The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
W . P. g . H A R D I N G , g o v e r n o r ALBERT STRAUSS, v i c e g o v e r n o r ADOLPH C. M I L L E R CARTER GUTFS s e c r e t a r y of t h e t r e a s u r y C H A R L E S S. H A M L I N chairman JOHN SKELTON WILLIAMS Comptroller of t h e C u r r e n c y F E D E R A L R E S E R V E B O A R D J . A. BRODERICK. s e c r e t a r y W. T. CHAPMAN. a s s i s t a n t s e c r e t a r y W . M . I M L A Y , FISCAL AGENT WASHINGTON a d d r e s s ,rch 31,191S r e p l y F E D E R A L t o RESERVE BOARD X-1432 (Revised.) Subject: Section 11 (k) of the Federal Reserve Act, Sir An opinion has been asked with reference to the construction of Section 11 (k) of the Federal Reserve Act as amended by the Act of September 26, 1918. That section as amended, provides in part that the Federal Reserve Board shall be authorized and empowered "To grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of e s t a t e s , assignee, receiver, committee of e s t a t e s of l u n a t i c s , or in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State in which the national bank i s located, "Whenever the laws of such State authorize or permit the exercise of any or a l l of the foregoing powers by State tanks, trust companies, or other corporations which compete with national bariks, the granting to and the exercise of such powers by national banks shall not be deemed to be in contravention of State or local law within the meaning of this Act.* The question f o r determination i s whether a national baric may exercise any of the eight powers expressly set forth in the law quoted above in any case where neither State banks, trust companies nor other competing corporations are authorized to exercise those powers. In other words, in a State where State banks or trust companies may exercise a l l of these eight powers with the exception of "administrator", for instance, nay national banks located in that State be permitted to act in that capacity? Under the interpretation of the term "when not in contravention of State or local law" a s construed before the amendment of September 26,1918 and as generally followed by the Federal Reserve Board prior to that date, there i s no doubt that the Board may permit a national bank in such a case to act as "administrator" i f there i s no express provision in the laws of the State which either d i r e c t l y or by necessary implication p r o h i b i t s national banks from acting in that capacity. I t may be argued that the second paragraph quoted above was intended to make a complete and exclusive d e f i n i t i o n of what c o n s t i t u t e s "when not in contravention of State or l o c a l law" and that even though there i s no express X-1432 -2- p^pv^sion of the State law which prohibits national banks from exercising any particular fiduciary power, nevertheless, such banks shall not be permitted to act in any fiduciary capacity in which a State bank, trust company or other competing corporation cannot a c t . I t does not appear, however, that t h i s construction can properly be supported not that i t i s consistent with the purpose for which the amendment was enacted. The phrase "when not in contravention o f ' S t a t e or local law" i s the only r e s t r i c t i v e clause applicable in t h i s discussion for i t i s apparent that the succeeding paragraph i s permissive rather than r e s t r i c t i v e and operates solely as an exception to the r e s t r i c t i v e clause of the f i r s t paragraph. The purpose of t h i s exception wap merely to insure to a national bank the r i g h t to exercise fiduciary powers in any case where a State bank, trust company or other competing corporation i s permitted under the State law to exercise those powers, even i f the State laws should contain an express provision either d i r e c t l y or by necessary implication prohibiting national banks from doing so. In other words, the sole f a c t that Congress expressly provided that i t i s not in contravention of State law within the meaning of the f i r s t paragraph of Section 11 (k) for a national bank to exercise any fiduciary power which a State bank or trust company may exercise, cannot of i t s e l f reasonably be construed to imply that i t . i s in contravention of State law for a national bank to exercise a fiduciary power which a State bank or trust company cannot exercise. If that had been the intention of Congress the term "when not in contravention of State or local law" would have been omitted from the f i r s t paragraph and the second paragraph would have been made to read substantially as follows: "No national bank shall be permitted to exercise any of the foregoing powers which neither State banks, trust companies or other coupe ting corporations are permitted to exercise under the State law." That, however, was not done. The r e s t r i c t i v e phrase "ehen not in contravention of State or local law" was retained in the f i r s t paragraph without change and the second and supplementary paragraph was inserted s o l e l y to protect national batiks from aiy possible discrimination on the part of State l e g i s l a t o r s . In short, while giving to the l e g i s l a t u r e of each State i n the f i r s t paragraph* the right expressly to prohibit national banks from exercising fiduciary powers, Congress, in the second paragraph, eliminates the p o s s i b i l i t y of . d i s crimination against national banks by providing, as a rule of law, that no State statute shall be construed to prohibit a national bank from exercising any fiduciary power which a State bank, trust company or other competing corporation can exercise. I t i s r e s p e c t f u l l y submitted,therefore,that the Federal Reserve Board nay l e g a l l y approve the application of any national bank to exercise any of the f i duciary powers authorized by Section l l ( k ) unless there i s an express statute of t the State in which the national bank i s located which e i t h e r d i r e c t l y or by necessary implication prohibits a national bank from exercising those powers, and that even in the case where there i s such an express statute, the Board nay approve the application i f any State bank,, trust company, or other competing corporation in that State i s permitted to exercise the powers applied for by the national bank.. That, I b e l i e v e , was the intention of Congress and the purpose of the law as amended. Respectfully, • • GEORGE L. HARRISON. W. P. G Harding, Hon. " http://fraser.stlouisfed.org/ rovprnnySt. Louis V&rfprfli f?/=jserve Federal Reserve Bank of Board. General Counsel.
@FedFRASER