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COPY • 1 8 1 2-7099 TEXT OF GLA.SS-STEAGALL BILL AS PASSED BY SENATE ON FEBRUARY 19th, 1932. 72d Congress 1st Session H. R. 9203 A "bill to improve the f a c i l i t i e s of t h e Federal r e s e r v e system f o r t h e s e r v i c e of commerce, i n d u s t r y , and a g r i c u l t u r e , to provide means f o r meeting the needs of member "banks i n exceptional circumstances, and f o r other purposes. Be i t enacted by the Senate and House of R e p r e s e n t a t i v e s of the United S t a t e s of America i n Congress assembled, That the Federal Reserve Act, as amended, i s f u r t h e r amended by i n s e r t i n g , between s e c t i o n s 10 and 11 t h e r e o f , a new s e c t i o n reading as f o l l o w s : "SEC. 10. (a) Upon r e c e i v i n g the consent of not l e s s than s i x members of the Federal Reserve Board, any Federal r e s e r v e bank may make advances, i n such amount as the board of d i r e c t o r s of such Federal r e s e r v e bank may determine, to groups of f i v e or more member banks a m a j o r i t y of them independently owned and controlled, w i t h i n i t s d i s t r i c t upon t h e i r time or demand promissory n o t e s , provided the bank or banks which r e c e i v e the proceeds of such advances as h e r e i n provided have no adequate amounts of e l i g i b l e or acceptable a s s e t s a v a i l a b l e to enable such bank or banks to obtain s u f f i c i e n t c r e d i t accommodations from the Federal r e s e r v e bank through r e d i s c o u n t s or advances other than as provided i n s e c t i o n 10 ( b ) . The l i a b i l i t y of the i n d i v i d u a l banks i n each group must be l i m i t e d to such p r o p o r t i o n of t h e t o t a l amount advanced to such group as the deposit l i a b i l i t y of t h e r e s p e c t i v e banks b e a r s to the aggregate deposit l i a b i l i t y v of a l l banks i n such group, but such advances may be made to a l e s s e r number of such member banks i f the aggregate amount of t h e i r deposit l i a b i l i t y c o n s t i t u t e s a t l e a s t 10 per centum of t h e e n t i r e deposit l i a b i l i t y of t h e member banks within such d i s t r i c t . Such banks s h a l l be authorized t o d i s t r i b u t e the proceeds of such loans t o such of t h e i r number and i n such amount as they may agree upon, but - 2 - X-7099 ± 8 3 "before so doing they s h a l l r e q u i r e such r e c i p i e n t banks to d e p o s i t with a s u i t a b l e t r u s t e e , r e p r e s e n t i n g the e n t i r e group, t h e i r i n d i v i d u a l n o t e s made i n f a v o r of the group p r o t e c t e d by such c o l l a t e r a l s e c u r i t y as may be agreed upon. Any Federal r e s e r v e bank making such advance s h a l l charge i n t e r e s t thereon a t a r a t e not l e s s than 1 p e r centum above i t s di ..count r a t e in e f f e c t a t the time of making such advance. No such note upon which advances are made by a Federal reserve bank under t h i s s e c t i o n s h a l l be e l i g i b l e under s e c t i o n 16 of t h i s Act as c o l l a t e r a l s e c u r i t y f o r Federal reserve n o t e s . "No o b l i g a t i o n s of any f o r e i g n government, i n d i v i d u a l , p a r t n e r s h i p , a s s o c i a t i o n , or c o r p o r a t i o n organized under the laws thereof s h a l l be e l i g i b l e as c o l l a t e r a l s e c u r i t y f o r advances under t h i s s e c t i o n . "Member banks a r e a u t h o r i z e d to o b l i g a t e themselves i n accordance with the p r o v i s i o n s of t h i s s e c t i o n . " SEC. 2. The Federal Reserve Act, as amended, i s f u r t h e r amended by adding, immediately a f t e r such new s e c t i o n 10 ( a ) , an a d d i t i o n a l new s e c t i o n reading as follows: "SBC. 10. (b) x U n t i l March 3, 1934, and in exceptional and exigent circum- s t a n c e s , and when any member bank, having a c a p i t a l of $2,000,000 or l e s s , has no f u r t h e r e l i g i b l e and a c c e p t a b l e a s s e t s a v a i l a b l e to enable i t to obtain adequate c r e d i t accommodations through r e d i s c o u n t i n g a t the Federal reserve bank or any o t h e r method provided by t h i s Act o t h e r than t h a t provided by Section 10 ( a ) , any Federal r e s e r v e bank, s u b j e c t in each case to a f f i r m a t i v e a c t i o n by not l e s s than s i x members of t h e Federal Reserve Board may make advances to such member bank on i t s time or demand promissory n o t e s secured to the s a t i s f a c t i o n of such Federal r e s e r v e bank; PROVIDED, That ( l ) each such note s h a l l b e a r i n t e r e s t a t a r a t e not l e s s than 1 p e r centum p e r annum higher than the h i g h e s t discount r a t e in e f f e c t a t such Federal reserve bank on the date of such n o t e ; (2) the Federal Reserve Board mgy by r e g u l a t i o n l i m i t and d e f i n e the c l a s s e s of assfets may be accepted which as s e c u r i t y f o r advances made under a u t h o r i t y of t h i s -3- X-7093 s e c t i o n ; and (3) no note accepted f o r any such advance s h a l l be e l i g i b l e a s 1 8 c o l l a t e r a l s e c u r i t y f o r Federal r e s e r v e n o t e s . «2To o b l i g a t i o n s of any f o r e i g n government, i n d i v i d u a l , p a r t n e r s h i p , a s s o c i a t i o n , or c o r p o r a t i o n organized under the laws thereof s h a l l be e l i g i b l e a s c o l l a t e r a l s e c u r i t y f o r advances under t h i s s e c t i o n . " SEC. 3. The second paragraph of s e c t i o n 16 of the Federal 3eserve Act, a s amended, i s ar. ended to read a s f o l l o w s : "Any Federal r e s e r v e bank: may make a p p l i c a t i o n to t h e l o c a l Federal r e s e r v e agent f o r svcli amount of the Federal r e s e r v e notes h e r e i n b e f o r e provided f o r a s i t may r e q u i r e . Such a p p l i c a t i o n s h a l l be accompanied with a tender to the local Federal r e s e r v e agent of c o l l a t e r a l in amount equal to the sum of the Federal r e s e r v e n o t e s thus a p p l i e d f o r and issued pursuant to such a p p l i c a t i o n . Ihe c o l l a t e r a l s e c u r i t y thus o f f e r e d s h a l l be n o t e s , d r a f t s , b i l l s of exchange, or acceptances acquired under the p r o v i s i o n s of s e c t i o n 13 of t h i s Act, or b i l l s of exchan.-e indorsed by a member bank of any Federal r e s e r v e d i s t r i c t and purchased under t h e p r o v i s i o n s of s e c t i o n 14 of t h i s Act, or "cancers' acceptances purchased under the o r o v i s i o n s of s a i d s e c t i o n 14, or gold or gold c e r t i f i c a t e s : PROVIDED, EOTCEVER, That, u n t i l March 3, 1934, should the Federal Reserve Board deem i t in the p u b l i c i n t e r e s t , i t may, upon the a f f i r m a t i v e v o t e of not l e s s than a m a j o r i t y of i t s members, a u t h o r i z e the Federal r e s e r v e banks to o f f e r , and t h e Federal r e s e r v e a g e n t s to a c c e p t , as such c o l l a t e r a l s e c u r i t y , d i r e c t o b l i g a t i o n s of the United S t a t e s . On March 3, 1934, or sooner should t h e Federal Reserve Board so decide, such a u t h o r i z a t i o n s h a l l terminate and such o b l i g a t i o n s of the United S t a t e s be r e t i r e d a s s e c u r i t y f o r Federal r e s e r v e n o t e s . In no event s h a l l such c o l l a t e r a l s e c u r i t y be l e s s than the amount of Federal r e s e r v e notes a p p l i e d f o r . The Federal r e s e r v e agent s h a l l each day n o t i f y the Federal Reserve Board of a l l i s s u e s and withdrawals of Federal r e s e r v e n o t e s to and by the Federal r e s e r v e bank to which he i s a c c r e d i t e d . The s a i d Federal Reserve Board .nay a t any time c a l l upon a Federal r e s e r v e bank f o r a d d i t i o n a l s e c u r i t y to http://fraser.stlouisfed.org/ p r o t e c t the Federal Federal Reserve Bank of St. Louis r e s e r v e notes i s s u e d to i t . "
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