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t 1/29/35 TITLE II. AMENDMENTS TO THE FEDSHAL RK3SRVB ACT. Seo. 201. (a) Section 4 of the Federal Reserve Act, as amended, is further amended by striking out the paragraph which ooamenoes with the words, "Glass C directors shall be appointed by the Federal Reserve Board* and the next succeeding paragraph, and inserting in lieu thereof the followingt "Class C directors shall be appointed by the Federal Reserve Board. They shall have been for at least two years residents of the districts for which they are appointed, ex* oept that this requirement shall not apply to the Governor and Vice Governor of the bank. Kaon Class C director shall hold office for a term of three years except that the Governor's term as a Class C direotor shall expire when he ceases to be Governor of the bank and, if the Vice Governor be designated as a Sless C director, his term as a Class C director shall expire when he ceases to be Vice Governor, (fee of the direotors of Class C shall be appointed by the Federal Reserve Board as Deputy Chairman to exercise the powers of the Chairman of the board when necessary* In the case of the absence of the Chair* man and Deputy Chairman, the third Class C director shall preside at meetings of the board. - 2 - "Effective ninety days after the enactment of the Act containing; this amendment, the offices of Governor end Chairman of the Board of Directors of eaoh Federal Reserve bank shall be combined* The Governor shall be the chief executive offioer of the bank and shall be appointed annually by the board of directors subject to the approval of the Federal Reserve Board. He shall not take office until approved by the Federal Reserve Board and thereupon he shall be appointed by the Federal Reserve Board as one of the Class C directors of the bank* He shall be ex offioio Chairman of the Board of Directors and Chairman of the Executive Commltteei and all other officers and employees of the bank shall be directly responsible to him. For eaoh Federal Reserve bank there shall be appointed annually in the same manner as the Governor a Vioe Governor, who shall, in the absence or disability of the Governor or during a vacancy in the office of governor, serve as the chief executive officer of the bank and act as Chairman of the Executive Committee of the bank* He may be appointed by the Federal Reserve Board as a Class C director of the bank and in such ease may be appointed as Deputy Chairman of the Board of Directors* Tvhenever a vacancy shall occur in the office of the Governor or Vioe Governor of a Federal Reserve bank, it shall be filled in the manner provided for original appointments; -3- and the person so appointed shall hold offioe until the Expiration of the term of his predecessor* M ^ffeotire ninety days after the enactment of the Aot containing this amendment, any Federal Reserve Agent who shall not hare boen appointed Governor of the bank shall cease to be a Class C director and Chairman of the Board of Directors* ill duties prescribed by law for the Federal ReserTe Agent shall be performed by such person as the Federal Reserve Board shall designate* *2fc member of the Board of Directors of a Federal Reserve ban*:, other than the Governor and Vice Governor, shall serve as a director for mor© than two consecutive terms of three years each, but this shall not prevent the present incumbents from serving out the remainders of their present terms*n (b) The last paragraoh of such section 4 is amended by strikin out the words "Thereafter oy%ry director of a Federal Reserve bank chosen as hereinbefore provided shall hold office for a term of three years" and substituting the words "Thereafter each director of Class A and eaon director of Class B ohosen as hereinbefore provided shall hold office for a term of throe years*n Sec* 202* Section 9 of the Federal Reserve Aot, as amended, is amended by oha&gin^ the period at the end of the tenth paragraph thereof to a oolon and adding the following! "Provided, further. That, upon application to the Federal Reserve Board at any time prior to July 1, 1937, by any nonraember bank which at the tine of such application hat been admitted to the benefits of insurance by the Federal Deposit Insurance Corporation under section 12B of this Act, the Federal Reserve Board, in its discretion, in order to facilitate the admission of such bank to membership in the Federal Reserre System, tnay waire in whole or in part the requirements of tills seetion relating to the amount of capital required of such bank* Such bank shall comply -with such require- ments within such period o? periods after admission as in the Board*s judgment shall be reasonable in view of all the circumstances." See* 203. Section 10 of the Federal Reserve Act, as amended, is further amended in the following respects* (1) Strike out the second sentence of the first paragraph and substitute the following! n In seleoting the six appointive members of the Federal Reserve Board the President shall choose persons well qualified by education or experience or both to participate in the formulation of national economic and monetary policies. Hot more than one of the appointive members shall be selected from any one federal Reserve district, except that this limitation shall not apply to the selection of the uoveraor." (2) Juoh first paragraph is further amended by adding at the end thereof the followingt "The appointive members of the Federal Reserve Board appointed after July 1, 1936, shall each receive a salary at the same rate as that of an associate justice of the Supreme Court of the United States, together with actual necessary travelling expenses* Kaon appointive member of the Federal Reserve Board heretofore appointed may retire from active service up n reaching the age of 70 or at any time thereafter, and all members hereafter appointed shall retire upon reaching the age of ?0« Kaon member of the Board so retired from active servioe who shall have served for at least five years shall receive, during the remainder of his life, retirement pay in an amount equal to the annual salary paid to appointive members prior to the enactment of the act containing this amendment! Provided, That, if he shall not have served for as much as 12 years, his retirement pay shall be at the rate of one-twelfth of suoh annual salary for each year and for any fraction of an additional year of suoh service1 Provided, further, That any member whose term expires between the ages • i* if fif f fvrti»<»r ortlai* of fcfct ail Nf it it or - 7« services so specified, but any such aesi^&iaent shall not include the dctorx&Jnation of any national or system policy or nxiy power to make rules and regulations or any power which under HM terms of t- is / c t is required to be exercised by & specified number of nat-bers of the «oard«n bee. 205* ?.ffective ninety days a/ter the enactment of this Act, section 12A of the ;ederal ;>esenre Act, ae amended* i« amended to read ae follows* :< i;eo.l2 • ere i s hereby created a .ederal .vpen arket o;;inittee ..hereinafter referred to as the OoBjmittee), which shall consist of MM overnor of the i ederal reserve 'card* "who shall be Chairman of the wom:.iittee# two members of the iedera-" Keserve oard, selected hy the Board* and two voirernors of the ) ederal . eserve banks* selected by the ovbrnore of the iederal reserve banks in accordance TAltli procedure prescribed by regulations of the .1 ederal *..©serve :;oar«« Vhe terms of the morsbers of the '.:oa»mittee* other than tu« QTer;ior of the i; ederal Reserve shall expire at th« end of each calendar year* oard, henever a vacancy s r a l l occur a successor shall be selected in the same manner as his predecosfior war selected* eetin.^,6 of the Cosy* mitt©e saall be held ftNH t i - e -co time upon the call of the -oTernor* ac the request oi* the oard or of any two jjieiribers of the 'OiTaaittee* or upon t/is own initiative* "The loi&dttee from t i e to time shall consider* adopt trensrtdt to the ] e eral ^«6eiire -oard resolutions setting • 8 - forth policies -which in the jud^ent of the Committee should be followed with respect to open market operations and discount rates of the Federal Keeerve banks, and the board shall give prompt consideration thereto* Upon notification of the Board's approval of any such resolution, the ieceral i©serve banks shall conform their open market operations to the provisions thereof, and the Committee shall aid in the execution of such policies and/or perform such other duties relating thereto as the Board may prescribe. All open market operations of the Federal reserve banks shall be subject to regulations, limitations and restrictions prescribed by the Federal ^serve Board, which shall not be inconsistent with resolutions approved by the Board as hereinbefore provided." See* 206. Section 1? of the Federal reserve Act, as amended, is further amended by adding at the end thereof a new paragraph reading as follows: "Upon the indorsement of any member bank, which shall be deemed a waiver of demand, notice and protest as to its own indorsement exclusively, and subject to such regulations as to maturities and other natters as the Federal reserve Board may prescribe, any Federal ©serve bank may discount any commercial, agricultural or industrial paper and may make advanees to any such member bank on its promissory notes secured by any sound assets of suoh member bank*" -9- See* 207* Subsection (b) of section 14 of the Federal re- serve Act, as amended, is further amended by changing the semicolon at the end thereof to a colon and adding the following* "Provided, That any bonds, notes or other obliga- tions which are direct obligations of the United States or which are fully guaranteed by the United States as to principal and interest may be bought and sold without regard to maturities*" Sec* 208* Section 16 of the Federal Reserve Act, as amended, ie further amended in the following respectsi (1) Strike out the first 10 paragraphs and substitute therefor the followingt "Sec* 16• Each Federal iteserve bank may issue Fed* eral Reserve notes, which shall be obligations of the United States, secured by a first and paramount lien on all of the assets of such bank* Federal Reserve notes shall be issued and retired under such rules and regulations as the Federal reserve Board may prescribe and shall be legal tender for all purposes* "Every Federal keeerve bank shall maintain reserves in lawful money (other than Federal Reserve notes or Federal iteserve bank notes) of not less than 55 per centum against its deposits and reserves in gold certificates of not less than 40 per centum against its Federal Reserve notes in actual -10- circulation. Each Federal Reserve note shall bear upon its face a distinctive letter, which shall be assigned by the Federal Reserve Board to each Federal Reserve bank, and also a serial number* "Y«hen rooeived by the Treasurer of the United States from a souroe other than a Federal Reserve bank, Federal Reserve notes unfit for further U3e shall be canceled and retired; and, upon receipt of advice of such cancellation and retirement, the issuing Federal lieservo bank shall reiiaburse the Treasurer of the United states for the notes so canceled and retired. When received by a Federal Reserve bank, Federal Reserve notes unfit for further u:;e shall be canceled and forwarded to the Treasurer of the Jnited States for retirement} and, if issued by another Federal ileserve bank, such issuing bank shall reimburse the federal Reserve bank which canceled such notes and forwarded them to the Treasurer of the United States* "In order to furnish suitable notes for circulation as Federal Reserve notes, the Secretary of the Treasury shall cause plates and dies to be engraved in the best manner to guard against counterfeiting and fraudulent alterations, and shall have printed therefrom and numbered suoh quantities of such notes of the denominations of £5, #10, $20, #50, £100, -11- ;:;S00, $1,000, $5,000, and 110,000 as may bo required to supply the Federal Reserve banks* i>uoh notes shall be in form and tenor as direoted hy the .eoretary of the Treasury and shall bear the distinctive numbers of the several Federal Reservo banks through whioh thoy are issued* '«hen such notes have been prepared, they shall be held in the Treasury subject to the order of the Federal Reserverfoardfor delivery to the Federal Reserve banks»M (2) The sixteenth paragraph is amended by striking out the words uor Federal Reserve A^ent" where they occur in three different place-s and also the words 1lor his" and the words "at the Treasury or at the Subtreasury of tho united states nearest the place of business of such Federal Reserve bank or s eh Federal Reserve Agent*" 3©c. 209* The sixth paragraph of section 13 of the Federal Re- serve Act, as amended,, is amended to read as follows; "ftotwithstandin.: the other provisions of this section* th© Federal Reserve ifoard, in order to prevent injurious credit expansion or contraction, nmy by regulation change the requirements as to reserves to be Lieintained against demand or time deposits or both by enber banks in any or all Federal He- serve districts and/or any or all of the three classes of cities referred to above." -12- 210* The first paragraph of section 24 of the Federal Reserve Act, as amended, is amended -co read as follows! "3eo« 24« Any national banking association may make loans secured by first liens upon improved real estate* including improved farm land and improved business and in* dustrial properties* A loan secured by real estate within the cleaning of this section shall be in the form of an obligation or obligations secured by mortgage, trust deed, or other instrument upon real estate when the entire amount of such obligation or obligations is made or is sold to such assooiationt Provided, That nothing contained in this seotion shall prevent any national banking association fron acquiring, as additional security for loans previously made in good faith, seeond or subsequent liens on real estate or shares or participations in such liens* The amount of any such loaa shall not exceed 60 per centum of the actual value of the real estate offered for security, bat no such loan upon such security shall be made for a longer term than three yearst Provided, That loans iaay be made in anounts not exceeding 76 j^r cent of the actual value of the real estate offered for security, if they are required to be completely amortised within periods not exceeding 20 years by means of substantially equal monthly, quarterly, semiannual or annual payments on prinel* pal with interest added or on principal and Interest combined: -13- Provided, further. That in the case of loans scoured byreal estate which are insured under the provisions of title II of the National housing Act, ouch restrictions as to the amount of the loan in relation to the actual value of the real estate and as to the fire-year lisdt on the terns of such loans shall not apply* Any such bank may m&ke such loans in an aggregate sum equal to the anount of the capital stock of such association paid in and unimpaired plus its unimpaired surplus fund, or equal to 60 per oentura of the amount of its time and tarings deposits* -whichever is the greater* 1rovlded, Th«t, in computing such a^gre* gate sum there shall be included all such loans on which the bank is liable as indorser, guarantor or otherwise and the book value of all real estate owned by the bank directly or indirectly except its banking premises t Provided, further. That all such 1 ana shall be subject to the general limitations contained in section 6200 of the Kevisect Statutes of the United states* Such banks may continue here* after as heretofore to receive tiae and savin a deposits and to pay interest on the same, but the rate or interest which suoh banks may pay upon such time deposits or upon savings or other deposits shall not exceed the aexlmum rate authorised by law to be paid upon suoh deposits by State banks or trust companies organised under the lavs of the State v&erein suoh national banking association is located* Ltate banks and trust companies which are members of the lederal Reserve system shall not make loans secured by real estate except to the same extent and under the same terms and conditions as nation* al banking associations are permitted to do so«n