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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,

( e of the direotors
fe

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




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if

fif

f

fvrti»<»r ortlai* of fcfct

ail

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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* " h shall
wo

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 . ederal *..©serve :;oar«« Vhe terms of the morsbers of the '.:oa»1
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 ; shall be canceled and
:e
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 b y
real 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