reserve Requirements of Member Banks
p. 27
SEC. 210
Real Estate Loans by Member Banks
State Member Banks Subjected to Real
Estate Restrictions tf National Banks
TITLE III.
SEC. 301
SEC* 302
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.
p. 27
p. 28
TECHNICAL AMENDMENTS
"Accidental Holding Company Affiliates"
eliminated
p. 29
Divorcement of Securities Companies in
Liquidation not Required
p» 29
SEC, 303(a) Section 21 of Banking Act Clarified;
Inapplicable to Banks Selling Mortgages
p# 29
SEC. 303(b) Examination of Institutions Receiving
Deposits From Own Officers or Employees
Not Necessary - Examined Institutions
to Pay Costs
p. 30
SEC. 304
SEC. 305
SEC. 306
Double Liability on National Bank Stock
Terminated
p. 30
Directors of Nonmember National Banks
Relieved of Stock Ownership Requirement
p. 31
Interlfeking Relationships Between Member
Banks and Securities Companies
p« 31
SECS. 307(a) Ohaiige in Amount of Investment Securities
& 307(b)
of One Obligor That May Be Held By Member
Bank
Purchase of Shocks for Account of Customers
SEC. 308
SEC. 309
p. 32
p. 32
Surplus Required for Organization of
National Banks
p* 33
Separation of National Bank Stock Certificates
from Those of Otner Corporations
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SEC. 3lO(a) Voting Permit Unnecessary for Liquidation
P* 33
SBC* 310(b) National Bank Shares That Cannot Be Voted
Not to Be Counted .
P. 34
SBC* S10(c) Limited Voting Permits and Cumul&tiTje Voting
Clarified
P* 34
Retention of Ireli^itle Assets by
Converting I3e.nks
?. 34
312
Comptroller May Delegate Countersinning
P. 35
MB. 313
Interest Rates Charged by National Bank
Brandies Outside United States
P. 35
SEC. 314
Accumulation of Surplus by National Bank
P. 35
SEC. 315
Criminal Provisions Re i&ibezelements,
False Entries> Etc*, Extended to
Insured Banks
%
P* 36
SEC. 316
Voluntary Liquidation of National Banks
P» 36
SEC. 317
Prohibition of Use of W#rd "National11
P. 36
SEC. 318
Reduction in Federal Reserve Bank Stock
to Conform te Reduction in Member Bank's
Surplus
P. 37
Publication of Condition Reports of
State Member Banks
P« 37
Limitation on Loans by lumber Lanks on
Government Obligations
P« 37
Indorsement *r Other Security Sufficient
for Reserve Bank Discounts for Individuals
P« 38
Changes in Wording of Section 13(b) #f
Federal Reserve Act
•,. 38
SEC. 311
sfc.
S2C. 319
sacUXJC *
320
321
SEC. 322
SEC. S23(a) Definition of Various Classes of Deposits
by Federal Jteserve Board
SEC* 323(b) Deduction of "Mounts Due From Banks" in
Computing Reserves
P. 38
39
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SSC* 323(c) Board1 s Control over Payment of Deposits
and Interest Made liore Flexible
Inspired Ban^s Subjected to Interest Rate
Limitations
p* 39
SEC* 323(d) Reserves Required on Government Deposits
p# 40
SEC* 324
Waiver of Reports or Examinations of
Affiliates
p* 40
p. 40
SEC* 325(a) Criminal Provisions Clarified, Extended
to Insured Banks
p. 40
SEC* 325(b) Federal Deposit Insurance Corporation
Examiners Subjected to Criminal Provisions
p* 41
S2C* 325(c) Borrowings by Executive Officers of Member
Banks•
Elimination of Criminal Penalty
p. 41
SiiC* 326
Restrictions on Loans to Affiliates Relaxed
?• 42
SEC. 327
"Working Capital(t Loans Relieved of Real
Estate Restrictions
Interlocking Bank Directorates
p* 43
p* 43
SEC* 328
SEOS. 329(a)
& 329(b)
National Bank Consolidations
p* 44
SECS* 330(a>
& 330(b)
Consolidation of State and KaLior.al Banl:s
P* 44
SEC* 331
SEC* 332
Limitation on Use of Words "Deposit
Insurance11
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Robber;/ of Insured Bank Punished
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S U M M A R Y
O F P R O P O S B L
0 F
" B A N K I N G
A C T
1 9 3 5".
There are summarized below the provisions of the proposed
"Banking Act of 1955"•
(fi*R. 5557 auri 6, 1716 as introduced .In
Congress under date of February 5 and February 6, 1935, respectively),
Thic is intended merely as a brief statement of the apparent effect
of the principal provisions of the bill but is not intended as a legal
interpretation of the language of the bill or as a comment thereon.
Title I of the bill is summarized by subject matter because
its provisions are closely interrelated. Titles II and III are summarized section by section•
The references in Title I to "Act" refer to the Federal
Reserve Act and the numbers following the word "Act" refer to sections
thereof. The references in Title I to "Bill" refer to the proposed
"Banking Act of 1935", and the numbers immediately after the word
"Bill" refer to the numbered subdivisions of Title I while the succeeding parenthetical numbers, if any, in such references refer to
the numbered paragraphs unckvr such so divisions.
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TITLE I, FEDERAL DEPOSIT INSURANCE AMENDMENTS,
MODIFICATIONS IN P U N OF DEPOSIT INSURANCE.
Upon the enactment of the bill the temporary insurance plan
now in existence will be converted into a permanent plan, changed
in some respects from the permanent plan now provided for by law.
Cost of Insurance to Banks, — In lieu of the assessments aggregating not more than 1 per cent of insured deposits
to which banks insured under the existing temporary insurance plan
are subject (Act, 12B(y)) and of the requirement that banks insured
under the permanent plan purchase stock in the Federal Deposit Insurance
Corporation (Act, 12B(e)) and then be liable for unlimited assessments
(Act, 12B(1)), insured banks under the plan set up in the bill will
be subject to an annual assessment of one-twelfth of 1 per cent of
their total deposits, which is payable semi-annually. The Federal
Deposit Insurance Corporation Directors may fix a lower rate or provide
for a refund or credit on such assessment, not to exceed 50 per cent
of the last annual assessment; but such lower r^to, refund, or credit,
must apply to all insured banks, except that a special rate may be set
for insured mutual savings banks. (Bill 8 ) .
The refund which, under
the old law, would be due to a member of the Temporary Insurance Fund
upon the dissolution of such Fund is to be credited to the bank by the
Corporation if the bank remains in the permanent insurance, and applied
to the bank*s annual assessment until exhausted. (Act, 123(y))j(Bill
8(4) )• As in existing lav;, the declaration or payment of a dividend
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-3by a bank which is in default in an assessmunt auo the Corporation
(Act, 12B{1)) is made punishable by fine or imprisonment or both.
(Bill, 22(3))•
Amount of Depoeics Insured. — In lieu of the existing
provision of the permanent insurance plan insuring* 100 per cent of
deposits up to $10,000, 75 per cent between £10,000 and v50,000, and
50 per cent above $50,000 (Act, 122(1)), it is provided that $5,000
shall be the maximum amount insured for one depositor, conforming in
this respect to the now existing plan for Temporary insurance (Act,,
I2B(y)). However, the amount of the insured deposit is to be computed after deducting offsets (Bill 12, 3(12)). Deposits of trust
funds are insured to the extent of $5,000 for each estate in addition
to the insurance of other deposits owed the trust beneficiary.
(Bill
3(12), 8(5)). Trust funds deposited by insured fiduciary banks in
other insured banks are likewise insured to the extent of $5,000 for
each trust estate represented. (Bill 8(5)).
WHAT BANKS ARE INSURED; TERMINATION OF INSURED STATUS.
Transfer of Members of Temporary Fund to Permanent Insurance Plan. — All operating members of the present Temporary Insurance
Fund continue to be insured, and are automatically transferred to the
permanent insurance plan (Bill 5,6), subject to the right of withdrawal or expulsion in certain cases, as indicated below. There is
no longer any necessity for examination or certification of such banks
which are already insured, in order to entitle them to permanent insurance. (Act, 12B(e)j Bill 5,6).
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Insurance of Banks Entering Federal Reserve System* — State
banks becoming members of the Federal Reserve System, national member
banks commencing or resuming business, and State banks converting into
national member banks, become insured upon the issuance of a specified
certificate to the Federal Deposit Insurance Corporation by the Comptroller
of the Currency in the case of a national bank, or by the Federal Reserve Board in the case of a State member bank; and if the bank entering the Sjystem or converting into a national bank is already insured,
no such certificate is required• The certificate must state that "consideration has been given" to the following factors: the financial %
history and condition of the bank, the adequacy of its capital structure, its fixture earnings prospects, the general character of its management, the convenience and needs of the community to be served by
the bank, and whether or not its corporate powers aye consistent with
the purposes of section 12B, (Bill 5 and 7 ) ,
Insurance of Additional Nonmember Pankg* — Until July 1,
1957 any national noniaember bank may become insured upon a similar
certification by the Comptroller of the Cxxrrency. Any State nonneuib^r
bank may also become insured until that date upon application to and
examination by the Federal Deposit Insurcuice Corporation, but before
approving such on application the Federal Deposit Insurance Corporation
Directors shall "give consideration" to the factors listed above, uid
shall determine, upon the basis of a thorough exrndnation, that the
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banlc^s assets iii excess of its capital requirements are adequate
to eooable it to meet all of its liabilities as shown "by the "books
of the "bank to depositors and other creditors. (Bill 6{2)). The
requirement of existing law in such cases is that the bank be in
"solvent condition*. (Act l2B(y), (e))«
The old provision in sec-
tion l2B(f) for insurance of a nomaember bank after July 1, 1936
pending its application for conversion into a national bank or for
admission to the System is eliminated*
(Bill 6),
Insurance Terminated for Certain Banks June 30, 1935* — A
nonmember bank may withdraw from the plan as of June 30, 1935 by
giving notice to tlie federal Deposit Insurance Corporation within
thirty days after the enactment of the bill, and notice to its depositors not less than 20 days before June 30, 1935. Insurance of
a State nonraember bank is also terminated on June 30, 1935 unless
before enactment of the bill, the bank filed the statement shoring
its deposits as of October 1, 1934 and paid the assessment as of
that date, as required by existing law. A bankfs insurance is also
terminated as of June 30, 1935, if prior to the enactment of the bill
it has permanently discontinued banking operations. (Bill 6(1)).
Termination of Insurance by Expulsion. —. The federal Deposit Insurance Corporation Directors are authorized to terminate
the insured status of a bank for continued unsound practices or repeated violations of the law or regulations to which the bank is
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subject. A statement of sucli violation must first be given the
Comptroller of the Currency in the case of a national or district
bank, the State Supervisory authorities in the case of a State
"bank, and also the Federal Heserve Board in the case of a State
member banh, for the purpose of securing a correction of such
practices or condition. If correction is not made within such
period, not exceeding 120 days, as the Conptroller, State authority, or Board, as the case may be, shall require, the Federal Deposit Ins-urance Corporation Directors, if they determine to proceed
further, shall give the bax& not less than thirty dayswritten
notice of intention to termi;mte its insured status, and fix a time
and place for hearing.
If the banfc does not appear, or if the Fed-
eral Deposit Insurance Corporation Directors make a written finding (such written findings to be conclusive) that any ground specified in such notice has Leeu established, the Directors wmay
order that the insured status of the bank be terminated1*.
The cor-
poration may puolisli notice of the tex%mi;jation, and the bank must
give notice to its depositors in the inanner prescribed by the Directors,
(Bill 9 ) .
After such termination, tlie insured deposits of each depositor
in the bank on the date of termination, less subsequent withdrawals,
remain insured for two years; and charing that period the bank must
continue to pay assessments like any other insured bank and remains
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subject to all other duties of an insm-ed bank. However, no additional deposits are insured, and the bank most not advertise or
&old itself out as having insured deposits unless it states with
equal prominence that deposits received after the date of termiration are not insured. Wher. the insured status of a bank is thus
terminated, if it is a State member bank the Federal Reserve Board
shall terminate its membership in the Federal 3esorve System in
accordance with the provisions of section 9 of the Federal Beserve
Act; and if it is a national bank the Comptroller shall appoint a
receiver for the ba:nk (which shall be the Federal Deposit Insurance
Corporation if the bank is unable to meet demands of its depositors).
(Bill 9 ) ,
Voluntary germination of Insurance. —*• Any insured nonmember
basic, upon not less than ninety days written notice to the Federal
Deposit Insurance Corporation, may terminate its status as an insured
bank, with continued insurance of existing deposits for two years as
noted above in the case of expulsion. (Bill 9 ) .
germination of Insurance by Assumption of Deposits, — Assumption of the liabilities of aa insured bank by another bank terminates
the insured status of such insured bank with like effect as if terminated as above, except that if the insured bank gives its depositors
notice of such assunption within tidrty days thereafter, in the manner
prescribed by regulations of the Federal Deposit Insurance Corporation
Directors, the insurance of its deposits canplotely terminates at the
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end of six months, and all future obligations of the bank to the
corporation also terminate,
(Bill 9(3)).
Termination of Insurance by Termination of Federal Reserve
Membership. — Termination of a member bank's membership in the
System automatically terminates its status as an insured bank, but
with like effect to that noted above
(Bill 9(2)), The existing
law does not continue the partial insurance for the tv/o year period,
and does not continue the bankfs responsibilities during that time.
(Act, 12B(i)h
ftasursnee of Nonmomber Panks Terminated July 1, 1957. —
After July 1, 1937 no Sta^e nonmember bank other than (a) a mutual
savings bank, (b) a Morris Plan bank, or (c) an Alaskan or Hawaiian
bank, may be or become an insured bank. On that date the insurance
of the deposits of such a State nonmember bank terminates.
GENERAL CONTROL OF INSURED BANKS.
Examination of Insured Banks. — In lieu of the limited power
of examination given the Federal Deposit Insurance Corporation in the
existing section 12B(y), the bill permits the Federal Deposit Insurance Corporation examiners, whenever considered necessary, to examine
any State nonmember bank which is insured or seeking insurance, and
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also any closed insured "bank:. With the written consent of the
Comptroller of the Currency, they nay also exaaine a:iy national
or district bank and with such consent froa the Federal Resorvo
Board, any State nienbor ba&x. In addition to the usual powers
of examination, these exarinors have power to adninister ou.ths,
take and preserve testimony loader oath and appi? to court officials
for subpoenas to carrpal the production or taking of testimony.
(Bill 10, 11(2)).
foipTication of Pagination Reports, —
The Federal De-
posit Insurance Corporation is authorized to publish in such
manner as it ray detornine, any part of the report of such an
exanination of an insured "bank; (except a national or distract "ban!':)
if such "bank fails to eonply with the reconmen&ations of the Federal
Deposit Insurance Corporation "based on such report of exanination,
for a period of 120 days after written notice of such reoonnen&ations,
Hot less than 90 days' notico of intention to rjake such publication
nust be given.
Condition Reports of Insurod ffonaanber Banks. —
Insured
State noamember "banks (except district "banks) are required to
make condition reports to the Federal Deposit Insurance Corporation
in such form and at such tiaes as the Federal Deposit Insurance Corporation Directors may require, and the Directors may require publication of these reports. Failure to mafce or publish such a report
rithin such time, jiot less than 5 days, as the Federal Deposit Insurance Corporation Directors may require, subjects a State jxonmember
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banlt to a penalty of ^100, recoverable by the Federal Deposit
Insurance Corroration for sach day «f such failure.
(Bill ll(s)).
Iferger of Insured Lank 7/ith lion-insured Banlr» --
Prior
y.ritten consent of the Federal Deposit Insurance Corporation is
required for an insured benK to consolidate or merge with a noninsured bank., assune liability for the deposits of a non-insured
bank, or transfer assets to a non-insured bank in consideration of
the assumption of liability for any portion of its deposits• Such
consent is also required for an insured State nonmember bank (except
a district baruc) to reduce the amount or retire any part of its common or preferred stock or capital notes or debentures. (Bill 22(4-)).
Burglary and Fidelity Insurance. —
The Federel Deposit
Insurance Corporation Directors may by regulation require insured
banks to project themselves against insurable losses> by carrying
burglary, fidelity and similar insurance! and if an insured bark
fails to comply with such requirements, the Federal Deposit Insurance Corporation may contract for such protection, adding the cost
to the assessment 0th9rvn.se payable by the bank.
(Bill 22(5)).
Insurance of Deposits^to bo Stated in Advertisements* —
The requiremert of existing law that insured banks display a sign
indicating the insurance of their deposits, is extended to reqvire
that they also include such information in advertisements relating
to deposits and in forms furnished for use of depositors. A definite penalty of ^100, recoverable by the Federal Deposit Insurance
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Corporation, for each day of violation of this provision, is
substituted for a more authorization to the Federal deposit
Insurance Corporation to impose & penalty not exceeding that
amount in its regulations on the subject.
(Act, 12B(v); Bill
21).
CHMOBS IK PROCEDURE FOR PAYIMJ INSURED DEPOSITS
The procedure for paying insured deposits remains largely
the came as in the old Act., except that certain provisions are
made more flexible and certain increased powers are given the
Federal Deposit Insurance corporation and its Directors*
(Act,
12B(1); Bill 1?).
Organisation of "Key,' Ban!:"« —• Upon the closing of an
insured bank, the Federal Deposit Insurance Corporation need no
longer organize a "new bank11 in all cases, as a means of paying off
the insured deposits • It nay follow this method, or it may pay off
such deposits by transferring them to another insured bank in the
same community or by any o*cher procedure adopted by the Federal
Deposit Insurance Corporation Directors*
(Act, 12B (l); Bill 12(6))>
The provision is added that if a new bank is organized, it must be
organized in the seme community-• Hov/sver, in certain circumstances,
tiie Federal Deposit Insurance Corporation directors may change the
location of the now bank to the Federal Deposit Insurance Corporation
office or some other place*
(Bill 12(8), (12))»
Obligations guaran-
teed as to principal and interest by the United States are made eligible investments for such "nev: banks"•
(Bill 12(9)) •
* 12 Investigation of Claims for Insured Deposits. —
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Through
claim agents, the Federal Deposit Insurance Corporation may investigate claims for insured deposits* such claim agents having
porter to administer oaths, take and preserve testimony under oath
and apply to court officials for subpoenas to compel the production or taking of testimony.
(Bill 11(2))« Except as the Federal
Deposit Insurance Corporation Directors may prescribe* neither the
Federal Deposit Insurance Corporation, a w new bank11, or a bank to
which insured deposits have been transferred by the Federal Deposit
Insurance Corporation, need recognise a claim to a part of a deposit
not appearing on the closed bankfs records as partly owned by the
claimant, if it -would increase the aggregate insured deposits of the
closed bank. (Bill 15(3)). The Federal Deposit Insurance Corporation
may withhold payment of an insured deposit to the extent necessary
to insure payment of a stockholders liability or any other sums due
from a depositor to a closed bank, which are not offset by a claim
due from the bank. (Bill 15(4))*
Discharge of Federal Deposit Insurance Corporation Liability
for Insured Deposit. •-
Payment of an insured deposit discharges the
Federal Deposit Insurance Corporation, a "new bank11, or a bank to
which the Federal Deposit Insurance Corporation has transferred an
insured deposit, to the same extent that payment by the closed bank
would have relieved the closed bank from liability for the insured
deposits (Bill 15(2)); and failure of a depositor to claim an insured
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deposit within one year after the appointment of a receive for a
closed bank bars the depositor's claim for insurance, leaving him
merely the claim he would have had against the closed bank's estate
if his deposit had not been insured*
(Bill 15(5)).
Participation of Federal Deposit Insurance Corporation in
Assets of Closed Bank. — The depositor and the Federal Deposit
Insurance Corporation, under the bill, will participate proportionately in the civic* ~nds from the liquidation of the closed bank
(Bill 12(7)), rvAiereas, under existing law, the Federal Deposit Insurance Corporation receives complete repayment before the depositor
begins to receive dividends on the uninsured portion of his deposit*
(Act, 12B(1)).
Criminal Provisions. — The criminal provisions ar§ amended
to make them more clearly applicable to persons attempting by false
statements to obtain payment of an insured deposit or other such
claim.
(Act, 12B(s)j Bill 19).
federal pepusit Insurance Corporation as National Bank Re-
ceiver. — The Federal Deposit Insurance Corporation need not give
bond as receiver of a national or district bank, may appoint agents
to assist in auch duties, and subject to the approval of the Comptroller of the Currency, may fix the fees and expenses for such liqui
rifetil&on and administration.
In order to simplify administration, the
Soniptroiler may relieve the Federal Deposit Insurance Corporatism
compliance with his receivership regulations.
(Bill 15).
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GENERAL CHANGES; PCMBRS AND ORGANIZATION OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION; ETC*
Powers of Federal Deposit Insurance Corporation Directors •
In several instances, powers previously given generally to the Federal Deposit Insurance Corporation are definitely lodged in its
Board of Directors, and additional ponvers are also given both the
Corporation and the Directors*
Acting or Deputy Comptroller of the Currency^ —
In the
event of a vacancy in the office of the Comptroller of the Currency*
the Acting Comptroller is authorized to act on the Federal Deposit
Insurance Corporation Board of Directors in his stead; and in the
absence of the Comptroller of the Currency, any Deputy Comptroller
may, -within the limits prescribed by the Comptroller, act as a
member of the Corporation's Bfard of Directors in his stead.
(Bill
2)#
Investigation of Banking Conditions• •-
The Federal De-
posit Insurance Corporation Directors are directed to gather information and data and make investigations and reports upon the organination, operation, closing, reopening, reorganization and consolidation
of banks, banking practices and management, and the security of
depositors and adequacy of service to borrowers• They are directed
to report their findings and recommendations to Congress, either
annually or specially*
(Bill 18).
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-15Capital Structure of the Federal Deposit Incur:nee Corporation . —
The capital structure of the Federal Deposit Insurance
Corporation is altered by the bill* Instead of consisting of three
kinds of $100 par value shares, two of which ty^es were to be held
by the Treasury end the insured banks, respective?wy, und wjre to receive 6 per cent dividends annually (Act, 12B(e),{d)), the stock is
to be bhat subscribed for before enactment of the bill (i.e,, by the
Treasury and the Federal reserve banks) and is to be no par value.
None of thu sto^k i& to puy dividends, just as now provided with
respect to stock issued to the Federal reserve l?anXs; and all stock
in the Corporation is to be non-voting. One share is to bo issued
(or exchanged anu reissued) for each $100 of consideration, and the
Federal Deposit insurance Corporation Directors are zo allocate this
consideration to the Corporation^ capital or surplus &s they deem
desirable. (Bill 4 ) .
Since the insured banks are no longer to own
stock in the Federal Deposit Insurance Corporation -, provisions for
varying the Corporation's capital stock with variations in the insured banks1 deposits (Act, 126(h)), or upon the insolvency of insured banks (Act, 12B(i)), are eliminated.
(Bill 8, 9 ) .
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Bonds and Other Obligations of,Federal Deposit Insurance Corporation• —
The approval of the Secretary of the Treasury
is made a prerequisite to the issuance of bonds or other obligations
of the Federal Deposit Insurance Corporation and the amount of such
obligations the Corporation may have outstanding is changed from
three times itc capital,, to three times the amount received in payment of its capital stock and of the first annual assessments of
the insured banks (Act, 12B(o)j Bill 17). The Secretary of the
Treasury is authorized to deal in the Corporation's obligations as
a public-debt transaction^ and proceeds of securities sold under
the Second Liberty Bond Act, as amended, may be used for such purpose or securities may be issued thereunder for that purpose. (Bill
17(2))• Obligations guaranteed as to principal and interest by the
United States are made eligible for investment of the Corporation's
funds. (Dill IS)*
Purchase of Closed Bank Assets by Federal Deposit Insurance
Corporation» —
The Federal Deposit Insurance Corporation's t!duty1! to
purchase the assets of banks which closed before its creation is ended
(Act, 12B(a); Bill l)j and, similarly, the power of bank receivers to
apply to the Federal Deposit Insurance Corporation for sales of or
loans on the assets of closed banks, is changed to apply only to receivers of closed insured banks, rather than to receivers of all closed
member banks*
If the Federal Deposit Insurance Corporation is also
receiver of the closed bank, the loan or purchase must first be ap- *
proved by a court of competent jurisdiction. (Act, 12B(n)j Bill 16)*
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Loans to Qperrtirg Bauks, —
*o avoid, threatened loss to
the Federal Deposit Insurance Corporation, or to encourage ;aorgers
or consolidations, etc., the Federal Deposit Lisurur.oo Corporation,
until July 1, 1936, may lend upon or purchase the assets of any insured bank or guarantee anotncr insured b^nk ag:dn3t iosv> by reason
of assuming the assets and liabilities of an insured bank. National
and district brnks .or, with the approval of the Comptroller of the
Currency, conservators thereof, are given thu mjceiis^.y authority
to contract for such loans from or s^lesto tfte Federal Deposit
Insurance Corporation. (Bill 16(4)).
Use of Other Ex^r.unation and Condition. R^po^ts. —
The
Fedex^al Deposit Insurance Corporation is given access ^o examination
and condition rev)orun juedd to tne Comptroller of the Currency and
the Federal Reserve banks. It wuy accept reports mrdo by or to
State bank supervisory authorities, and it may furnish to the Comptroller, the Federal reserve banks or such State civuboritiea* examination or condition reports made by or to it. (Bill 11(4))*
Expanses of the Federal Deposit Insurance Corporation. —
The routine operating expenses of the Federal Deposit Insurance
Corporation (excluding payments such as insured deposits, exoenses
of acting as receiver, actual loans, expenses in running x*ew banks,
oocO must conform to estimates approved by the Director of the
Budget and accounts necessary for this purpose .ire to be mainieiued
on the books of the Treasury. (Bill 17(3)).
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Jurisdiction of Federal Courts* —
The Federal Deposit
Insurance Corporation is given access to the Federal courts and
imraunity from attechment or execution before final judgment,
identical with such privileges given Federal reserve banks in
section 25(b) of the Federal Reserve Act. (Bill 10)*
Definitions• —
Definitions are given for various terms
used in section 12B (Bill 5)j and it is provided that unincorporated
banks which continue to be insured under the provisions of the act,
are to be included in the terms "State bank* and "State nonmgmber
bank" for the purposes of section 12B. (Bill 23).
TITLS II* * AMBBDME8TS ESPECIALLY AFFECTING FEDERAL RESERVE SYSTJ&I
SECTION 201.
Governor of Federal Reserve Bank* - Appointment - Qualifications Duties *
Section 4 of the Federal Reserve Act is amended to recognize in the Act for the first time, the office of Governor of a
Federal Reserve bank* He is to be appointed Annually by the Reserve
bank directors, subject to the approval of the Federal Reserve 3oard;
and he is made ex officio chairman of the Board of Directors and chairman of the Executive Committee, as well as chief executive officer of
the bank to vfham all other officers and employees are directly responsible •
The Governor of the bank is to be appointed a Class C Director by the Federal Reserve Board but, unlike the other Class C Directors, he need not have been a resident of the district for two years,
and he continues as Class C Director 'only during his service as
Governor rather than for the usual three year term*
Abolition of Office of Federal Reserve Agent*
Ninety days after enactment of the bill, the offices of
Governor and Chairman of the Board of Directors are to be combined,
and on that date, any Federal Reserve Agent not appointed Governor of
the bank ceases to be a Class C Director and Chairman of the Board*
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Duties preocribed by law for the Federal Reserve Agent arc to be
performed by such person as the Fedaral Reserve Board shall
designate•
Provisions Tor appointment of Federal Reserve i^entn
and Assistant federal Reserve agents are repealed.
The present requirement that the Chairman of the Board
of Directors "be a person of tested banking experience" is eliminated, together with the requirements that he maintain a local
office of the Federal Reserve Board on the premises of the Federal
Reserve bank and make regular reports to the Board•
Viee-Governor of Federal Reserve Banks•
Provision is made for a Vice-Governor who, in the absence or disability of the Governor, or during a vacancy in that
office, is to serve as chief executive officer of the bank and as
chairman of the bank's Executive Committee*
He is chosen in the
same manner as the Governor and may be appointed a Class C Director.
If he is appointed Class C Director, he may also be appointed
deputy chairman of the Board of Directors; and like the Governor,
he continues as Class C Director only during his service as ViceGovernor, and is not subject to the requirement of two years
residence in the district• Vacancies in the office of Governor or
Vice Governor are to be filled as provided in the case of original
appointment and for the remainder of the term of the predecessor.
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Llmitation on Federal Reserve? Bunk Direc cor s *,.,Continuoils Service.
Federal Reserve bank directors, other than the Governor
and Vice Governor, are not permitted to serve more than two consecutive terms of three years each, but present incumbents may
serve out their terms*
SECTION 202.
Capital Requirements for Admission to Federal Reserve System.
Section 9 of the Federal Reserve Act is r.mended to permit the Federal Reserve Board, upon the application of an insured
nonmember bank prior to July 1, 1957, to ^raive in whole or in part
the capital requirements for admission to the System, such requirements to be complied with by the bank within such period after admission as the Board may deem reasonable.
SECTION 20o.
Qualifications of Governor and Members of Federal Reserve Board.
(1). Section 10 of tht* Federal Reserve Act is amended to
exempt the Governor of the Federal Reserve Bo&ra from the requirement
that no two appointive members of the Board may be from the same
Federal Reserve District* In selecting the six appointive members
of the Board, the President is directed to "choose persons well
qualified by education and experience or both to participate in the
formulation of national, economic and monetary policies"$ and the
present requirement that the President "have duo regard "DO a fair
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representation oi the financial, agricultural, industrial and
commercial interests and geographical uivisiors of th-3 country11
is eliminated.
Salaries and Retirement of Members of Z?-^?&L.S^serve Jtoard •
(2) The salaries of appointive members of the Federal
Reserve Board appointed after July 1, 1935, are increased from
$12,000 a year to 015,000. "Each appointive member" of the Board
appointed prior to the enactment of the bill may retire at the age
of seventy or at any time thereafter, and "all members" appointed
after enactment of the bill are required to retire upon reaching
the age of seventy. If any such retired Board member has served
as. many as five years, he is to receive a retirement pension of
f1,000 a year for each year or fraction of a year of his service,
but not exceeding $12,000 per annum* Any member \?ho is at least
65, and who is not reappointed, is also entitled to receive retirement pay on the same basis as if retired at 70. The necessary funds
are to be provided by the Federal Reserve banks*
Term of Governor of Hoard^Subject to Presidents Pleasure•
(3) It is made clear that the Governor and Vice Governor
of the Board, following their designation by the President, continue
as such only "until the further order" of the Presidentj and the
Governorf s membership on the Board is made to termine.be upon the
termination of his designation as Governor.
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SECTION 204•
Assignment of Duties by Federal Kesurve Board*
Section 11 of the Federal Reserve kcfc is amended bo
It clear that the Board may assign to designated memDors, officers,
or representatives of the Board, duties,functions and services to
be performed by it under the Federal aeeerve Ac*, other than the
determination of national or system policy, A:he oakin^ o^ rules or
regulations, or povreis \*hich the Act requires to be exercised by a
specified number of bocrd members•
SECTION 205.
Federal Open Market Gomiui^ee* - bombership and Powers»
Section ISA of the Federal Reserve Act is rewritten to
alter the membership of the Federal Open Market Committee and increase
its powers, effective 90 days after enactment of bill. Instead of
consisting of one member from each Federal Reserve district selected
annually by the directors of the federal Reserve bank, it is to consist of the Governor of the Board as Chairman, taro members of the
Board selected by the Board, &nd tv;o Federal Reserve b^nk Governors
selected by the Governors of such "UonkK. Terms of all members of
the Committee (except the Governor of the Board) expire with the
calendar yearj and, in the event ox" vacancies, a successor is chosen
in the same manner as his predecessor. Instead of meeting at least
four times per year u(;on the call of the Governor of the Fsderal rteserve Board or the requeso of any threo members of the committee, it
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is to meet merely upon call of the Governor, at the request of the
Board or of any two members of the committee, or upon his ovm initiative . The meetings need no longer be in Washington, and the
provision
stating that Board members may attend Committee meetings
is eliminated.
Open market policies adopted by the committee need no
longer be submitted to the Board for approval but instead are transmitted direct to the Federal Reserve banksj and they must conform
their open market operations to such policies, no longer being permitted to give notice of a decision not to participate in such
operations. The Committee is to aid in the execution of such policies and perform related duties prescribed by the Board»
The Federal Reserve banks1 open market operations are
still subject to regulations of the Board. The general statement
in the present subsection (c) of the principles to be followed in
open market operations is eliminated•
The provision
of Section ISA relating to the Boardfs power
to regulate relations of the Federal Reserve System vdth foreign central or other foreign banks is eliminated, but, apparently, with little
effect, since the power to control such relations of Federal Reserve
banks remains in the Board under section 14(g) of the Federal Reserve
Act.
Open Market Committee to Make Recommendations Regarding Discount Rates.
The Committee is also to make recommendations to the Board
regarding the discount rates of the Federal Reserve banks.
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-25SECTION 206.
Keuvireme.tts as to Eligibility of Paper for Reaigcounu•
Section IS of the Federal Reserve Act is amended by the
addition of a paragraph permitting Federal Reserve banks, subject
to regulation by the BoatxJ as to maturities &nd other matters, to
rediscount any commercial, agricultural, or in^ustrir.l paper upon
the indorsement of a member bank, and to make M J V & P C ^ S to *iny meufoer
bank on its promissory note secured by any sound assets of such member bank*
In effect, this abolishes ell technical requirements as to
naturity and other matters relating to advances and discounts, and
instead giver, the Eoard power to regul&ie such questions.
SECTION 207.
Obligations Guaranteed by United States Eligible for Purchase by
Federal Reserve Banks•
Section 14(b) of the Federal Reserve Act is amended to make
obligations fully guaranteed as to principal nad interest by the United
States eligible for purchase and sale by Federal Reserve banks without
regard to maturities.
SECTION 208.
Federal Reserve Mote Issue Requirements«
Section 16 of the Federal Reserve Act is amended to remove
all provision for specific collateral securing Federal Ke3erve notes
and abolish the present procedure by which they are issued to the
banks by the Board through the Federal Reserve Agents•
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-26Instead, federal Reserve noooc r-re to be issued and
retired directly by the Federal Reserve banlcs under rules and
regulations prescribed by the Board; and all provision for their
redemption is eliminated, together with all provision for the
redemption fund now kept with the Treasurer of the United States
for that purpose. Federal Reserve banks uie uo longer forbidden
to pay out the Federal Resorv? notes op another Federal Reserve
bank. The existing provisions authorising the Board to impose a
tax on Federal Reserve notes outstanding in excels of the gold
certificates held as collateral, and to refuse a particular application of a Federal Reserve bank for federal Reserve notes, are
eliminated•
Federal Reserve notes received by the Treasurer of the
United States from sources other than Federal Reserve banks are to
be canceled and retired if unfit for further use, and the issuing
bank is to reimburse the Treasurer of the United States therefor*
Federal Reserve notes unfit for further use which are received by
Federal Reserve banks aro to be forwarded to Washington, canceled
and retired| and if such notes were issued by another Federal Reserve bank, the issuing bank is to make reimbursement.
Federal Reserve Notes a First Lien. Federal Reserve notes remain a first lion en all the assets
of the issuing bank, but it is not clear whether such a lien remains
for Federal Reserve Bank notes.
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Reserves to be Maintained by Federal Reserve Banks»
Forty per cent reserves in gold certificates are still to
be maintained against Federal Reserve notes in actual circulation•
The thirty-five per cent lawful money reserves required to
be maintained by Federal Reserve banks against deposits may not include Federal Reserve notes or Federal Reserve bank notes•
SECTION 209.
Reserve Requirements of Member Banks+
Section 19 of the Federal Reserve Act is amended to clarify
arid make more flexible the Boardf s power to change the reserve requirements of member banks• These requirements may be changed "in
order to prevent injurious credit expansion or contraction"; and it
is no longer necessary first to have a declaration, upon the affirmative vote of five Board members and the approval of the President
that "an emergency exists by reason of credit expansion•" It is made
clear that the changes need not apply uniformly, but may be made as to
demand or time deposits or both and may be different in different Federal Reserve districts or in different classes of cities as classified
for reserve purposes.
SECTION 210.
Real Estate Loans by Member Banks»
Section 24 of the Federal Reserve Act is amended to remove
the requirement that improved real estate upon which a national bank
lends must be located in the bank*s Federal Reserve district, or
within 100 miles of the bank's city. The amount which a national
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-28bank may lend on such real estate is incr^as^d from 50 per cent
of the value to 60 per cent, and the maximum maturity is decreased
from five years to three. However, according to o new provision,
if such a loan is completely amortized, it may be for as much as
75 per cent of the v&luu of the properoy, and may extend for as
long as twenty years.
The amount of real estate loans which a national bank may
make is increased from an aggregate equal to 25 per cent of its paid
in and unimpaired capital and surplus, or 50 per cent of its savings
deposits » whicJisver is the greater, to 100 per cent of its paid in
and unimpaired capital and surplus, or 60 per cent of its time and
savings deposits« whichever is the greater. However, a new provision
requires the book value of all real estate ovmed by the bank (except
its banking premises) to be included in computing such aggregate•
State Member Banks Subjected to Heal Estate Restrictions of National
Banks•
State member banks are subjected to the same limitations
as national banks in making nev.r i»eal estate loans.
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TITLE III. - TECHNICAL AMENDMENTS
SECTION SOI
"Accidental Holding Cprnpriny Affiliates" eliminated.
Section 2(c) of the Banking Act of 1933 is amended to eliminate from the definition of "holding company affiliates," and hence
fron all provisions regarding jsuch affiliates, every "organization
which in the judgment of the Federal P.eservn Board, is not engaged,
directly or indirectly, as a business in holding the stock of, or
managing or controlling bank*;, banking associations, savings banks,
and/or trust companies".
SECTION 302.
Pivorcement of securities companies in liquidation not required.
Section 20 of the Banking Act of 1933 is amended to make
it clear, in conformity with a previous ruling of the Board, thaL member banks need not divorce securities affiliates which have been
placed in formal liquidation.
SECTIOB 303(a).
Section 21 of Banking Act clarified; inapplicable to banks selling
mortgages.
Section &l(a)(l) of oho Banking Act of 1933 is amended to
make it clear that it does not prohibit any financial institution or
private banker fro>n engaging in tho securities business to the limited
extent permitted to national banks under section 5136 of tho Revised
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-50-
Statutes•
(Section 5136 limits national banks, in dealing an<3 under
writing, to United Status Govwrnuent obligations, general obligations
of States or subdivisions, and obligations ifseuud under the Federal
Farm Loan Act or by the Federal Home Loan Banks or the Home Owners
Loan Corporation,) It also is made clear thr.t section 21(a)(l) does
not prohibit a bank from soiling without recourse or agreement to repurchase, obligations evidencing loans on real estate,
SECTION 303(b).
Examination of institutions receiving dfcposits from own officers or
employees not necessary - Examn^d institutions to pay cost3.
Section 21 (a) (2) of the Banking Act of 1933 is amended to
make it clear that institutions receiving deposits only from their
"officers, agents or employees" are not subject to the limitations
of the section and so need nob submit reports or be examined as required in that section. It also is made clear that institutions examined undur that section by the Comptroller of the Currency or a
Federal reserve bank arc to bear the expense of such examination.
SECTION 504.
Double liability on national bank stock terminated*
Section 22 of the Banking Act of 1955, which ended double
liability on national bank stock issued after June 16, 1955, is amended
to terminate on July 1, 1957, the doubio iiaiujlity on previously insued stock in national banks operating on th&t latter date.
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SECTION 305.
Dir^ptors of nonmember national banks relieved of stock ownership
requirement.
Section 4 of the Act of June 16, 1934, which relieved directors of member banks from the stock ownership requirement of
section 31 of the Banking Act of 1933, is amended to eliminate such
requirement also as to noncieiaber national barks, such as those in
Alaska and Hawaii.
SECTION 306.
Interlocking relationships between member banks end securities companies .
Section 32 of the Banking Act of 1955 is rewritten to
make the prohibitions against interlocking relationships between
member banks and securities companies extend to the employees of
both such organizations in addition to their officers and directors;
and individuals engaged in the securities business are subjected to
the same prohibitions as officers of companies and members of partnerships so engaged.
Permission of the Board for such interlocking relationships is to be given l!in limited classes of cases" and by "general
regulations" rather than by individual permit. Such relationships
may be permitted when they "would not unduly influence the investmant policies of sucn member bank or tin advice it gives its customers regarding investments", rather than when they wou!td bo "not
incompatible with the public interest"•
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The securities companies whose officers and employees are
subjected to these disabilities are changed from those "engaged primarily in the business of purchasing, sell5jig or negotiating securities11
to those "primarily engaged in tho issue, flotation, underwriting, public sale or distribution, at wholesale or retail, or through syndicate
participation, of stocks, bonds, or other similar securitiesff• The
prohibition against correspondent relationships between member banks,
and securities companies is eliminated.
SECTIONS 507(a) AND 307 (b).
Change, in amount of investment securities of one obligor that may be
held by member bank.
Section 5136 of the Revised Statutes is amended to eliminate the existing prohibition against a member bank purchasing and
holding more than 10 per cent of a particular issue of securities;
but the total obligations of one obligor which may be purchased and
held by a member bank is reduced from 15 per cent of the bank's paid
in and unimpaired capital and 25 per cent of its unimpaired surplus,
to 10 per cent of each*
Purchase of stocks for account of customers.
It is also made clear, in conformity with previous rulings of the Comptroller of the Currency and the Bosrd, that national
and other member banks may purchase and sell stocks for the account
of their customers.
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SECTION 308.
Surplus required for organization of national otinkfi*
Section 5158 of the Revised Statutes is amended to require
for the organization of a nev; national bank, a paid in surplus of 20
per cent of its capital, but the Comptroller of the Currency is permitted to waive this requirement as to a converting State bank.
SECTION 309.
Separation of national bank stock certificates from those of other
corporations.
The requirement of section 5139 of the Revised Statutes
that stock certificates of national banks may not "represent the stock"
of aigr other corporation, except a member bank or a corporation existing on the date the paragraph took effect "engaged solely in holding
the bank premises of such association", is changed so that such certificates merely may not "bear any statement purporting to represent
the stock" of any other corporation, except e member bank or a corporation existing on the date the paragraph took effect "engaged
primarily in holding the bank premises". A provision is also added
to the effect that the section shall not operate to prevent the transfer of stock of another corporation being, conditioned upon the transfer
of a national bank rtock certificate.
SECTION 310(a).
Voting permit unnecessary for liquidation.
Section 5144 of the Revised Statutes is amended to elim-
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inate the necessity for a voting permit in cases where shr.res of a
member bank held ty a holding company affiliate are to be voted merely
in favor of placing the bank in voluntary liquidation.
SECTION SlO(b).
National bank shares that can not be voted not to be counted•
Section 5144 of the Revised Statutes is amended to make it
clear that shares which are held by a national bank as sole trustee
and which, therefore, under that section, cannot be voted, are to be
excluded in determining whether matters voted upon by the shareholders
were adopted lay the requisite percentage of shares.
SECTION 310(c).
Limited voting permits and cumulative voting clarified.
Section 5144 of the Revised Statutes is amended to make it
clear that holding company affiliates which have obtained a voting permit are entitled to the right of cuioulative voting given other shareholders by the section, and also to make it clear that the Federal
Reserve Board may issue limited voting permits *.nd is not confined to
issuing general voting permits. Both these changes conform with previous rulings of tho Board*
SECTION 511.
Retention of ineligibla assets by converting banks•
Amends section 5154 of the Revised Statutes to authorize
*he Comptroller of the Currency to permit State banks converting into
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-35netioncl banhs to retain end cr.rrjr, at a value de drained by the Comptroller, i-ssots not permitted to be acquired aid held by national banks •
SECTIOH ZL2.
Comptroller may delegate cotxntersigning»
Section 5162 of the Revised Statutes is amended to authorize
the Comptroller of the Currency to designate a person or persons to
countersign on his behalf assignments and transfers of bonds•
SECTION SIS*
Interest rates charged by national bank bronchos outside United States•
Section 5197 of the Bevised Statutes is amended to permit
national beak branches located outside the States of the United States
and the District of Coluiribia to charge interest at the rate permitted
by local lai*.
SECTION S14.
Accumulation of surplur by national bank.
Section 5199 of ths Revised Statutes is amended to make
the requirement that a national ban!; ccrry ono~tenth of earnings to
the surplus fund before declaring a dividend, apply only to tho declaration of a dividend on its co inon stock, and also to change the amount
of surplus to be accuaulo/bed, fron f0 per cent cf its "capital stock!f
to 100 per cent of its "common cepitcl1*-.
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-56SECTION 315.
Criminal provisions re embezzlementsf false entries* etc.% extended
to insured banks.
The criminal provisions of section 5209 of the Revised
Statutes relating to embezzlements, false entries, etc* are extended
to apply to officers, directors, and employees, etc., of insured banks.
SECTION 316.
Voluntary liquidation of national banks.
A paragraph is added to section 5220 of the Revised Statutes
to provide a procedure to be followed in cases of voluntary liquidation
of national banks as authorized by that section. Liquidation is to be
accomplished by a liquidating agent or committee which is to be responsible to the bank's directors and stockholders, and the bank is to be
subject to examination by the Comptroller of the Currency.
SECTION 317.
firohibition of use of word "national".
Section 5243 of the Revised Statutes prohibiting the use
of the word "national" in certain cases is rewritten so as to prohibit
the use of the word as a part of the name or title of any person, firm
or corporation doing the business of bankers, brokers or trust or savings institutions unless organized under the laws of the United States
or permitted by the laws of the United States to use such name or now
lawfully using such name.
SEC!Eff)H 318»
Reduction in federal reserve bank stock to conform to reduction in
member bankfs surplus.
Section 5 of the Federal Reserve Act is amended to r equire
member banks to reduce their holdings of Federal reserve bank stock upon
a reduction in their surplus, just as they are already reqpaired to do
upon a reduction in their capital. This applies to past as well as
future reductions •
SBCTIOU 319.
Publication of condition reports of State member bftpfeg.
Section 9 of the Federal Reserve Act is amended to authorize the Federal Reserve Board to prescribe the information to be contained in, and form oft condition reports of State member banks > and
to require publication of such reports under regulations of the Boards
SECTION 3 0 .
Limitation on loans by member banks on government obligations•
Section 11 (m) of the Federal Reserve Act is amended to
place State member banks on a parity with national banks in lending
on the security of bonds or notes of the TMted States issued since
April 34, 1917, or certificates of indebtedness of the ttoited States,
by chaaging the limitation on loans to one individual on such security,
from 10 per cent of the bank's unimpaired capital and surplus to 25
per cent thereof, as provided for national banks in section 5200 of
the Revised Statutes*
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SECTION 321•
Inuorsement or other security sufficient for Reserve baiuc discounts
for individuals.
The third paragraph oi section 13 of the Federal Reserve
Act is amended to require either indorsement or other security* rather
than both, for paper discounted by Federal reserve banks for individuals or corporations unable to secure adequate credit accommodations
from other banks.
SECTION 322.
Changes in wording of Section 13(b) of Federal Reserve Act*
This section makes certain changes in the language of section 13b of the Federal Reserve Act, making it conform to the amendment in Title I of the bill whereby stock of the Federal Deposit
Insurance Corporation subscribed for by the Federal reserve banks
is changed to no par value*
These changes in section 13b, however,
are in form only and do not alter the effept of the existing law*
SE61IOK 323 (a).
Definition of various classes of deposits by Federal Reserve Board.
The definitions of "demand deposits" and "time deposits:I
are stricken from section 19 of the Federal Reserve Act, and instead,
the Federal Reserve Board is given power to define for the purposes
of the section the terms;
"demand deposits", "gross demand deposits",
"deposits payable on demand", "time deposits", "savings deposits" and
"trust funds", to determine vrixat is to bo deemed a payment of interest
and to prescribe regulations to effectuate the purposes of tke section.
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SECTION 323(b),
DoAiction of "amounts due from franks11 in computing reserves.
Section 19 of the Federal Reserve Act is amended so that,
for purposes of computing member frank reserves, amounts due from other
franks (including checks in process of collection) may fre deducted from
gross- deoaaaad deposits rather than merely froxa amounts duo to other franks.
SECTION 323(c).
Board*s control over payment of deposits and interest made more flexible.
Section 19 of the Federal Reserve Act is amended to add to
the exemptions from the prohibition against the payment of interest on
demand deposits: (1) contracts existing *hen a frank joins the System,
(2) deposits payable outside the States of the United States and the
District of Colombia (rather than merely those payable in foreign
cotqatries), (3) deposits of trust funds on which interest is required
fry State law, (4) deposits of the United States, its territories, districts or possessions on which interest is required fry law*
The section is also amended to make more flexible the Board f s
power to classify time and saviugs deposits and limit the rates of ix*~
terest to oe paid tixereon. The absolute prohibition against the payment of time deposits before maturity is relaxed to purmit such payments
under conditions prescribed by the Board; and deposits payable only at
offices of member batfes located outside the States of the United States,
and the District of Oolxunbia are exempted from all restrictions on payment before maturity and all restric tiona oa interest rates.
U 40 ii
Ir-75
Insured franks subjected to interest rate limitations»
All insured banks (except nonmember mutual savings and Morris
Plan "banks) are subjected to the same limitations as member backs with
respect to the payment of deposits and interest tliereon.
SECTION 323(d)
Reserves required on government deposits.
At the end of Section 19 of the Federal Reserve Act a new
paragraph is added reqtiiring member' .banks to keep the same reserves
against deposits of the United States as against other deposits, thus
repealing the contrary provibions of the Liberty Bond Acts,
SECTION 324.
Jlaivjjr of yspogts or .wmimbions
of affiliates,
A new paragraph is added to section 21 of the federal Reserre
Act to permit the Federal Reserve Board or the Comptroller of the Currency
as the case may be, to waive examination of, or reports from, affiliates
of a member banli, when they are % o t necessary to disclose fully the relations between such affiliate and such bank and the effect thereof upon
the affairs of s-uch bank11.
SECTION 325(a),
Criminal provisions clarified, extended to insured banks»
Section 22(a) is amended to make it clear that the prohibitions against loms or gratuities to bank examiners from member banks,
and their officers and employees, apply only to banks subject to examination by such examiners; and also to make it clear that these prohibi-
« 41 -
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tions and the prohibitions against thefts by examiners apply to State
examiners examining member banks as well as to Federal examiners, but
not to private examiners. The prohibitions are extended to cover insured banks.
SECTION 325(b).
Federal Deposit Insurance Corporation Examiners subjected to criminal
provisions.
The prohibition in section 22(b) of the Federal Beserve
Act against a National Bank Examiner receiving compensation from any
bank, or officer or employee thereof, is extended to Federal Deposit
Insurance Corporation examiners; and the restrictions against examiners
revealing the borrowers or collateral of member banks is extended to
cover insured banks,
SECTION 325(c).
Borrowings by executive, off icer^pf jpynber batiks ~,JEli^natio& of cfrimj*
nal penalty•
Section 22(g) of the Federal Reserve Act forbidding execxu.
tive officers of member banks to borrow from their banks i s amended by
giving the Federal Eeserve Board power to remove such officers for violations, rather taan subjecting them to the present penalty of $5,000
and/or a year in j a i l .
The $10,000 fine on the bank i s eliminated.
The period permitted fot renewing such loa^s that were outstanding on June 16, 1933, i s extended from June 16, 1935, to June 16,
1938, but a finding by the bank directors that such renewal i s in the
interest and that the officer has made reasonable effort to re~
duce his obligation mast be spread on the "bankrs minute book. Borrowing by a partnership in which one or more executive officers have in*»
dividually or collectively a majority interest is stated to be within
the prohibition, whereas the existing law prohibits loans to partnerships in #iich an executive officer has any interest. It is made clear
that, in order to aid or protect the basil, executive officers may indorse papar previously taken by the bank in good faith, or may incur
any indebtedness to the "bank. The Board is given power to define terms
used in the section and prescribe regulations to effect its purposes•
SUCTION 326.
Restrictions on loans to affiliates^
The exemptions from the limitations of section 23A on
member banks' loans to affiliates and loans on and investments in the
securities of affiliates* are broadened to exempt from its provisions
(1) affiliates engaged "primarily" in holding the bank premises (the
existing law re4uires them to be ^solely* so engaged), (2) affiliates
primarily engaged in maintaining aad operating properties acquired for
banking purposes prior to enactment of the bill, (3) wholly owned subsidiaries of foreign banking corporations organized under the Federal
Reserve Act, (4) wholly owned subsidiaries of similar corporations in
which national banks are authorized to invest under section 25 of the
federal Reserve Act, (5) affiliates which becaae such through a bona
fide previous debt, and (6) affiliates which are such because their
shares are held by the bank as fiduciary (except when the beneficiaries
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are a majority of the bank*s stockholders) •
The section is also made inapplicable to affiliate indebtedness arising from the uapaid balance due on assets pur chased
from the bank,
SECTION 327.
"Working capital** loans relieved of real estate restrictions.
Section 34 of the Federal Beserve Act is amended to exempt
from the restrictions of that section on real estate loans, all "working capital11 loans in wliich the Reconstruction Finance Corporation
or a Federal reserve bank has participated or made a commitment, or
which it has discounted, loaned upon or purchased*
SECTION 328.
Interlocking bank directorates•
Section 8A of the Clayton Act wliich restricts interlocking
relationships between banks and trust companies organized or operating
under the laws of* the United States and institutions which ttmake loans
secured by stock or bond collateral11 is eliminated.
Section 8 of the Clayton Act is rewritten to apply to all
member banks rather than banks organized or operating under the laws
#f the United States; and a definite prohibition against a private
banker, or a director, officer, or employee of any other bank, savings
bank {other than a nrutual savings baidt), or trust coEpany serving as
officer, director, or employee of a member bank, is substituted for
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1-75
the existing restrictions that depend upon the size of the "banks and
of the cities in which they are located. Authority to the Board to
relax this prohibition "by "general ^regulations« in wlimited classes of
cases11 when !tsuch classes of institutions are not in substantial competition11, is substituted f or its existing power to allow the service of
one individual to a limited number of institutions "by issuing individual
permits when wnot incompatible with the public interest11,
SECTIONS 329(a) AND 329(b).
bask consolidations«
Section 1 of the Act of November 7,1918 (U-S.C , Title
12, section 33) is amended to clarify the provisions relating to con~
solidatitns of national "barCcs, particularly with respect to dissenting
stockholders.
SECTIONS 330(a) and 330(b).
Consolidation of State and national banks.
By provisions similar to those of the previous section of
the bill, section 3 of the Act of November 7, 1918 (U-S.C., Title 12 f
section 34(&)) is amended to clarify the provisions relating to consolidations of State and national banlrs, particularly with respect to
dissenting stockholders.
SECTION 331limitation' on use of words ^Deposit Insurance1**
Section 2 of the Act ,of May 24, 1926, (U.S.C, Title 12,
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sections 584-588) forbidding the misleading use of the words "federal",
"United States«, and "Reserve" by banlrs, insurance companies, and
similar financial institutions is amended to forbid such use of the
words "Deposit Insurance",
SECTION 332.
Robbery pf insured bank punished^
The Act of May 18, 1934 (48 State. 783) punishing robberies
of member banks and of banking institutions organized or operating
under Federal law, is amended to extend such protection to insured banks*
@FedFRASER