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64 ( co?y ) X-4-500 January 8, 1926. ti onorable Louis McEaddea, Chairman, Committee on Banking and Currency, House of Representatives, Washington, D. C. My dear Congressman: The Federal Reserve Board weIconss the opportunity afforded by the request conveyed in your l e t t e r of December 11, 1935, to express i t s opinion on your B i l l , HiB. 2, amending the .National Bank Act and the Federal Reserve Act. The urgent,impertance of liberalizing the law so as to enable national banks to compete moro e f f e c t i v e l y with State institutions has long been recognized by the Board, and appropriate l e g i s l a t i o n for this purpose lias been under consideration during tho last year by a special commit tec of o f f i c e r s of various Federal reserve banks assisted by the Board's Division of Research and S t a t i s t i c s , The opinions herewith submitted are based in large measure upon the work of this Committee after consultation with the Federal Advisory Council. Many of the provisions of the b i l l as introduced are approved without change, but the Board ventures to suggest considerable changes in Section 5200 designed in part to clarify that very complicated section and in part to limit certain somewhat hazardous classes of loans. While strongly in favor of liberalizing the statute, the Board f e e l s also that i t i s highly desirable to introduce additional safeguards, especially in view of the numerous bank failures in recent years. The Board, therefore, submits a limited number of suggestions with this ©bject in view. They are designed mainly to secure more adequate data regarding the conditions of the bonks through examination and i t i s not believed that they would hamper in any way the conduct of i t s business by any well managed bank. -2- X-45G0 sections approved without A?,\ suggsstzd chaiges, ^ho Board approves tho following provisions of H.R. 2 in their present form: Section 2(a)j amending subsection 2 of Section 5136 of the Revised Statutes so as to give national banks indeterminate charters in lied of charters for a term of 99 years, Section 2(b), amending subsection 7 of Section 5136 of the Revised Statutes so as to regulate the safe deposit "business and the business of buying and selling investment securi t i e s when transacted by national banks, Section 3, amending Section 5137 of the Revised Statutes so as to permit the purchase by national banks of such real estate as shall be necessary for their accommodation in the transaction of their business rather than merely such as may be necessary for their immediate use. Section amending Section 5138 of the Revised Statutes so as to authorize the chartering of national banks in outlying sections of large c i t i e s with a capital of $100,000. Section 5, amending Section 5142 of the Revised Statutes so as expressly to authorize national banks to increase their capital by means cf stock dividends. Section 6, an ending' Section 5150 of the Revised Statutes so as to authorize the board of directors of a^ national bank to designate a director in lieu of the president to be chairman of the board of directors. ^ection 13, amending Section 5208 of the Revised Statutes relating to the certification of checks by officers, directors, agents or employees of Federal reserve banks and member banks of the Federal Reserve System. S e c t i o n 14, amending S e c t i o n 5211 of the Rev i s e d S t a t u t e s so a s to p e r m i t r e p o r t s of c o n d i t i o n of n a t i o n a l banks to t h e Comptroller of t h e Currency to be s i g n e d by the v i c e p r e s i d e n t or a s s i s t a n t cashier. 65 < -3- ' X-4500 Section 15, amending the fourth paragraph of Section IS of the Federal Reserve Act so as to permit federal reserve bruaks to rediscount for member banks the e l i g i b l e paper of any one "borrower in an amount equal to that which may "be borrowed lawfully from 'any national banking association under the terms of Section 5200 of the Revised Statutes as amended. Section 16, amending Section 22 of the Federal Reserve Act, so as to make thefts "by any "bank examiner or assistant "bank examiner from any member bank of the Federal Reserve System a Federal offense. REAL ESTATE LCAITS. The Board approves of that portion of Section 17 of your B i l l which would amend Section 24 of the Federal Reserve Act so as to broaden the power of national banks to make loans on real estate and increase the aggregate amount of such loans which may be made by any national bank from 33 l / 3 per cent of i t s time deposits to 50 per cent of the national bank's savings deposits; but the Board i s opposed to that portion of this section of the B i l l (page 27, lines 4 to 9, inclusive) which would provide that the rate of interest which national banks may pay upon time deposits, savings deposits or other deposits shall not exceed the maximum rate authorized to be paid upon such deposits by State banks or trust coripani es. COSES OLIDATI PIT OF NATIONAL BANKS. Upon consideration of Section 1 of your B i l l , which would amend the Consolidation Act of November 7, 1918, by the addition thereto of a new section simplifying the procedure involved in the consolidation gf State banks with national banks, the Board . voted to approve a l l of such proposed new section except that portion thereof which relates to branch banking. SECTIOH 5200 OF THE REVISED STATUTES. The Board recommends that the following be substituted for Section 11 of your B i l l , which would amend and reenact Section 5200 of the Revised Statutes: X-iSOO »3oc. 11. 'Ifcit Suction 550Q of the Revised Statutes of the United State;:?, cs -mended, be mended to read as follows: 1 Suction 5200. The totnl direct l i a b i l i t i e s to any national banking association of any person, firm, company or corporation for mo.icy borrowed shall at no time exceed 10 pur con turn of the amouht of tlio cop i t a l stock of such association actually paid in and unimpaired and 10 ptier centum of its unimpaired surplus fund; and the aggregate l i a b i l i t i e s to any national banking association of any portion, firm, company or corporation, to wit, the direct l i a b i l i t i e s for moneys borrowed and the indirect l i a b i l i t i e s as surety, endorser or guarantor, where such surety., drawer, endorser, or guarantor obtains a loan from, or discounts paper with, or s e l l s paper under guarantee to, any such association, shall at no time exceed 25 per centum of the amount of the capital stock of such association actually paid in and unimpaired, and 25 per centum of i t s unimpaired surplus find. 'Within the meaning of this section: (a) The l i a b i l i t i e s of any company or firm shall include ..the . l i a b i l i t i e s of the several members thereof; (b) where the majority of the stock of any corporation is owned by any borrower the l i a b i l i t i e s of such corporation as surety, drawer, endorser or guarantor shall be considered part of the aggregate l i a b i l i t i e s of such borrower; and (c) a l l l i a b i l i t i e s of the actual borrower on accommodation paper, whether in the form of l i a b i l i t i e s as maker, accentor, surety, drawer, endorser, or guarantor shall be considered direct l i a b i l i t i e s within the meaning of this section. 1 The limitations prescribed above in the f i r s t paragraph of this section shall be subject to the following exceptions: ' ( l ) Liabilities arising out of the discount or purchase of the following classes of paper shall be subject to no limitation based upon the amount of such capital and surplus except where both the drawer and drawee, or both the maker and payee, are corporations and one of such corporations i s a f f i l i a t e d with, or a subsidiary of,thb%other - i . e . , where a majority of the stock of one of"such corporations is owned by the other or by the stockholders thereof: (a) B i l l s of exchange drawn in good faith , against actually existing values. X-4500 (b) Commercial or business paper actually owned. • ' l'-y the person, company, corporation, or firm negotiating the same, (c.) Drafts and "bills of oxchango secured by shipping documents conveying or securing t i t l e to goods shipped. * 1 (2) Liabilities arising out of the discount or purchase of the following classes of paper shall be subject to no limitation based upon the amount of such capital and surplus: (a) Demand obligations which are or have been discounted or purchased for the account of the drawer or endorser and which are secured by documents covering commodities in actual process of shipment. (b) Bankers' acceptances of the kinds described in section 13 of the,federal Reserve Act. (c) ^otes secured by not less than a like face amount of bonds, notes, or certificates of indebtedness of the United States. 1 (3) In addition to the 10 per centum permitted under the f i r s t paragraph of this section, l i a b i l i t i e s to any national banking association may be incurred in an amount equal ^ 0 15 per centum of the paid in and unimpaired capital and-'l5 per centum of the unimpaired surplus fund of such national banking association, when such l i a b i l i t i e s are evidenced by notes secured by shipping documents, warehouse receipts, or other such documents conveying or securing t i t l e covering readily marketable non-perishable staples, the actual market value of which is not at any time less than 115 per centum of the face value of such notes, and which arc fully covered by insurance if i t i s customary to insure such staples; but this exception shall not apply to l i a b i l i t i e s of any person, corporation, firm or company or the several members thereof arising from the same transactions and secured upon the identical staples for more than six months; Provided. * however. That l i a b i l i t i e s of this character may be incurred for a period of not more than three months in an additional amount equal to 15 per ccn turn of the paid in and unimpaired capital and 15 per centum of the unimpaired surplus fund pf such national banking association, in addition to the 10 per centum permitted under the f i r s t paragraph of this section and the 15 per centum hereinbefore permitted under this paragraph* - 6 - X-4500 1 (4) In addition to the 10 per centum permitted under the f i r s t paragraph of this scction, l i a b i l i t i e s to any national banking association may "be incurred in an amount equal to 15 per centum of the paid in and unimpaired capital and 15 per centum of the unimpaired surplus fund of such national banking association, when evidenced by notes secured by documents conveying or securing t i t l e to live stock which is being prepared for market during the period of the loan evidenced by such notes, and the market value of which is not at any time less than 115 per centum of the face amount of such notes; but this exception shall not apply to the l i a b i l i t i e s of any person, corporation, firm, or company, or the several members thereof, for more than nine months; Provided, however. That exceptions (3) and (4) are not cumulative but only alternative exceptions - i . e . , only one of the two shall be available to the same borrower and not both at the same time, 1 n 69 This proposed revision cf Section 5200 i s ' a result of a thorough study which the Board has caused to be made by a committee of officers of the Federal Reserve System aided by the Board1s Division of Research and Statistics. The recommendations of this committee were also considered by the Federal Advisory Council, In the opinion of the federal Reserve Board, this revision combines the best features of the various drafts of Section 5200 incorporated in the b i l l s on this subject heretofore introduced in Congress, together with certain new -provisions which the Board believes to be desirable. Those features of this proposed revision which are taken from drafts heretofore considered by Congress require no comment; but I shall comment briefly on certain of the proposed new features. Subdivisions (b) and (c) of the second paragraph of the above draft are new and are intended to bring under the 10$ limitation of the f i r s t paragraph the indirect l i a b i l i t i e s of a f f i l i a t e d corporations and l i a b i l i t i e s of the borrower on accommodation paper* The Board believes this i s necessary in order to cover cases where the drawer and drawee or the maker and indorser are in effect a single interest» The f i r s t and second exceptions are broadened so as to apply to l i a b i l i t i e s arising out of the purchase of paper as well as the discount of paper# A provision i s also inserted in the f i r s t exception excluding from the benefits of that exception paper on which the drawer and drawee, or the maker and payee, are a f f i l i a t e d corporations, The purpose of this provision i s to exclude some portion of those notes and b i l l s of exchange which are in subgis&ce nothing more than the obligations of a single interest. Certain language is inserted in subdivision (a) of the second, exception to exclude the holding of accepted demand obligations for an indefinite period of time by a bank,-a practice which involves making what i s substantially an unsecured loan on single name paper# ~ 7 - X-4500 ^0 A new subdivision (c) is added to tho s ocond oxcoption, excluding from any limitation notes secured by not less than a like face amount of "bonds, notes or certificates of indebtedness of the United States. WThis is based on the theory that, since banks may purchase air unlimited amount of these securities, i t would seem logical to permit them to make loans in unlimited • mounts on notes collateraled by such securities. The third exception, which relates to l i a b i l i t i e s on notes secured by shipping documents, warehouse receipts, or other such documents conveying or securing titles covering readily marketable nonperishable staples, would permit such loans to be made in an amount equal to 15 per centum of the bankf s capital and surplus in addition to the basic 10 per cent for periods not in excess of six months, and in an additional amount equal to 15 per cent of the "bank1 s capital and surplus for a period of not more than three months. The provision requiring such staples to be insured is qualified in such a way as not to apply to such staples as pig iron, lead, zinc, etc., which arc not customarily insured. The above draft of this exception i s believed to be a fair compromise between the corresponding provisions of the various other drafts of this b i l l which have heretofore been introduced in Congress; and the Board believes that i t will enable the banks to supply all proper financial f a c i l i t i e s for the marketing of such staples. Tiie fourth exception, which relates to loans on live stock is changed so as not to apply to loans on dairy or breeder herds nor to txie l i a b i l i t i e s of any one borrower for more than nine months. SUGGESTED AMSl-TDMmTS DESIGIJZD [TO STEElIGTHm TEE BMKS. Tne Board also desires to recommend, the following additional amendments to the National Bank Act and the Federal Reserve Act and requests that these proposed amendments be incorporated in your b i l l : 1. That Section 5202 of the Revised Statutes as amended be further amended by adding at the end thereof a new paragraph to read as follows: f * t'Vill obligations of every nature both direct and indirect arising out of the sale, pledge, or hypothecation of any one of i t s assets by § national banking &ssaciatiqa shall be definitely recorded upon i t s books at the time such assets arc sold, pledged, or hypothecated. For each failure to comply with this requirement a national banking association shall be subject # 8 f*n@ pf Five Hundred DoiXays, be imposed by the CeHptyoller of the .... . t^is pr.epog^l 4s designed to cover the rather common practice of ths assumpt^gn obligations by banks in an informal fashion, often in correspondence between bank o f f i c i a l s . These obligations - 8 - X-4500 71 f r e q u e n t l y escape the n o t i c e of "bank examiners "because t h e y a r e n o t d e f i n i t e l y r e c o r d e d on t h e books of the "banks. 2 . That S e c t i o n 5240 of t h e Revised S t a t u t e s of t h e United S t a t e s , a s amended, he f u r t h e r amended by adding a t t h e end t h e r e o f a new paragraph reading as follows: n Whenever in t h e judgment of t h e Comptroller of t h e Currency any n a t i o n a l banking a s s o c i a t i o n i s so c l o s e l y r e l a t e d in management, o p e r a t i o n or i n t e r e s t to any o t h e r bank, b a n k i n g a s s o c i a t i o n , t r u s t company, s e c u r i t i e s company or investment company t h a t an examination of such n a t i o n a l banking a s s o c i a t i o n f a i l s to d i s c l o s e i t s t r u e fcbhdition i n t h e absence of d e t a i l e d i n f o r m a t i o n r e g a r d i n g such o t h e r r e l a t e d i n s t i t u t i o n , such n a t i o n a l banking a s s o c i a t i o n s h a l l (a) obt a i n from such r e l a t e d i n s t i t u t i o n and f u r n i s h to t h e Compt r o l l e r of t h e Currency a copy of a r e p o r t of an examination of such r e l a t e d i n s t i t u t i o n made by t h e S t a t e a u t h o r i t i e s s i m u l t a n e o u s l y w i t h an examination of such n a t i o n a l banking a s s o c i a t i o n made by examiners a p p o i n t e d by bhc Comptroller of the Currency, or (b) by such o t h e r means as may be deemed s a t i s f a c t o r y by t h e Comptroller of t h e Currency, f u r n i s h to t h e Comptroller of the Currency d e t a i l e d information r e g a r d ing t h e c o n d i t i o n and o p e r a t i o n of such r e l a t e d i n s t i t u t i o n . In such c a s e s t h e Comptroller of t h e Currency may, upon r e q u e s t , f u r n i s h t h e S t a t e S u p e r v i s o r of Banking, or o t h e r s i m i l a r o f f i c e r s , c o p i e s of r e p o r t s of examination of such r e l a t e d n a t i o n a l b a n k i n g a s s o c i a t i o n . If any n a t i o n a l banking a s s o c i a t i o n s h a l l f a i l t o comply w i t h t h e r e q u i r e m e n t s of t h i s p a r a g r a p h a f t e r a demand f o r such compliance has been made by the Comptroller of the Currency, t h e Comptroller s h a l l r e p o r t the f a c t s i n t h e c a s e to t h e F e d e r a l Reserve 3oSrd, which may, a f t e r a h e a r i n g , i s s u e an o r d e r d e p r i v i n g such n a t i o n a l banking a s s o c i a t i o n of the p r i v i l e g e of r e c e i v i n g any d i s c o u n t s , advancements or a c commodations from the F e d e r a l r e s e r v e bank of which i t i s a memb e r u n t i l i t h a s complied f u l l y w i t h a l l demands made by t h e Compt r o l l e r of t h e Currency p u r s u a n t to t h e p r o v i s i o n s of t h i s p a r a g r a p h . The F e d e r a l Reserve Board s h a l l send a copy of such o r d e r by r e g i s t e r e d mail to such n a t i o n a l banking a s s o c i a t i o n and a copy to t h e F e d e r a l r e s e r v e bank of which i t i s a member; and, a f t e r r e c e i p t of s a i d o r d e r , such F e d e r a l r e s e r v e bank s h a l l n o t r e d i s c o u n t any paper f o r , or make any l o a n , advancement, or o t h e r e x t e n s i o n of c r e d i t t o , such n a t i o n a l b a n k i n g a s s o c i a t i o n u n t i l s a i d F e d e r a l r e s e r v e bank h a s been n o t i f i e d by t h e F e d e r a l Reserve Board t h a t such n a t i o n a l banking a s s o c i a t i o n has complied f u l l y w i t h the r e q u i r e m e n t s of t h i s p a r a g r a p h . " This p r o p o s a l i s desirj^S&t© s e c u r e a d e q u a t e i n f o r m a t i o n r e g a r d i n g n a t i o n a l banks which a r e r e l a t e d t o o t h e r i n s t i t u t i o n s and i n p a r t i c u l a r to a f f o r d some check upon c e r t a i n abuses f r e q u e n t l y engaged i n by c h a i n s of b a n k s . During the l a s t few y e a r s a number of such c h a i n s have coll'apscd, - 9 - X-4500 72' and i n v e s t i g a t i o n shows t h a t v/hon a n a t i o n a l "bank i s i n such a chain an e x a m i n a t i o n of i t f a i l s to d i s c l o s e i t s t r u e c o n d i t i o n , duo to t h e s h i f t i n g of a s s e t s back and f o r t h between t h e v a r i o u s i n s t i t u t i o n s which make up t h e c h a i n . o . That S e c t i o n 9 of t h e F e d e r a l R e s e r v e Act a s amended "be x£i*t¥&r amended "by i n s e r t i n g t h e r e i n , immediately a f t e r t h e s i x t h p a r a g r a p h t h e r e o f , a ne?- "paragraph r e a d i n g a s f o l l o w s ; "When'over i n t h e judgment of t h e F e d e r a l R e s e r v e Board any member bank i s so c l o s e l y r e l a t e d i n management, o p e r a t i o n and i n t e r e a t t o any o t h e r "bank, b a n k i n g a s s o c i a t i o n , t r u s t company* S e c u r i t i e s company ox4 i n v e s t m e n t conn any t h a t an e x a m i n a t i o n of such member bank f a i l s to d i s c l o s e i t s t r u e c o n d i t i o n i n t h e a b s e n c e of d e t a i l e d i n f o r m a t i o n r e g a r d i n g such o t h e r r e l a t e d i n s t i t u t i o n , such member bank s h a l l ( a ) o b t a i n f r o m such r e l a t e d i n s a n d f u r n i s h to t h e F e d e r a l Reserve Board a copy of a r e p o r t of an e x a m i n a t i o n of such r e l a t e d i n s t i t u t i o n made by t h e S t a t e a u t h o r i t i e s s i m u l t a n e o u s l y w i t h an e x a m i n a t i o n of such member "bank, or (b) by such o t h e r means a s may be deemed s a t i s f a c t o r y by t h e F e d e r a l Reserve Board, f u r n i s h t o t h e F e d e r a l R e s e r v e Board d e t a i l e d i n f o r m a t i o n r e g a r d i n g t h e cond i t i o n and o p e r a t i o n s of such r e l a t e d i n s t i t u t i o n . In such c a s e s t h e F e d e r a l R e s e r v e Board may, upon r e q u e s t , f u r n i s h t h e S t a t e S u p e r v i s o r of Banking, or o t h e r s i m i l a r o f f i c e r s , c o p i e s of r e p o r t s of any e x a m i n a t i o n of such r e l a t e d member bank which h a s been made by d i r e c t i o n of t h e F e d e r a l R e s e r v e Board o r of t h e F e d e r a l r e s e r v e bank by examiners s e l e c t e d or a p p r o v e d by t h e F e d e r a l R e s e r v e Board, I f any member bank s h a l l f a i l to comply w i t h t h e r e q u i r e m e n t s of t h i s p a r a g r a p h a f t e r a demand f o r such compliance h a s been made by t h e F e d e r a l R e s e r v e Board, s a i d Board may, a f t e r a h e a r i n g , i s s u e an o r d e r d e p r i v i n g such member b a n k of t h e p r i v i l e g e of r e c e i v i n g any d i s c o u n t s , advancements o r accommodations f r o m t h e F e d e r a l r e s e r v e bank of which i t i s a member u n t i l i t h a s complied f u l l y w i t h a l l demands made by t h e F e d e r a l R e s e r v e Board p u r s u a n t to t h e p r o v i s i o n s of t h i s p a r a g r a p h . The F e d e r a l R e s e r v e Board s h a l l send a copy of such o r d e r by r e g i s t e r e d m a i l to such member bank and a copy to t h e F e d e r a l r e s e r v e bank of which i t i s a member, and, a f t e r r e c e i p t of s a i d o r d e r , such F e d e r a l r e s e r v e b a n k s h a l l n o t r e d i s c o u n t any p a p e r f o r , o r make any l o a n , advancement, or o t h e r e x t e n s i o n of c r e d i t t o , such member bank u n t i l s a i d F e d e r a l r e s e r v e bank h a s been n o t i f i e d by t h e F e d e r a l R e s e r v e Board t h a t such member bank h a s complied f u l l y w i t h t h e r e q u i r e m e n t s of t h i s p a r a g r a p h . 1 1 - 10 - . X-4500 7X This proposal is similar to the preceding and. i s intended to apply to State V.rsnks and trust companies which are members of the Federal Reserve System. At present the only penalty for non-compliance with any provision of the Federal Reserve Act by State member banks is that provided for in the seventh paragraph of Section:-9 of the Federal Reserve Act, which authorizes the Federal Reserve Board to expel from the Federal Reserve System any State member bank which f a i l s to comply with the provisions of that Section. The penalty suggested above is less drastic but i s nevertheless thought to be sufficient. 4t That Section 5146 of the Revised Statutes of the United States, as amended, be further amended to read as follows: 11 Sec.5146. Every director must, during his whole term of service, be a citizen of the United States, and at least three-fourths of the directors must have resided in the State, Territory, or District in which the association is located, or within f i f t y miles of the location of the o f f i c e of the association, for at least one year immediately preceding their election, and must be residents of such State or within a f i f t y mile territory of the location of the association during their continuance in o f f i c e . Every director must own in his own right at least ten shares of the capital stock of the association of which he is a director, unless the capital of the bank shall not exceed $25,000, in which case he must own in his own right at least f i v e shares of such capital stock. Any director who ceases to be the owner of the required number of shares of the s to sic, or who pledges or hypothecates the same, or who becomes in any other manner disqualified, shall thereby vacate his place. "Ho national banking association shall make a loan or loans aggregating more than Five Hundred Dollars to any salaried, officer of such national banking association or to any corporation in which such officer or any director of such national banking association owns or controls a majority of the stock or of which he i s an officer or director, unless (a) such loan i s f u l l y secured by readily marketable collateral, or (b) such officer or director has f i r s t made available to the board of directors of such national banking association by f i l i n g with such national banking association in approved form a financial statement of such officer or of such corporation, as the case may be, which financial statement shall accurately show the financial condition of such officer or corporation at the clese of the last f i s c a l or calendar year preceding the loan. A violation of this provision shall disqualify any such officer or director from serving as such and vacate his place." - 11 - X-4500 74 This would -amend Section 5146 in feo respects: (1) The last sentence of that section as i t no*,v reads would he amended so as to disqualify a director who pledges or hypothecates his stock. This is intended merely to meet an apparent oversight in the law. (2) A new paragraph would oe added relating to loans to officers of national tanks and to"corporations the majority of the stock of which i s owned or controlled by officers or directors of national banks.. 5. That Section 5305 of the Revised Statutes of the United States, as amended, be further amended to read as follows: "Sec.5205. Every association which shall have failed to pay up i t s capital stock, as required by law, and every association whose capital stock shall have become impaired by losses or otherwise, shall, within two months after receiving notice thereof from the Comptroller of the Currency, pay the deficiency in the capital stock, by assessment upon the shareholders pro rata for the amount of capital stock held by each; and the Treasurer of the United States shall withhold the interest upon a l l bonds held by him in trust for any such association, upon n o t i f i c a t i o n from t h e Comptroller of t h e Currency, until otherwise notified by him. If any such association shall f a i l to pay up its capital stock, end shall refuse to go into liquidation, c?s provided by law, for two months after receiving notice from the Comptroller, a receiver may be appointed to close up the business of the association, according to the provisions of section fifty-two hundred and thirty-four; And provided, That if any shareholder or shareholders of such bank shall neglect or refuse, after two months' notice, to pay the assessment, as provided in this section, i t shall be the duty of the board of directors to cause a sufficient amount of the capital stock of such shareholder or shareholders to be sold at public auction (after thirty days' notice shall be given by posting such notice of sale in the office of the bank, and by publishing such notice in a newspaper of the city or town in which the bank is located, or in a newspaper published nearest thereto), to make good the deficiency, and the balance, if any, shall be returned to such delinquent shareholder or shareholders: Provided, however, That the Comptroller of the Currency may extend the time for payment of such assessment whenever in his judgment i t may be deemed advisable." The only effect of this amendment would be to shorten from three months to two months the period allowed for the payment of assessments to restore the capital of a national bank which has become inkpaired, with a provision authorizing the Comptroller of the Currency - 12 X-4500 - to extend the time for the payment of such assessment when in his judgment i t may be deemed advisable. The Board has taken no definite action upon those provisions of your B i l l which are not specifically mentioned above, but if i t does so I shall advise you promptly of the actiori taken. The Board i s also considering the advisability of recommending the enactment of certain other amendments to the National Bank Act and the federal Reserve Act, but has not yet taken definite action upon the matter. If i t decides to recommend any further amendments, I shall advise you at a later date. It may be of interest to yjur Committee to know that this letter was considered in detail at a meeting of the Federal Reserve Board at which all members except the Secretary of the Treasury and the Comptroller of the Currency were present and was approved by a l l those members who were present. If there i s anything further that the Board can do to be of any assistance to you in this or in any other matter, please do not hesitate to call upon us. Very truly yours, D. R. Crissinger, Governor. WW-OMC sad P.S. If you so desire the Board will be glad to furnish you with additional copies of this letter foS&ie use of the other members of your Committee.
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