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FEDERAL RESERVE BOARD WASHINGTON X-3I+23 May 31, 1922. SUBJECT: Senate Bill 2653. Dear Sir: ' F b r y o u r i n f o r m a t i o n t h e r e is e n c l o s e d h e r e w i t h g, c o p y o f a l e t t e r a d d r e s s e d * b y t h e B o a r d , t o t h e C h a i r m a n of the Banking and Currency Committee of the Senate expressing the Board's views w i t h respect to Senate Bill 2653* o f t h e t e x t o f t h e b i l l is a l s o e n c l o s e d h e r e w i t h . Very truly yours, G o v e r n o r . (Enclosures) TO ALL FEDERAL RESERVE AGENTS. A copy X-3423a COPY M a y 27, 1 9 2 2 . Hon. George P. McLean, Chairman, Banking and Currency Committee, United States Senate, Washington, D. C. My dear Mr. Chairman: R e c e i p t is a c k n o w l e d g e d o f y o u r l e t t e r o f M a y 1 3 r e q u e s t i n g the views of the Federal Reserve B o a r d as to Senate B i l l 26^3, w h i c h w o u l d a m e n d S e c t i o n 5 2 0 1 R e v i s e d S t a t u t e s so a s t o a u t h o r i z e 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 s to invest in the s t o c k of safe d e p o s i t companies, U n d e r e x i s t i n g l a w n a t i o n a l b a n k s a r e p e r m i t t e d to r e c e i v e v a l u a b l e s o n d e p o s i t f o r s a f e k e e p i n g a n d to r e n t s a f e d e p o s i t b o x e s ; b u t it a p p e a r s t h a t s u c h b u s i n e s s s o m e t i m e s r e s u l t s i n l o s s to t h e b a n k s a n d t h a t t h e p u r p o s e o f t h i s b i l l is to e n a b l e t h e m to l i m i t or segregate such losses by forming separate corporations for the purpose of carrying on this b u s i n e s s . The Federal Reserve Board approves of the p u r p o s e of the b i l l to p e r m i t n a t i o n a l b a n k s to o r g a n i z e s e p a r a t e c o r p o r a t i o n s t o carry on their safe deposit business; but the B o a r d feels that the b i l l a s d r a w n is a m b i g u o u s a n d is s u s c e p t i b l e o f a c o n s t r u c t i o n w h i c h w o u l d p e r m i t n a t i o n a l b a n k s to h o l d s t o c k i n c o r p o r a t i o n s e n g a g e d i n m a n y o t h e r a c t i v i t i e s i n a d d i t i o n to t h e b u s i n e s s o f r e c e i v i n g v a l u a b l e s o n deposit for safekeeping and renting vaults, safes, and safe deposit boxes. It a l s o c o n t a i n s s o m e p r o v i s i o n s w h i c h m a k e it u n n e c e s s a r i l y complicated and confusing. T h u s , it c o n t a i n s a p r o v i s i o n t h a t n o n a t i o n a l b a n k shall p u r c h a s e or h o l d shares of s t o c k of a n y c o r p o r a tion except such a s are a u t h o r i z e d b y the F e d e r a l R e s e r v e Act, w h i c h is m e r e l y d e c l a r a t o r y o f e x i s t i n g l a w , a n d a p r o v i s i o n r e q u i r i n g shares of stock of other corporations a c q u i r e d by n a t i o n a l banks in s a t i s f a c t i o n of debts p r e v i o u s l y c o n t r a c t e d to be d i s p o s e d o f w i t h i n a c e r t a i n t i m e , w h i c h a p p a r e n t l y h a s n o r e l a t i o n to t h e h o l d i n g o f stock in safe deposit companies. If, a s it is a s s u m e d , t h e s o l e p u r p o s e o f t h e b i l l is t o e n a b l e n a t i o n a l b a n k s to p u r c h a s e a n d h o l d s t o c k i n s a f e d e p o s i t c o m p a n i e s , t h e B o a r d f e e l s t h a t it w o u l d b e p r e f e r a b l e t o e n a c t a simpler f o r m of b i l l h a v i n g no other effect t h a n that. It is suggested, t h e r e f o r e , that the last p a r a g r a p h of t h e b i l l b e stricken out and that the following be substituted in l i e u thereof: "Any national banking association nay purchase and hold the stock of any corporation organized a n d existing u n d e r the laws of the State in w h i c h such a s s o c i a t i o n is l o c a t e d , w h i c h is d o i n g b u s i n e s s o n X-3423a: the premises on which the principal business of such a s s o c i a t i o n is c o n d u c t e d , a n d w h i c h is e x c l u s i v e l y engaged in the business of receiving v a l u a b l e s on dep o s i t for safekeeping a n d letting vaults, safes, a n d safe deposit boxes; Provided, that the p u r c h a s i n g a n d h o l d i n g o f s u c h s t o c k is f i r s t d u l y a u t h o r i z e d b y r e s o l u t i o n of the b o a r d of directors of such a s s o c i a t i o n a n d b y t h e w r i t t e n a p p r o v a l of t h e C o m p t r o l l e r o f t h e Currency, stating the number a n d amount of the shares w h i c h the a s s o c i a t i o n m a y p u r c h a s e a n d h o l d ; Provided, further, that the Comptroller of t h e Currency m a y r e q u i r e any a s s o c i a t i o n to dispose of p a r t or a l l of a n y s u c h s t o c k w i t h i n a s p e c i f i e d time, not less t h a n six m o n t h s a f t e r r e c e i p t of w r i t t e n n o t i c e f r o m h i m , if i n h i s j u d g m e n t s u c h a c t i o n is n e c e s s a r y f o r t h e p r o t e c t i o n of s u c h a s s o c i a t i o n o r i t s s t o c k h o l d e r s or d e positors". This provision follows as closely a s practicable the c o r r e s p o n d i n g p r o v i s i o n of S e c t i o n 1 0 6 of the N e w Y o r k B a n k i n g Law w h i c h authorizes banks to purchase a n d h o l d s t o c k of any s a f e d e p o s i t c o m p a n y o r g a n i z e d a n d e x i s t i n g u n d e r t h e lav/a o f It w o u l d b e m o r e l o g i c a l t o i n s e r t the State of N e w York, this p r o v i s i o n in S e c t i o n 5 1 3 ^ of the R e v i s e d S t a t u t e s , w h i c h d e f i n e s t h e c o r p o r a t e p o w e r s o f n a t i o n a l b a n k s ; but it p r o b a b l y w o u l d b e e a s i e r t o s u b s t i t u t e it f o r t h e l a s t p a r a g r a p h o f S e n a t e B i l l 2 6 5 3 , s i n c e t h a t b i l l is a l r e a d y b e f o r e t h e C o m mittee. Yours very truly, (Signed) P. G. Harding. G o v e r n o r . COPY X-3%2}b 6 7 t h Congress, 1st S e s s i o n , S. 2653• IN THE SENATE OF THE UNITED STATES. October 2 0 (calendar day, N O V E M B E R l), 1921. Mr„ W a d s w o r t h introduced the following bill; w h i c h w a s read twice and r e f e r r e d to t h e C o m m i t t e e o n B a n k i n g and C u r r e n c y . A BILL To a m e n d s e c t i o n 5201 of the R e v i s e d Statutes to a u t h o r i z e 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 s to i n v e s t i n t h e s t o c k o f s a f e - d e p o s i t c o m p a n i e s , and for other purposes* B e it e n a c t e d b y t h e S e n a t e a n d H o u s e o r R e p r e s e n t a t i v e s o f the United States of A m e r i c a in Congress assembled, That the f o l l o w i n g p a r a g r a p h b e a d d e d to s e c t i o n 5 2 0 1 o f t h e R e v i s e d S t a t u t e s : "That no a s s o c i a t i o n shall p u r c h a s e or h o l d shares of s t o c k of any corporation except such as axe authorized by the F e d e r a l Reserve Act, or the s t o c k of any safe-deposit company o r g a n i z e d a n d existing u n d e r t h e l a w s o f t h e S t a t e i n w h i c h t h e a s s o c i a t i o n is l o c a t e d a n d d o i n g b u s i n e s s o n the p r e m i s e s o w n e d or l e a s e d by the a s s o c i a t i o n , u n l e s s the p u r c h a s e of such shares of s t o c k in a n y s a f e - d e p o s i t company shall b e authorized by resolution of the b o a r d of directors of the a s s o c i a t i o n and formally a p p r o v e d by the C o m p t r o l l e r of the C u r r e n c e : Provided, That the shares of stock of other c o r p o r a t i o n s a c q u i r e d b y a n y a s s o c i a t i o n in s a t i s f a c t i o n of debt p r e v i o u s l y cont r a c t e d s h a l l b e d i s p o s e d of a s s o o n as sale c a n b e e f f e c t e d at a p r i c e e q u a l to the amount of the debt for w h i c h the s h a r e s w e r e a c q u i r e d , b u t i n n o e v e n t s h a l l t h e s h a r e s so a c q u i r e d b e h e l d l o n g e r than two y e a r s f r o m the date of acquirement.11
@FedFRASER