The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
X-4720 2 v 9 FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO T H E FEDERAL RESERVE BOARD N0V@IHD6r 1 5 , 1926. Dear S i r ; As you probably know, under date of June 3, 1926, Congress adopted an a c t to c o n s o l i d a t e , c o d i f y , and s e t f o r t h the general and permanent laws of the United S t a t e s in f o r c e December 7, 1925. This Act i s known a s "The Code of Laws of the United S t a t e s of .America/' The e n a c t i n g p r o v i s i o n provides t h a t the Code " s h a l l e s t a b l i s h prima f a c i e t h e laws of the United S t a t e s , general and permanent in t h e i r n a t u r e , in f o r c e on t h e 7 t h day of December, 1925; but nothing in t h i s Act s h a l l be construed a s r e p e a l i n g or amending any such law or as e n a c t i n g a s new law any m a t t e r contained in the Code. In case of any i n c o n s i s t e n c y a r i s i n g through omissions or otherwise between the p r o v i s i o n s of any s e c t i o n of t h i s Code and the corresponding p o r t i o n of the l e g i s l a t i o n h e r e t o f o r e enacted, e f f e c t s h a l l be given f o r a l l purposes whatsoever to such enactments." While the Code a t p r e s e n t i s thus only prima f a c i e evidence of t h e law, i t i s planned to r e e n a c t i t and give i t t h e e f f e c t of r e p e a l i n g and superseding a l l law i n f o r c e December 7, 1925, a s soon as i t i s i p o s s i b l e to discover and c o r r e c t such e r r o r s as a r e contained i n the Code in i t s p r e s e n t form. I t i s h i g h l y important, t h e r e f o r e , to discover and c a l l a t t e n t i o n to a l l important e r r o r s in the c o d i f i c a t i o n of t h e Federal He serve Act and r e l a t e d s t a t u t e s as soon as p o s s i b l e , in order t h a t such s t a t u t e s may not be amended u n i n t e n t i o n a l l y when the Code i s given f i n a l e f f e c t . A c a r e f u l examination by t h i s o f f i c e of t h a t p a r t of the Code which corresponds to the p r o v i s i o n s of the Federal Reserve Act has d i s c l o s e d a number of omissions and i n a c c u r a c i e s which have been c a l l e d to the a t t e n t i o n of Congroar;. I enclose f o r your information a copy of a l e t t e r on t h i s s u b j e c t which the Board addressed to Honorable Boy Gr, F i t z g e r a l d , Chairman of the House Comm i t t e e on Revision of Laws under date of November 9, and a l s o a copy of a memorandum prepared by t h i s o f f i c e c a l l i n g a t t e n t i o n to such e r r o r s and omissions as have been discovered. If in the course of your work you should discover any f u r t h e r e r r o r s in the c o d i f i c a t i o n of t h e Federal Reserve Act or r e l a t e d s t a t u t e s , I should a p p r e c i a t e i t i f you w i l l c a l l such e r r o r s promptly to the a t t e n t i o n of t h i s o f f i c e , in order t h a t proper s t e p s may be taken to have them c o r r e c t e d . P r e l i m i n a r y copies of t h i s Code, bound in buckram but without index or t a b l e s , can be purchased from the Government P r i n t i n g O f f i c e f o r $3 p e r copy. Digitized for Enclosures. FRASER Very t r u l y yours, Walter Wyatt General Counsel. (COPY) 280 X-4702-a November 9, 1926 Honorable Roy Q. F i t z g e r a l d , Chairman, Committee on Revision of Laws, House of R e p r e s e n t a t i v e s , Washington, D. C. My dear Congressman : The Federal Reserve Board has received a copy of the Code of the Laws of the United S t a t e s passed by Congress June 30, 1926, and has noted your r e q u e s t , accompanying each volume of the Code, t h a t those who use the Code i n form your Committee of any omission or misstatement which may be discovered. In compliance with your r e q u e s t , Counsel tb the Federal Reserve Board has made a c a r e f u l examination of t h a t p a r t of the Code which corresponds to the p r o v i s i o n s of the Federal Reserve Act, and has prepared a memorandum c a l l i n g a t t e n t i o n to a number of omissions and i n a c c u r a c i e s , A copy of t h i s memorandum i s enclosed herewith f o r the information of your committee. Among the m a t t e r s omitted from the Code a r e the s i x t h and seventh paragraphs of S c c t i o n 2 of the Federal Reserve Act, which provide f o r the f o r f e i t u r e of the f r a n c h i s e s of n a t i o n a l banks f o r f a i l u r e to comply with the p r o v i s i o n s of the Federal Reserve Act, I t i f probable t h a t these p r o v i s i o n s were omitted from the c o d i f i c a t i o z l because t%ie c o d i f i o r s considered them obs o l e t e . The f i r s t sentence of the 6th paragraph p r o v i d e s : "Should any n a t i o n a l banking a s s o c i a t i o n i n the U n i t e s S t a t e s now organized f a i l within one yeat a f t e r the passage of t h i s Act to becohe a member bank or f a i l to comply with any of the p r o v i s i o n s of t h i s Act tepplidable t h e r e t o , a l l of the r i g h t s , p r i v i l e g e s , and f r a n c h i s e ^ of such a s s o c i a t i o n granted to i t under the n a t i o n a l bank Act, or under the p r o v i s i o n s of t h i s Act, s h a l l bo thereby f o r feited." Because of the words " w i t h i n one year a f t e r the passage of t h i s Act", the codi f i e r s e v i d e n t l y thought t h a t t h i s p r o v i s i o n expired by l i m i t a t i o n one year a f t e r the passage of the Federal Reserve Aot; but such was not the i n t e n t of Congress. Congress intended t h a t a l l natiena,! banks then i n e x i s t e n c e or which might subsequently be organized should become members of the Federal Reserve System and a t a l l times comply wit& fcjae p r o v i s i o n s of the Federal Reserve Act. The words above quoted were i n s e r t e d i n the Act merely f o r the purpose of g i v i n g n a t i o n a l banks then i n e x i s t e n c e one^ycar w i t h i n which te comply with the p r o v i s i o n s ef the Federal Reserve Act b e f o r e they should be s u b j e c t e d to the f o r f e i t u r e of t h e i r c h a r t e r s f o r f a i l u r e to do s o . Although the language of the law i s not e n t i r e l y c l e a r , t h i s was the obvious i n t e n t of Congress and t h i s i s tho c o n s t r u c t i o n which has been given to t h e law and has been g e n e r a l l y accepted as c o r r e c t . The s i x t h and seventh paragraphs of X-4702-a 881 the Federal Reserve Act, t h e r e f o r e , are not obsolete; and i t i s h i g h l y import a n t t h a t thfey be r e t a i n e d i n the law, because they provide the most e f f e c t i v e means of e n f o r c i n g those p r o v i s i o n s of the Federal Reserve Act which p e r t a i n t# n a t i o n a l banks. v The f i r s t sentence of the f o u r t h paragraph of Section 10 of t h e Federal Reserve Act p r o v i d i n g t h a t the f i r s t meeting of the f e d e r a l Reserve Soard glial1 be h e l d i n Washington has been omitted, a p p a r e n t l y because i t was considered o b s o l e t e . This p r o v i s i o n , however, i s s t i l l of importance i n the d e t e r mination of the l o c a t i o n or s i t u s of the Federal Reserve Board f o r s u i t or otherwise. The question of the s i t u s of the Federal Reserve Board has ailready been r a i s e d i n one important case, and t h i s p r o v i s i o n of law was one of the grounds upon which the Court based i t s opinion t h a t the Federal Reserve Board i s an i n h a b i t a n t of the D i s t r i c t of Columbia w i t h i n the meaning oif Sect i o n 51 of the J u d i c i a l Code. \ Section 29 of the Federal Reserve Act which provides t h a t i f any p a r t of the Act i s adjudged i n v a l i d such i n v a l i d i t y s h a l l not extend to other p a t t s of th@ Act, has been omitted. This p r o v i s i o n i s an important one and should be r e t a i n e d , u n l e s s the Code cotitains a s i m i l a r p r o v i s i o n g e n e r a l l y a p p l i c a b l e to a l l the p r o v i s i o n s of the Code. Such a g e n e r a l p r o v i s i o n of the Code has n o t been found i n the i n v e s t i g a t i o n made by the Board's Counsel. Section 30 of the Federal Reserve Act which e x p r e s s l y r e s e r v e s to Congress the r i g h t to amend, a l t e r or r e p e a l the Act i s omitted. While the Board i s of the opinion t h a t Congress would have t h i s r i g h t without an exp r e s s r e s e r v a t i o n , the r e t e n t i o n of such a p r o v i s i o n i n the law i s b e l i e v e d to be very d e s i r a b l e because i t e f f e c t i v e l y s e t t l e s the question beyond any p o s s i b i l i t y of d i s p u t e . A s i m i l a r p r o v i s i o n of the National Bank Act was omitted when t h a t Act was incorporated i n the Revised S t a t u t e s of the United S t a t e s , and such omission has given r i s e t o much debate as to the r i g h t of Congress to amend c e r t a i n p r o v i s i o n s of the National Bank Act. A r e p e t i t i o n of t h a t u n f o r t u n a t e occurrence i s u n d e s i r a b l e . Some of the e r r o r s in the c o d i f i c a t i o n which a r e mentioned i n the enclosed memorandum, such as those in Sections 1, 92, 231 and 462 a r e unimport a n t , but a r e mentioned f o r the sake of accuracy and completeness. The e r r o r s occurring i n the following s e c t i o n s of T i t l e 12 of the Code, however, are important and should be c o r r e c t e d : 2 4 8 ( e ) , 248(1), 324, 327, 330, 331, 345, 346, 351, 373, 411, 412, 413, 414, 420, 422, 447, 448, 467, 482, 611, 613, 615, 616., 617, 619, 629, 630, 631, 943, 1222 and 1223; and a l s o Section 771 of T i t l e 31. Some of these e r r o r s very s e r i o u s l y a f f e c t the e x i s t i n g p r o v i sions of the Federal Reserve Act, and i t i s highly important t h a t they be corr e c t e d b e f o r e the Code i s given the e f f e p t 'pf superseding p r e e x i s t i n g law. One er two of these e r r o r s w i l l be discussed, by way of i l l u s t r a t i o n . Section 327 of T i t l e 12 of the Code corresponds to the seventh p a r a graph ef S e c t i o n 9 of the Federal Reserve Act, which authorized, the Federal Reserve Board to r e q u i r e any member bank which has f a i l e d to comply with the p r o v i s i o n s of " t h i s s e c t i o n " ( i . e . , Section 9 of the Federal Reserve Act) to -3- X-4702-a 2 8 2 surrender i t s stock i n the Federal reserve bank and to f o r f e i t a l l r i g h t s and p r i v i l e g e s of membership. Although t h i s p r o v i s i o n r e f e r s to the -.thole of Sect i o n 9 of the Federal Reserve Act, containing some twelve paragraphs which are incorporated i n the Code as Sections 321 to 331, i n c l u s i v e , the c o d i f i e r s f a i l ed to change the words " t h i s section" so as to r e f e r to the other s e c t i o n s of the Code which correspond to the other paragraphs of S e c t i o n 9 of the Federal Reserve Act. The r e s u l t i s t h a t Section 327 of the Code i s p r a c t i c a l l y meani n g l e s s ; and, i f the Code should "be given the e f f e c t of superseding p r e e x i s t i n g law without c o r r e c t i n g t h i s mistake, i t would deprive t h e Federal Reserve Board of t h i s very important power to enforce the p r o v i s i o n s of Section 9 of the Fed e r a l Reserve Act. Section 412 of T i t l e 12 of the Code would very s e r i o u s l y change the v i t a l l y important p r o v i s i o n s of the law with r e f e r e n c e to the c h a r a c t e r of c o l l a t e r a l which may "be pledged ™ith the Federal Reserve Board to secure Federal Reserve n o t e s . Thus the Code a u t h o r i z e s the pledging of n o t e s , d r a f t s and "bills of exchange acquired under the p r o v i s i o n s of Section 342 of the Code, whereas under t h a t Section of the Code n o t e s , d r a f t s and "bills of exchange may "be a c quired by Federal r e s e r v e banks only f o r purposes of c o l l e c t i o n , the Federal reserve banks a c q u i r e them merely as Agents, have no t i t l e to them, and could not p r o p e r l y pledge them as s e c u r i t y f o r Federal Reserve n o t e s . Section 412 ef the Code a l s o a u t h o r i z e s the pledging of acceptances acquired "by Federal r e s e r v e banks under Section 372, whereas Section 372 merely confers powqr on member banks to i s s u e bankers' acceptances. On the o t h e r hand, S e c t i o n 412 of the Code omits r e f e r e n c e to Section 359, which corresponds to Section 1 4 ( f ) of the Federal Reserve Act, and thus would deprive Federal r e s e r v e banks of the r i g h t to pledge as c o l l a t e r a l s e c u r i t y to Federal Reserve notes acceptances of Federal Intermediate Credit Banks and National A g r i c u l t u r a l Corporations which may now be purchased by Federal r e s e r v e banks under the p r o v i s i o n s of Section 1 4 ( f ) . The important c o r r e c t i o n s which should bo made i n Section 412 are c l e a r l y i n d i c a t e d in the enclosed memorandum prepared by the Board's Counsel. The Board cannot undertake to d i s c u s s in d e t a i l a l l of the e r r o r s in the C o d i f i c a t i o n which would s e r i o u s l y a f f e c t the e x i s t i n g p r o v i s i o n s of the Fed e r a l Reserve Act;, but they a r e pointed out i n the enclosed nioaorandum, and the Board urges most s t r o n g l y t h a t the necessary c o r r e c t i o n s be made b e f o r e the c o d i f i c a t i o n i s given the e f f e c t of superseding p r e e x i s t i n g law. The Federal Reserve Board d e s i r e s to do everything p o s s i b l e to a s s i s t you and your Committee i n the important t a s ^ of making t h i s Code a b s o l u t e l y accurate and complete and hopes t h a t you w i l l c a l l upon i t i f i t can be of any f u r t h e r a s s i s t a n c e to you i n the m a t t e r . In tjMs connection, the Board r e quests t h a t i t be given an opportunity of %avi$g i t s Counsel confer *7ith your c o d i f i c a t i o n experts i n order to -take sure t h a t the important mistakes i n those p o r t i o n s of t h e c o d i f i c a t i o n vrhich cover the p r o v i s i o n s of the Federal Reserve Act may be c o r r e c t e d b e f o r e the c o d i f i c a t i o n i s given f i n a l e f f e c t . Very t r u l y yours, Enclosure. D. R. C r i s s i n g e r , Governor %
@FedFRASER