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mTTATIVE DBJ.FT OF P.MENDMENTS TO REGULATIONS.
The attached draft of amendments to the Federal Reserve Board's Regulations is merely tentative and is intended
primarily to serve as a basis for discussion.
It has not
been submitted to, or approved even tentatively by, the Federal
Reserve Board.
Constructive criticisms and suggestions are
invited.
The changes in the existing regulations are noted in
red ink.
("l{""l,...
r.:
Jr -'.
(To be inserted in Reg'J.lation L c.t the
place ir,dicated)
(Insert #1)
and ~2) certain bills of excn::::_nge pay:;ble at sight or on de!I'and
are eligible even though they have no fixed ITaturity {See Section
VII, below).·
I
(Insert #2)
that which could be borrowed lawfully from such State bank or
trust company under the terms of Section 5200 of the United States
Revised Statutes, were it a national banking association.
(Insert d!j)
(b) It must not.b2 a note, draft, or bill of exchange the proceeds of whic:1 :1ave been or c;,r2 tc be 2,dvc::.nced or loaned to s~rr.e
other borroner, except a;:; to paper described ~-::elmv under Sect1.ons
VI(b) ani VIIL
(Insert #4)
or drawn, or the proceeds thereof ho.ve csen or :::re to be used, for
such a purpose as to render them eligib~e for rediscount under the
terms of this regulation.
(Insert 4~)
(a) Definition. Agricultural p&per within the :ceaning of t"his
regulation is iefinsd as a negotiable note, draft or bill of exchange
issued or drawn, or the proceed; of '"'hie:.-, hsve been or are to be
used, for acricultural purposes, including the production of agricultural pro"cucts, ths carrying or marketing of agricultural products
by the growers thereof, and the breeding, raising, fattening or IT.arketing of live stock, and \Vhich has a :r.aturity at t:1e time of rediscount of not more than nine n:onths, e~:clusive of days of grace.
(b) Paper of Cooperative ;:arketing Lssociations. Unier the express terms of Section 13(a), notes, d.rafts, bills of exchange, or
acceptances issued or dra,·.n by cooperative rrarketing associations
composed of producers of 2gricultural products are d.eemed to !lave
been issued or dra\m for an agricultural purpose, and therefore
constitute agricultural paper, if the proceeds thereof have been or
~~.~1
- 2 -
are to be:
(1) ]\dvanced by such association to any members thereof for an
agricultural purpose, or
(2) Used by such association in making payments to any members
thereof on account of agricultural products delivered by such me~
bers to the association, or
(3) Used by such as'?ocbtion to meet expey,ditures incurred or to be
incurred by the association in connection with the grading) processingt packing> preparation for martet or rr:arketing of any agricultural
product handled b,- such association for any of its members.
The~e are not only the classes of paper of such associ~tions
which are eligible for rediscount, however, and any other paper of suci1
assocktions which complies with the pertinent requirements of this
regulation rray be rediscounted on the same terms and conditions as the
paper of any other person or corporation.
(Insert 4;6)
SECTION VII.
SIGHT DRf,FTS SECUR.t:'D BY BILLS OF LtDHm •
.A Federal Reserve Eank may rediscount for any of its member banks
bills of exchange payable at sight or on :lemand which:
(a) Are dra\vn to finance the domestic shipment of nonperishable,
readily marketable staple agricultural products, and
(b) ~re secured by bills of lading or other shipping documents
conveying or securing title to such staples.
All s~ch bills of exchange shall be fo~varded promptly for collection, and demand for payment shall be rrade with reasonable promptness
after the arrival of such staples at their destination. In no event
shall any such bill be held by or for the account of a Federal Reserve
Bank for a period in excess of 90 days.
In discounting such bills Federal Reserve Panlrs rr.ay compute the
interest to be deducted on the basis of the estimated life of each bill
and adjust the amount thus deducted after payment of such bills to conform to the actual life thereof.
SECTION VIII.
FACTORS 1 PIPER.
Notes, drafts, and bills of exchange of factors issued as such rr.aking advances exclusively to producers of staple agricultural products in
their raw state" are eligible for rediscount with maturities not in excess of 90 days, exclusive of days of grace, irrespective of the requirements of Sections II(a) and II(b).
11
nn..:
... 3 -
rr:•c. JL
(Insert ,77)
SECTION XI.
W~TURITIES~
(a) Legal Requirements~ No such acceptance is eligible for rediscount which has a maturity at the time of rediscount in excess of 90
days' sight, exclusive of days of grace, except that acceptances drawn
for agricultural purposes and secured at the time of acceptance by
warehouse receipts or other such documents conveying or securing title
covering readily marl:etable staples rray be rediscounted with rr.aturities
at the time of rediscount of not more than six months' sight, exclusive of days of grac~~
n .... ,...,
r:.i:__,.(.~~
(To be inserted in Regulation E.)
(Insert ¥1)
SECTION II.
~EFINITIONS.
'::ithin the meaning of this regulation:
The term trwarrant 11 shall be
revenue bonds, and warrants with a
constru~d
IJ:ELtu~ity
to mean "bills, notes,
from data of purchase of not
exceeding six months."
The term "municipality" slk1.ll be construed to mean
11
State;
county, district, political subdivision, or municipality in the continental United States, including irrigation, droinage, and
recla~ation
districts."
The tarm "net funded indebtedness 11 shall be construed to n"ean
the legal gross indettedness of the municipality (including the amount of
any school district or other bonds which depend for their redemption upon
taxes levied upon property within the municipality) less the aggregate of
ths following items:
(1)
The amount of outstanding bonds or other debt obligations
(2)
~ade
payable from current revenues;
The amount of outstanding bonds issued for the purpose of
providing the inhabitants of a municipality with public
utilities, such as waterworl;ts, docks, electric plants,
I
transportation facilities, etc: Provided,
Tr~t
avidence
is submitted showing th'::t the income fron such utilities
is sufficient for
~aintenance,
for payment of interest on
•
n,..,
~~
,<,, '•,
- 2 -
such bonds, and for the accR1IUlat ion of a sinl inc: fund for
their redemption;
(3) The
:~,mount
of outstanding improvement bonds, issued under ls,ws
which provide for the levying of special assessments ag::,inst
abutting property in amounts sufficient to insure the payment
of interest on th0 bonds and the redemption thereof! Provided,
That such bonds are direct obligations of the municipality and
included in the gross indebtedness of the municipeJ i ty;
(4)
~ne
total of all
siti}~ing
funds accumulated for the
reden~tion
of the gross indebtedness of the municipality, except sinl::ing
funds applicable to bonds just described in (1), (2), and
(3) above.
(Insert
4~2)
?Tarrants will be construed to comply with that part of Section
III(c) ~~~ve to term of existence and noniefault, under the following
conditions:
(1)
\Tarrants issued by or in behalf of any municipality which was,
subsequent to the issuance of such warrants, consolidated with or merged
into an existing political division which meets the requirements of these
regulati?ns, will be deemed to be the warrants of such political
division: Provided, That such warrants were assumed by such political
division under statutes and appropriate proceedings the effect of which
is to
~ake
such warrants general obligations of such assuming political
division and payable, either directly or ultimately, without limitation
- 3-
to a special fund from the proceeds of· taxes levied
UIJOn
all the
taxable real and personal property within its territorial· limits.
(2)
':" 7arrants is ued by or in behalf of any municipality which was,
subsequent to the issuance of such warrants, wholly succeeded by a newly organized political division whose term of existence, add..od to that
of suCh original political division or of any other political division
so succeeded, is 2qual to a period of 10 years will be de0rrk.:d to be warrants of such succeeding political division: Provided, That during suCh
period none of such political divisions sh:.ll have defo.ulted for a period
exceeding
e'-!t
15
days in the payment of any part of either
of any funded debt authorized to be contracted by
princip~l
it·~
or inter-
.''.nd. provid0d fur-
ther, That such we.rrants were assu.med ey such nevr political division under
~>t2,tutes
and appropriate proceedings the effect of which is to mals:e such
warrants general obligations of such assuming political division and payable:
either directly or
ulti~ately,
without limitation to a special fund from the
proceeds of taxes levied uptm all the taxable real and personal property
within its territorial limits.
(3)
~:'arrants
issued by or in behalf of any municipality which,
prior to such issuance 1 becaffie
the successor of one or more, or was formvd
by the consolidation or merger of two or more 1 preexisting political divlsions, the term of existence of one or more of which, added to that of
such succeeding or consolidated
of 10
years~
political division, i.s equal to a period
will be deemed to be warrants of a political division which
has been in existence for a period of 10 years:
Provided~
That during
r"l-~·
such period none of such original, succeeding, or consolidated political
divisions shall have defaulted for a period exceeding
15
days in the
payment of any part of either principal or interest of any funded debt
authorized to be contracted by it.
."'::'!
('":. : ..• •.~>
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(To ·ba inserted in Re;::sul :~tlon H.)
(IESERT #:1)
SECTION II.
? LT~S ELIGIBLE FOR MEMBERSHIP.
reserve bank, ..l St::cte o:mk or trust com.::2UY must
_J..~va
a s,_Jecial or general l.::tw of the St.J.te or district in
2.
li.Ct :;.s
C:tei t:tl __ Stock.
~mended 1
been incor;or::ted undor
w~-:tich
it is located.
Under the terms of Section 9 of the Federal Reserve
no :::Lf}llyin; bani<: c:m be
:::~.dmi tted
to memoers.lip 1n a Feder:.:tl
re.serve oank unless:
(.::)
It r,ossesses a p'1id-u;, unim~, :..ired c2.~~i t::.l sufficient to en-
title it to become a national bmking
(o)
It ...~assesses
J. -':
:~ssoci:,tion
li1 the place where it is
:cid-ul:', unim~---irad cs._,_:;its.l of at least 60 p.::r
c.;ntum of such e1mount, ...nd, under .en;::,_lty of loss of membership, com;lies
with the rules. ,:.:nd regul :ctions herein
~~rescribed
by the Federal Reserve
Board fixing the time within which :md the method ·by which the unimpaired
ca..c i t::cl of such b:.:nk shall bo incre_;.sed out of net income to eq_ud th;;:; cc.r- i tal
required under (a)
ln ordeT" to become a member of the Feder:tl Reserve Sys tern, therefore,
any
St.'lte bank or trust company must have a minimum .:_)aid-u_p capit:::Ll stock
at the time it becomes a member
~s
follows:
If locc::.ted in a city or town: Mininum C0.,eJit:.:..l i f s.dwith a popul.:,tion of
mitted under cln:P.se (a)
- - - - - - - 3,000 in-
Not exce0din~
habi t.::tnt s.
Minimum c::tpi tal
if admitted m1der
clause (b)
- - - - ---- -
$25,0-C
$15,COO
-- -- - - - - - - - - - - - - - - - - ....
x_ 3b 7lc
-2K~ceedint;
3,C .C but not
ex~:
ceeding 6,0:Jv inh::J.bit~ts
Exceedin~:,
ceedin~
$30,000
-
6 ,0~ 0 1 but not ex-
50 ,0·...,0 inhabit-mts. :
E:~ceedin~
f'"'11""""-'
,r. ·~j ·f
~;.10o
,ooc
---------·---
$60,0(,0
$120,000
50,000 inh.:"bitc:.J.'lts:
Any bank admit ted to membershi.;_.:,
und~
cl:::tuse (b) must :\.lso,
:\.S :::\.
con-
dition of membersl1i-"'' the viol::.tion of which will subJect it to e:x:l_;ulsion frorr:
the Federal Reserve System, increase its capital within five yelrs
~fter
the
c:t_t.l.._.;rov.:.::..l of its i:l.p,;liC::J.t ion by the Federi:l.l Reserve Bo2crd to the arnoun t required under (o.).
b~nk
For the purpose of providins for such increase, every such
s:::-L:tll set .J.Side e::J.ch yeo.r in
its net e-:lrnin,:,s for the
..::~recedin
::t
specio.l fund not less th-1.n 50 per cent of
ye21.r, .::tnd if such net e:\.rnin;;s exceed 12
of 6 p:;r cent of thep;:Ud-up c.:1pit.:1.l shall be c::trried to such fund, until such
ever it amounts to $5,0..,0, or .:1t such other time :1s the Federn.l Reserve Bo.:1rd
m:::ty require, such fund shi:l.ll be used to incr.;:n.se the capital of such b::mk,
except that any odd sums of less them $100 need not be so applied .:md !ll3.Y ramain in such fund until the.next increase of capital.
(INSERT f2)
If such banl< ~pplies for membership under Section II, 2, (b), it sh.J.ll
also file with its ~pplication an abreement on Federal Reserve Board Form
----------' sisued by tha holdars of not lass than two-thirds of its c:1pit~l
stock, in which such stockholders shall undertake to do all in their power to
brin3 about compliance with the requirements of that section nnd to vote for
and do everything elsenecass-1.ry to authorize ::md consumn:1te the increases of
capit.::,l therein required,
..
0;
... ~-::.
f"'C'' '·c"
-3(INSERT
#3)
(4)
Shall not, except UiOn prior application to and approval of t:t1e
Federal B.eserve Board, reduce its capital stocl': or c:lUse or permit any
change in the general
c~aracter
of its assets or broadening of the
functions exercised by it ~uch as will' tend to affect mterially the
standard maintained at the time of its admission and required as a condition of membership;
(5)
Shall exercise all of its powers with due regard to the safety
of its customers;
(6)
Shall not, except upon prior application to and approval of the
Federal Reserve Board, establish any branch or agency; consolidate with
or absorb
any other
~;
either directly or indirectly, through af-
filiated corporations or otherwise, acquire an interest in another bank
in excess of 20 per cent of the capital stock of such other bank; directly
or indirectly promote the establishment of any new bank for the purpose
of acquiring such an interest in it; nor make any engagement to acquire
such an interest.
(7)
Shall reduce to the limits prescribed by the laws of the State
of its incorporation any loan which may be in excess of such limits and
thereafter shall keep its loans within such limits;
(.'!)
Shall reduce to 10% of its capital and surplus all balances in
excess thereof, if any, which are carried with baru:.s or trust companies
not members of the Federal Raserve System;
(9)
rJay accept drafts and bills of any character permitted by the
laws of the State of its incorporation; but the aggregate amount of all
nn'""
-4-
X-367lc '-" ''::}
acceptances outstanding at any one time shall not exceed the limitations
imposed by Section
13 of the Federal Raserve .Act, that is,
507~ of its
capital and surplus for acceptances drawn for the purpose of furnishing
dollar
e~:change
in countries spacified by the FedGral Reserve Board, and
:>07~ of its capital and surplus for all other accaptances, whether domestic
or foreign, except that the Federal Reserv8 Board may increase this limit
from 507~ to 1007~ upon the application of such member lank; provided, ~owever, that in no
~vent
shall the aggregate amount of domestic acceptances
outstanding at any one time exceed
(10)
507o of its capital ::md sur_I)lus; and
Shall cotnply at all times with any and all S_r;;::)cial conditions
of membership prescribed by the Federal Reserve
Eo~rd
at the time of the
admission of such member bank to the Federal Reserve System or subsequently agreed upon by the Federal Reserve Board and such member barll'.
(To be inserted in Re_;tJ.:::.tion I)
(!NSERT
#1)
L
New natione1l b.:mks.-
E:lch newly orge1nized bank (including ony
1
nonmerrber Ste1te bank which sh.::tll have converted into a n2tional bank )
shall file with the Feder2l Reserve B:::tnk of its district an
~pliccttion
to the Federal Reserve Boe1rd on F. R. B, Form }0, made a part of this
reg,ul.::ttion, for :m amount of capi t::1l stock of the Federal Reserve B:mk of
its district equ:tl to
6 per cent of the paid-up caflital stock Cllld surplus
of such national bnnk.
SV.Ch applicntion shall be forwarded promptly to
the Federal Reserve Bo:crd, :md i f it is
~und
to be in proper form the
Federal Reserve Bo.::trd will either disapprove it or approve it effective
if and when the Comptroller of the Currency issues to such bank his certifice1te of =<.uthori ty to coinrnence business.
the :tpplying bank
s~1o..ll
thereupon UB.lte ::;.
If its C1ppl$cation is npproved,
paym~;Jnt
to the Federnl Reserve
B::J.nk of its district of one-half of the amount of its subscription, i.e.,
3 per cent of the amount of its paid-up capitul
receipt of this payment the Federal Rsserve
ther~for,
~d
B~nk
surplus; and upon
will issue a
recei~t
place the amount in a suspense account, and notify the Federal
Reserve Board that it
h~s
Currency issuc1s to such
teen received.
al~.i.:~lyin,~
~fuen
the Comptroller of the
b:mlc: his certificate of authority to com-
mence business; the Federal r.eserv8 Bank shall issue a stock certificate
to tho
applyin~
bnnk, .:md the cnpi t:W.. stock of the Federal Reserve Bank
represented by such certificD-te slnll be considered :::ts issu-:;d ·1s of the
date upon which the Comptroller of the Currency issues his certificate
of ::...uthori ty to commence business.
'£he remaining h::.t.lf of the sub scri.ption
..
.
X-367ld
-2-
of the applyin13
b~
t1:1e Federal Reserve
sh:::Lll be subject to call when deemed necessary by
Bo~d ...
(INSERT #2)
If the receiver sh:::Lll fail to
time
s~ecified,
Federal
Reserv~
wh~reupon
m~:c
such :::Lpplication within the
the Feder:::Ll Reserve AGent shall report the facts to the
Boord with a recommendation as to the action to be taken,
the Federal Res0rve Board will oithor issue
such stock or, if the circumstances warrant it,
tional time in
w~lich
,~>rMt
to fil0 such on application.
~
order to cancel
the receiver ad.d.i-
@FedFRASER