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332.3-4 - Repeal of authority to use Federal
Farm Loan Bonds as security for
promissory notes of Member Banks

[PuDuc—No. 66-73D CONGRESS]
[H.R. 5661]
AN ACT
To provide for the safer and more effective use of the assets of banks, to regulate
interbank control, to prevent the undue diversion of funds into speculative
operations, and for other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That the short
title of this Act shall be the "Banking Act of 1933."
SEC. 2. As used in this Act and in any provision of law amended
by this Act—
(a) The terms "banks ", "national bank ", "national banking
association ", "member bank ", "board ";"district ", and "reserve
bank" shall have the meanings assigned to them in section 1 of the
Federal Reserve Act, as amended.
(b) Except where otherwise specifically provided, the term "affiliate" shall include any corporation, business trust, association, or
other similar organization—
(1) Of which a member bank, directly or indirectly, owns or
controls either a majority of the voting shares or more than 50
per centum of the number of shares voted for the election of its
directors, trustees, or other persons exercising similar functions at
the preceding election, or controls in any manner the election of a
majority of its directors, trustees, or other persons exercising similar
functions; or
(2) Of which control is held, directly or indirectly, through
stock ownership or in any other manner, by the shareholders of a
member bank who own or control either a majority of the shares
of such bank or more than 50 per centum of the number of shares
voted for the election of directors of such bank at the preceding
election, or by trustees for the benefit of the shareholders of any
such bank; or
(3) Of which a majority of its directors, trustees, or other persons
exercising similar functions are directors of any one member bank.
(c) The term "holding company affiliate" shall include any corporation, business trust, association, or other similar organization—
(1) Which owns or controls, directly or indirectly, either a
majority of the shares of capital stock of a member bank or more
than 50 per centum of the number of shares voted for the election
of directors of any one bank at the preceding election, or controls
in any manner the election of a majority of the directors of any one
bank; or
(2) For the benefit of whose shareholders or members all or
substantially all the capital stock of a member bank is held by
trustees.




2

[PUB.Go.]

SEC. 3. (a) The fourth paragraph after paragraph "Eighth" of
section 4 of the Federal Reserve Act, as amended (U.S.C., title 12,
sec. 301), is amended to read as follows:
"Said board of directors shall administer the affairs of said bank
fairly and impartially and without discrimination in favor of or
against any member bank or banks and may, subject to the provisions of law and the orders of the Federal Reserve Board, extend.
to each member bank such discounts, advancements, and accommodations as may be safely and reasonably made with due regard for
the claims and demands of other member banks, the maintenance of
sound credit conditions, and the accommodation of commerce, industry, and agriculture. The Federal Reserve Board may prescribe
regulations further defining within the limitations of this Act the
conditions under which discounts, advancements, and the accommodations may be extended to member banks. Each Federal reserve
bank shall keep itself informed of the general character and amount
of the loans and investments of its member banks with a view to
ascertaining whether undue use is being made of bank credit for
.
the speculative carrying of or trading in securities, real estate, or
commodities, or for any'other purpose inconsistent with the maintenance of sound credit conditions; and, in determining whether to
grant or refuse advances, rediscounts or other credit accommodations,
the Federal reserve bank shall give consideration to such information. The chairman of the Federal reserve bank shall report to
the Federal Reserve Board any such undue use of bank credit by
any member bank, together with his recommendation. Whenever,
in the judgment of the Federal Reserve Board, any member bank
is making such undue use of bank credit, the Board may, in its
discretion, after reasonable notice and an opportunity for a hearing,
suspend such bank from the use of the credit facilities of the Federal
Reserve System and may terminate such suspension or may renew
it from time to time."
(b) The paragraph of section 4 of the Federal Reserve Act, as
amended (U.S.C., title 12, sec. 304), which commences with the words
"The Federal Reserve Board shall classify" is amended by inserting
before the period at the end thereof a colon and the following:
"Provided, That whenever any two or more member banks within
the same Federal reserve district are affiliated with the same holding
company affiliate, participation by such member banks in any such
nomination or election shall be confined to one of such banks, which
may be designated for the purpose by such holding company affiliate."
,
SEC. 4. The first paragraph of section 7 of the Federal Reserve
Act, as amended (U.S.C., title 12, sec. 289), is amended, effective
July 1, 1932, to read as follows:
"After all necessary expenses of a Federal reserve bank shall have
been paid or provided for,the stockholders shall be entitled to receive
an annual dividend of 6 per centum on the paid-in capital stock,
which dividend shall be cumulative. After the aforesaid dividend
claims have been fully met, the net earnings shall be paid into the
surplus fund of the Federal reserve bank."
SEC. 5. (a) The first paragraph of section 9 of the Federal Reserve
Act, as amended (U.S.C., title 12, sec. 321; Snpp. VI, title 12, sec.
321), is amended by inserting immediately after the words "United




[Pus.NJ

3

States" a comma and the followi'4g::' including Morris Plan banks
"
and other incorporated banking -ihstitutions engaged in similar
business."
(b) The second paragraph of section 9 of the Federal Reserve Act,
as amended, is amended by adding at the end thereof the following:
"Provided, however, That nothing herein contained shall prevent
any State member bank from establishing and operating branches in
the United States or any dependency or insular possession thereof or
in any foreign country, on the same terms and conditions and subject
to the same limitations and restrictions as are applicable to the
establishment of branches by national banks."
(c) Section 9 of the Federal Reserve Act, as amended (U.S.C.,
title 12, secs. 321-331 Supp. VI, title 12, secs. 321-332), is further
amended by adding at the end thereof the following new paragraphs:
"Any mutual savings bank having no capital stock (including any
other banking institution the capital of which consists of weekly or
other time deposits which are segregated from all other deposits and
are regarded as capital stock for the purposes of taxation and the
declaration of dividends) but having surplus and undivided profits
not less than the amount Of capital required for the organization of a
national bank in the same place, may apply for and be admitted to
membership in the Federal Reserve System in the same manner and
subject to the same provisions of law as State banks and trust companies, except that any such savings bank shall subscribe for capital
stock of the Federal reserve bank in an amount equal to six-tenths of
1 per centum of its total deposit liabilities as shown by the most recent
report of examination of such savings bank preceding its admission
to membership. Thereafter such subscription shall be adjusted
semiannually on the same percentage basis in accordance with rules
and regulations prescribed by the Federal Reserve Board. If any such
mutual savings bank applying fol; membership is not permitted by
the laws under which it was organized to purchase stock in a Federal
reserve bank, it shall, upon admission to the system, deposit with
the Federal reserve bank an amount equal to the amount which it
would have been required to pay in on account of a subscription to
capital stock. Thereafter such deposit shall be adjusted semiannually in the same manner as subscriptions for stock. Such
deposits shall be subject to the same conditions with respect to repayment as amounts paid upon subscriptions to capital stock by other
member banks and the Federal reserve bank shall pay interest
thereon at the same rate as dividends are actually paid on outstanding shares of stock of such Federal reserve bank. If the laws under
which any such savings bank was organized be amended so as to
authorize mutual savings banks to subscribe for Federal reserve bank
stock, such savings bank shall thereupon subscribe for the appropriate
amount of stock in the Federal reserve bank, and the deposit hereinbefore provided for in lieu of payment upon capital stock shall be
applied upoh such subscription. If the laws under which any such
savings bank was organized be not amended at the next session of
the legislature following the admission of such savings bank to
membership so as to authorize mutual savings banks to purchase
Federal reserve bank stock, or if such laws be so amended and such
bank fail within six months thereafter to purchase such stock, all




4

[Pm 66.1

of its rights and privileges as a member bank shall be forfeited and
its membership in the Federal Reserve System shall be terminated
in the manner prescribed elsewhere in this section with respect to
State member banks and trust companies. Each such mutual savings
bank shall comply with all the provisions of law applicable to State
member banks and trust companies, with the regulations of the Federal Reserve Board and with the conditions of membership prescribed
for such savings bank at the time of admission to membership, except
as otherwise hereinbefore provided with respect to capital stock.
"Each bank admitted to membership under this section shall
obtain from each of its affiliates other than member banks and
furnish to the Federal reserve bank of its district and to the Federal
Reserve Board not less than three reports during each year. Such
reports shall be in such form as the Federal Reserve Board may
prescribe, shall be verified by the oath or affirmation of the president
or such other officer as may be designated by the board of directors
of such affiliate to verify such reports, and shall disclose the information hereinafter provided for as of dates identical with
fixed by the Federal Reserve Board for reports of the conditithose
on of
the affiliated member bank. Each such report of an affiliate shall
be transmitted as herein provided at the same time as the corresponding report of the affiliated member bank, except that the
Federal Reserve Board may, in its discretion, extend such time for
good cause shown. Each such report shall contain such information
as in the judgment of the Federal Reserve Board shall be necessary
to disclose fully the relations between such affiliate and such bank
and to enable the Board to inform itself as to the effect of such
relations upon the affairs of such bank. The reports of such affiliate
s
shall be published by the bank under the same conditions as govern
its own condition reports.
"Any such affiliated member bank may be required to obtain
any such affiliate such additional reports as in the opinion from
of its
Federal reserve bank or the Federal Reserve Board may be necessa
in order to obtain a full and complete knowledge of the conditi ry
on
of the affiliated member bank. Such additional reports
transmitted to the Federal reserve bank and the Federal shall be
Reserve
Board and shall be in such form as the Federal Reserve Board
may
prescribe.
"Any such affiliated member bank which fails to obtain
of its affiliates and furnish any report provided for from any
preceding paragraphs of this section shall be subject to by the two
$100 for each day during which such failure continu a penalty of
es,
direction of the Federal Reserve Board, may be collecte which, by
otherwise, by the Federal reserve bank of the district ind, by suit or
which such
member bank is located. For the purposes of this
paragraph and
the two preceding, paragraphs of this section, the term
shall include holding company affiliates as well as other 'affiliate'
affiliates.
"State member banks shall be subject to the same
conditions with respect to the purchasing, selling, limitations and
holding of investment securities and stock as are underwriting, and
applicable in the
case of national banks under paragraph 'Seventh'
of section 5136
of the Revised Statutes, as amended.
"After one year from the date of the enactment of
Act of 1933, no certificate representing the stock of any the Banking
State member




[PUB.66.]

5

bank shall represent the stock of gny other corporation, except a
member bank or a corporation eisting on the date this paragraph
takes effect engaged solely in holding the bank premises of such State
member bank, nor shall the ownership, sale, or transfer of any
certificate representing the stock of any such bank be conditioned in
any manner whatsoever upon the ownership, sale, or transfer of a
certificate representing the stock of any other corporation, except a
member bank.
"Each State member bank affiliated with a holding company
affiliate shall obtain from such holding company affiliate, within
such time as the Federal Reserve Board shall prescribe, an agreement that such holding company affiliate shall be subject to the same
conditions and limitations as are applicable under section 5144 of
the Revised Statutes, as amended, in the case of holding company
affiliates of national banks. A copy of each such agreement shall be
filed with the Federal Reserve Board. Upon the failure of a State
member bank affiliated with a holding company affiliate to obtain
such an agreement within the time so prescribed, the Federal Reserve
Board shall require such bank to surrender its stock in the Federal
reserve bank and to forfeit all rights and privileges of membership
in the Federal Reserve System as provided in this section. Whenever the Federal Reserve Board shall have revoked the voting permit
of any such holding company affiliate, the Federal Reserve Board
may, in its discretion, require any or all State member banks
affiliated with such holding company affiliate to surrender their
stock in the Federal reserve bank and to forfeit all rights and
privileges of membership in the Federal Reserve System as provided
in this section.
"In connection with examinations of State member banks, examiners selected or approved by the Federal Reserve Board shall make
such examinations of the affairs of all affiliates of such banks as
shall be necessary to disclose fully the relations between such banks
and their affiliates and the effect of such relations upon the affairs
of such banks. The expense of examination of affiliates of any State
member bank may, in the discretion of the Federal Reserve Board,
be assessed against such bank and, when so assessed, shall be paid
by such bank. In the event of the refusal to give any information
requested in the course of the examination of any such affiliate, or in
the event of the refusal to permit such examination, or in the event
of the refusal to pay any expense so assessed, the Federal Reserve
Board may, in its discretion, require any or all State member banks
affiliated with such affiliate to surrender their sto k in the Federal
reserve bank and to forfeit all rights and privileges of membership
in the Federal Reserve System, as provided in this section."
SEC. 6. (a) The second paragraph of section 10 of the Federal
Reserve Act, as amended (U.S.C., title 12, sec. 242), is amended to
read as follows:
"The Secretary of the Treasury and the Comptroller of the Currency shall be ineligible during the time they are in office and for two
years thereafter to hold any office, position, or employment in any
member bank. The appointive members of the Federal Reserve
Board shall be ineligible during the time they are in office and for
two years thereafter to hold any office, position, or employment in




6

[Pus. 66.1

any member bank, except that this restriction shall not apply to a
member who has served the full term for which he was appointed.
Upon the expiration of the term of any appointive member of the
Federal Reserve Board in office when this paragraph as amended
takes effect, the President shall fix the term of the successor to such
member at not to exceed twelve years, as designated by the President
at the time of nomination, but in such manner as to provide for the
expiration of the term of not more than one appointive member in
any two-year period, and thereafter each appointive member shall
hold office for a term of twelve years from the expiration of the term
of his predecessor. Of the six persons thus appointed, one shall be
designated by the President as governor and one as vice governor of
the Federal Reserve Board. The governor of the Federal Reserve
Board, subject to its supervision, shall be its active executive officer.
Each member of the Federal Reserve Board shall within fifteen days
after notice of appointment make and subscribe to the oath of office."
(b) The fourth paragraph of section 10 of the Federal Reserve
Act, as amended (U.S.C., title 12, sec. 244), is amended to read as
follows:
"The principal offices of the Board shall be in the District of
Columbia. At meetings of the Board the Secretary of the Treasury
shall preside as chairman, and, in his absence, the governor shall
preside. In the absence of both the Secretary of the Treasury and
the governor the vice governor shall preside. In the absence of the
Secretary of the Treasury, the governor, and the vice governor the
Board shall elect a member to act as chairman pro tempore. The
Board shall determine and prescribe the manner in which its obligations shall be incurred and its disbursements and expenses allowed
and paid, and may leave on deposit in the Federal Reserve banks the
proceeds of assessments levied upon them to defray its estimated
expenses and the salaries of its members and employees, whose
employment, compensation, leave, and expenses shall be governed
solely by the provisions of this Act, specific amendments thereof, and
rules and regulations of the Board not inconsistent therewith; and
funds derived from such assessments shall not be construed to be
Government funds or appropriated moneys. No member of the Federal Reserve Board shall be an officer or director of any bank, banking institution, trust company, or Federal Reserve bank or hold stock
in any bank, banking institution, or trust company; and before
entering upon his duties as a member of the Federal Reserve Board
he shall certify under oath that he has complied with this requirement, and such certification shall be filed with the secretary of the
Board. Whenever a vacancy shall occur, other than by expiration
of term, among the six members of the Federal Reserve Board
appointed by the President as above provided, a successor shall be
appointed by the President, by and with the advice and consent of
the Senate, to fill such vacancy, and when appointed he shall hold
office for the unexpired term of his predecessor."
SEC. 7. Paragraph (m)of section 11 of the Federal Reserve Act, as
amended (U.S.C., title 12, sec. 248), is amended to read as follows:
"(in) Upon the affirmative vote of not less than six of its members the Federal Reserve Board shall have power to fix from time
to time for each Federal reserve district the percentage of indi-




[Pm NJ

7

vidual bank capital and surplus which may be represented by loans
secured by stock or bond collateral made by member banks within
such district, but no such loan shall be made by any such bank to
any person in an amount in excess of 10 per centum of the unimpaired capital and surplus of such bank. Any percentage so fixed
by the Federal Reserve Board shall be subject to change from time
to time upon ten days' notice, and it shall be the duty of the Board
to establish such percentages with a view to preventing the undue
use of bank loans for the speculative carrying of securities. The
Federal Reserve Board shall have power to direct any member bank
to refrain from further increase of its loans secured by stock or
bond collateral for any period up to one year under penalty of
suspension of all rediscount privileges at Federal reserve banks."
SEC. 8. The Federal Reserve Act, as amended,is amended by inserting between sections 12 and 13 (U.S.C., title 12, secs. 261, 262, and
342), thereof the following new sections:
"SEC. 12A. (a) There is hereby created a Federal Open Market
Committee (hereinafter referred to as the '
committee '), which.
shall consist of as many members as there are Federal reserve districts. Each Federal reserve bank by its board of directors shall
annually select one member of said committee. The meetings of
said committee shall be held at Washington, District of Columbia,
at least four times each
upon the call of the governor of the
Federal Reserve Board or at the request of any three members of
year,
the committee, and, in the discretion of the Board, may be attended
by the members of the Board.
(b) No Federal reserve bank shall engage in open-market operations under section 14 of this Act except in accordance with regulations adopted by the Federal Reserve Board. The Board shall
consider, adopt, and transmit to the committee and to the several
Federal reserve banks regulations relating to the open-market transactions of such banks and the relations of the Federal Reserve System
with foreign central or other foreign banks.
"(c) The time, character, and volume of all purchases and sales
of paper described in section 14 of this Act as eligible for openmarket operations shall be governed with a view to accommodating
commerce and business and with regard to their bearing upon the
general credit situation of the country.
"(d) If any Federal reserve bank shall decide not to participate
in open-market operations recommended and approved as provided
in paragraph (b) hereof, it shall file with the chairman of the
committee within thirty days a notice of its decision, and transmit
a copy thereof to the Federal Reserve Board.
"SEC. 12B. (a) There is hereby created a Federal Deposit Insurance Corporation (hereinafter referred to as the'
Corporation '),
whose duty it shall be to purchase, hold, and liquidate, as hereinafter
provided, the assets of national banks which have been closed by
action of the Comptroller of the Currency, or by vote of their directors, and the assets of State member banks which have been closed
by action of the appropriate State authorities, or by vote of their
directors; and to insure, as hereinafter provided, the deposits of all
banks which are entitled to the benefits of insurance under this
section.




8

[Pus.66.1

"(b) The management of the Corporation shall be vested in a
board of directors consistino• of three members, one of whom shall
be the Comptroller of the''
Currency, and two of whom shall be
citizens of the United States to be appointed by the President, by
and with the advice and consent of the Senate. One of the appointive members shall be the chairman of the board of directors of the
Corporation and not more than two of the members of such board
of directors shall be members of the same political party. Each
such appointive member shall hold office for a term of six years and
shall receive compensation at the rate of $10,000 per annum, payable
monthly out of the funds of the Corporation, but the Comptroller
of the Currency shall not receive additional compensation for his
services as such member.
"(c) There is hereby authorized to be appropriated, out of any
money in the Treasury not otherwise appropriated, the sum of
$150,000,000, which shall be available for payment by the Secretary
of the Treasury for capital stock of the Corporation in an equal
amount, which shall be subscribed for by him on behalf of the United
States. Payments upon such subscription shall be subject to call in
whole or in part by the board of directors of the Corporation. Such
stock shall be in addition to the amount of capital stock required to
be subscribed for by Federal reserve banks and member and nonmember banks as hereinafter provided, and the United States shall be
entitled to the payment of dividends on such stock to the same extent
as member and nonmember banks are entitled to such payment on the
class A stock of the Corporation held by them. Receipts for payments by the United States for or on account of such stock shall be
issued by the Corporation to the Secretary of the Treasury and shall
be evidence of the stock ownership of the United States.
"(d) The capital stock of the Corporation shall be divided into
shares of $100 each. Certificates of stock of the Corporation shall
be of two classes—class A and class B. Class A stock shall be held
by member and nonmember banks as hereinafter provided and they
shall be entitled to payment of dividends out of net earnings at the
rate of 6 per centum per annum on the capital stock paid in by them,
which dividends shall be cumulative, or to the extent of 30 per centum
of such net earnings in any one year, whichever amount shall be the
greater, but such stock shall have no vote at meetings of stockholders.
Class B stock shall be held by Federal reserve banks only and shall
not be entitled to the payment of dividends. Every Federal reserve
bank shall subscribe to shares of class B stock in the Corporation to
an amount equal to one half of the surplus of such bank on January
1, 1933, and its subscriptions shall be accompanied by a certified check
payable to the Corporation in an amount equal to one half of such
subscription. The remainder of such subscription shall be subject to
call from time to time by the board of directors upon ninety days'
notice.
(e) Every bank which is or which becomes a member of the Federal Reserve System on or before July 1, 1934, shall take all steps
necessary to enable it to become a class A stockholder of the Corporation on or before July 1, 1934; and thereafter no State bank or
trust company or mutual savings bank shall be admitted to membership in the Federal Reserve System until it becomes a class A




[Pos.66.1

9

stockholder of the Corporation, no,national bank in the ,continental
United States shall be granted a certificate by the Comptroller of
the Currency authorizing it to commence the business of banking
until it becomes a member of the Federal Reserve System and a
class A stockholder of the Corporation, and no national bank in
the continental United States for which a receiver or conservator
has been appointed shall be permitted to resume the transaction
of its banking business until it becomes a class A stockholder of the
Corporation. Every member bank shall apply to the Corporation
for class A stock of the Corporation in an amount equal to one half
of 1 per centum of its total deposit liabilities as computed in accordance with regulations prescribed by the Federal Reserve Board;
except that in the case of a member bank organized after the date this
section takes effect, the amount of such class A stock applied for by
such member bank during the first twelve months after its organization shall equal 5 per centum of its paid-up capital and surplus, and
beginning after the expiration of such twelve months' period the
amount of such class A stock of such member bank shall be adjusted
annually in the same manner as in the case of other member banks.
Upon receipt of such application the Corporation shall request the
Federal Reserve Board, in the case of a State member bank, or the
Comptroller of the Currency, in the case of a national bank, to certify upon the basis of a thorough examination of such bank whether
or not the assets of the applying bank are adequate to enable it to
meet all of its liabilities to depositors and other creditors as shown
by the books of the bank; and the Federal Reserve Board or the
Comptroller of the Currency shall make such certification as soon as
practicable. If such certification be in the affirmative, the Corporation shall grant such application and the applying bank shall pay one
half of its subscription in full and shall thereupon become a class A
stockholder of the Corporation: Provided, That no member bank
shall be required to make such payment or become a class A stockholder of the Corporation before July 1, 1934. The remainder of
such subscription shall be subject to call from time to time by the
board of directors of the Corporation. If such certification be in the
negative, the Corporation shall deny such application. If any
national bank shall riot have become a class A stockholder of the
Corporation on or before July 1, 1934, the Comptroller of the Currency shall appoint a receiver or conservator therefor in accordance
with the provisions of existing law. Except as provided in subsection (g) of this section, if any State member bank shall not have
become a class A stockholder of the Corporation on or before July 1,
1934, the Federal Reserve Board shall terminate its membership in
the Federal Reserve System in accordance with the provisions of
section 9 of this Act.
"(f) Any State bank or trust company or mutual savings bank
which applies for membership in the Federal Reserve System or for
conversion into a national banking association on or after July 1,
1936, may, with the consent of the Corporation, obtain the benefits
of this section, pending action on such application, by subscribing
and paying for the same amount of stock of the Corporation as it
would be required to subscribe and pay for upon becoming a member
Pub. No.66-2




10

(Pm 663

bank. Thereupon the provisions of this section applicable to memb
banks shall be applicable to such State bank or trust company er
mutual savings bank to the same extent as if it were alrea or
dy a
member bank: Provided, That if the application of such
State bank
or trust company or mutual savings bank for membership
in the
Federal Reserve System or for conversion into a natio
nal banking
association be approved and it shall not complete
its membe
the Federal Reserve System or its conversion into a natio rship in
association within a reasonable time, or if such appli nal banking
disapproved, then the amount paid by such State cation shall be
bank or trust
company or mutual savings bank on account of its
subscription to the
capital stock of the Corporation shall be repaid
to
longer be subject to the provisions or entitled to the it and it shall no
privileges of this
section.
"(g) If any State bank or trust company,or mutual savin
gs bank
(referred to in this subsection as 'State bank')
becomes a member of the Federal Reserve Syste which is or which
m is
the laws under which it was organized to purch not permitted by
ase stock in the
Corporation, it shall apply to the Corporation
for admission to the
benefits of this section and, if such applicatio
appropriate certification in accordance with n be granted after
deposit with the Corporation an amount equal this section, it shall
to
it would have been required to pay in on accountthe amount which
to capital stock of the Corporation. Thereafter of a subscription
be adjusted in the same manner as subscriptisuch deposit shall
ons
class A stockholders. Such deposit shall be subje for stock by
conditions with respect to repayment as amounts ct to the same
paid on subscriptions to class A stock by other member banks and
the
shall pay interest thereon at the same rate as dividends Corporation
are actually
paid on outstanding shares of class A stock.
deposit is maintained with the Corporation, such As long as such
for the purposes of this section, be deemed to be a State bank shall,
class
of the Corporation. If the laws under which such A stockholder
State bank was
organized be amended so as to authorize State
for class A stock of the Corporation, such Statebanks to subscribe
six months thereafter subscribe for an appropriatbank shall within
e
class A stock and the deposit hereinafter providedamount of such
for in lieu of
payment upon class A stock shall be applied upon
If the law under which such State bank was such subscription.
organ
amended at the next session of the State legislatur ized be not
admission of such State bank to the benefits of this e following the
authorize State banks to purchase such class A stocksection so as to
,
be so amended and such State bank shall fail withior, if the law
thereafter to purchase such class A stock, the deposit n six months
with the Corporation shall be returned to such previously made
State bank and it
shall no longer be entitled to the benefits of this
section, unless it
shall have been closed in the meantime on account
of inability to
meet the demands of its depositors.
"(h) The amount of the outstanding class A
stock of the Corporation held by member banks shall be annually
inafter provided as of the last preceding call date adjusted as hereincrease their time and demand deposits or as as member banks
become members or subscribe to the stock of the additional banks
Corporation, and




11)ua.

11

such stock may be decreased in amount as member banks reduce
their time and demand deposits or cease to be members. Shares of
the capital stock of the Corporation owned by member banks shall
not be transferred or hypothecated. When a member bank increases
its time and demand deposits it shall, at the beginning of each
calendar year, subscribe for an additional amount of capital stock of
the Corporation equal to one half of 1 per centum of such increase
in deposits. One half of the amount of such additional stock shall
be paid for at the time of the subscription therefor, and the balance shall be subject to call by the board of directors of the Corporation. A bank organized on or before the date this section takes
effect and admitted to membership in the Federal Reserve System
at any time after the organization of the Corporation shall be
required to subscribe for an amount of class A capital stock equal
to one half of 1 per centum of the time and demand deposits of the
applicant bank as of the date of such admission, paying therefor
its par value plus one half of 1 per centum a month from the period
of the last dividend on the class A stock of the Corporation. When
a member bank reduces its time and demand deposits it shall surrender, not later than the 1st day of January thereafter, a proportionate amount of its holdings in the capital stock of the Corporation, and when a member bank voluntarily liquidates it shall
surrender all its holdings of the capital stock of the Corporation
and be released from its stock subscription not previously called.
The shares so surrendered shall be canceled and the member bank
shall receive in payment therefor, under regulations to be prescribed by the Corporation, a sum equal to its cash-paid subscriptions
on the shares surrendered and its proportionate share of dividends
not to exceed one half of 1 per centum a month, from the period of
the last dividend on such stock, less any liability of such member
bank to the Corporation.
" If any member or nonmember bank shall be declared insolvent,
(i)
or shall cease to be a member bank (or in the case of a nonmember
bank, shall cease to be entitled to the benefits of insurance under this
section), the stock held by it in the Corporation shall be canceled,
without impairment of the liability of such bank, and all cash-paid
subscriptions on such stock, with its proportionate share of dividends
not to exceed one half of 1 per centum per month from the period of
last dividend on such stock shall be first applied to all debts of the
insolvent bank or the receiver thereof to the Corporation, and the
balance if any, shall be paid to the receiver of the insolvent bank.
"-(j) 'Upon the date of enactment of the Banking Act of 1933, the
Corporation shall become a body corporate and as such shall have
Power—
First. To adopt and use a corporate seal.
"Second. To have succession until dissolved by an Act of
Congress.
"Third. To make contracts.
"Fourth. To sue and be sued, complain and defend, in any court
of law or equity, State or Federal.
"Fifth. To appoint by its board of directors such officers and
employees as are not otherwise provided for in this section, to define
their duties, fix their compensation, require bonds of them and fix




12

[Pm 68.1

the penalty thereof, and to dismiss at pleasure such officers or employees. Nothing in this or any other Act shall be construed to
prevent the appointment and compensation as an officer or employee
of the Corporation of any officer or employee of the United States
in any board, commission, independent establishment, or executive
department thereof.
"Sixth. To prescribe by its board of directors, bylaws not inconsistent with law, regulating the manner in which its general
.
business may be conducted, and the privileges granted to it by law
may be exercised and enjoyed.
Seventh. To exercise by its board of directors, or duly authorized
officers or agents, all powers specifically granted by the provisions
of this section and such incidental powers as shall be necessary to
carry out the powers so granted.
"(k) The board of directors shall administer the affairs of the
Corporation fairly and impartially and without discrimination. The
board of directors of the Corporation shall determine and prescribe
the manner in which its obligations shall be incurred and its expenses allowed and paid. The Corporation shall be entitled to the
free use of the United States mails in the same manner as the
executive departments of the Government. The Corporation with
the consent of any Federal reserve bank or of any board, commission, independent establishment, or executive department of the Government, including any field service thereof, may avail itself of the
use of information, services, and facilities thereof in carrying out
the provisions of this section.
"(1) Effective on and after July 1, 1934 (thus affording ample
time for examination and preparation), unless the President shall by
proclamation fix an earlier date, the Corporation shall insure as
hereinafter provided the deposits of all member banks, and on and
after such date and until July 1, 1936, of all nonmember banks,
which •are class A stockholders of the Corporation. Notwithstanding any other provision of law, whenever any national bank
which is a class A stockholder of the Corporation shall have been
closed by action of its board of directors or by the Comptroller of
the Currency, as the case may be, on account of inability to meet the
demands of its depositors, the Comptroller of the Currency shall
appoint the Corporation receiver for such bank. As soon as possible thereafter the Corporation shall organize a new national bank
to assume the insured deposit liabilities of such closed, bank, to
receive new deposits and otherwise to perform temporarily the functions provided for it in this paragraph. For the purposes of this
subsection, the term insured deposit liability' shall mean with
respect to the owner of any claim arising out of a deposit liability
of such closed bank the following percentages of the net amount
due to such owner by such closed bank on account of deposit liabilities: 100 per centum of such net amount not exceeding $10,000;
and 75 per centum of the amount, if any, by which such net amount
exceeds $10,000 but does not exceed $50,000; and 50 per centum of
the amount, if any, by which such net amount exceeds $50,000:
Provided, That, in determining the amount due to such owner for
the purpose of fixing such percentage, there shall be added together
all net amounts due to such owner in the same capacity or the same
right, on account of deposits, regardless of whether such deposits




iPUB. 60.]

13

be maintained in his name or in the names of others for his benefit.
For.the purposes of this subsection, the term insured deposit liabilities' shall mean the aggregate amount of all such insured deposit
liabilities of such closed bank. The Corporation shall determine as
expeditiously as possible the net amounts due to depositors of the
closed bank and shall make available to the new bank an amount
equal to the insured deposit liabilities of such closed bank, whereupon such new bank shall assume the insured deposit liability of such
closed bank to each of its depositors, and the Corporation shall be
subrogated to all rights against the closed bank of the owners of
such deposits and shall be entitled to receive the same dividends from
the proceeds of the assets of such closed bank as would have been
payable to each such depositor until such dividends shall equal the
insured deposit liability to such depositor assumed by the new bank,
whereupon all further dividends shall be payable to such depositor.
Of the amount thus made available by the Corporation to the new
bank, such portion shall be paid to it in cash as may be necessary to
enable it to meet immediate cash demands and the remainder shall
be credited to it on the books of the Corporation subject to withdrawal on demand and shall bear interest at the rate of 3 per centum
per annum until withdrawn. The new bank may, with the
approval of the Corporation, accept new deposits, which, together
with all amounts made available to the new bank by the Corporation,
shall be kept on hand in cash, invested in direct obligations of the
United States, or deposited with the Corporation or with a Federal
reserve bank. Such new bank shall maintain on deposit with the
Federal reserve bank of its district the reserves required by law of
member banks but shall not be required to subscribe for stock of the
Federal reserve bank until its own capital stock has been subscribed
and paid for in the manner hereinafter provided. The articles of
association and organization certificate of such new bank may be
executed by such representatives of the Corporation as it may designate; the new bank shall not be required to have any directors at
the time of its organization, but shall be managed by an executive
officer to be designated by the Corporation; and no capital stock need
be paid in by the Corporation; but in other respects such bank shall
be organized in accordance with the existing provisions of law relating to the organization of national banks; and, until the requisite
amount of capital stock for such bank has been subscribed and paid
for in the manner hereinafter provided, such bank shall transact
no business except that authorized by this subsection and such business as may be incidental to its organization. When in the judgment of the Corporation it is desirable to do so, the Corporation shall
offer capital stock of the new bank for sale on such terms and conditions as the Corporation shall deem advisable, in an amount sufficient in the opinion of the Corporation to make possible the conduct
of the business of the new bank on a sound basis, but in no event less
than that required by section 5138 of the Revised Statutes,as amended
(U.S.C., title 12, sec. 51), for the organization of a national bank in
the place where such new bank is located, giving the stockholders of
the closed bank the first opportunity to purchase such stock. Upon
proof that an adequate amount of capital stock of the new bank has
been subscribed and paid for in cash by subscribers satisfactory to the
Comptroller of the Currency, he shall issue to such bank a certificate




14

tPus. ea.]

of authority to commence business and thereafter it shall be managed
by directors elected by its own shareholders and may exercise all of the
powers granted by law to national banking associations. If an adequate amount of capital for such new bank is not subscribed and paid
in, the Corporation may offer to transfer its business to any other
banking institution in the same place which will take over its assets,
assume its liabilities, and pay to the Corporation for such business
such amount as the Corporation may deem adequate. Unless the
capital stock of the new bank is sold or its assets acquired and its
liabilities assumed by another banking institution, in the manner
herein prescribed, within two years from the date of its organization,
the Corporation shall place the new bank in voluntary liquidation
and wind up its affairs. The Corporation shall open on its books a
deposit insurance account and, as soon as possible after taking possession of any closed national bank, the Corporation shall make an
estimate of the amount which will be available from all sources for
application in satisfaction of the portion of the claims of depositors
to which it has been subrogated and shall debit to such deposit insurance account the excess, if any, of the amount made available by the
Corporation to the new bank for depositors over and above the
amount of such estimate. It shall be the duty of the Corporation
to realize upon the assets of such closed bank having due regard
;
to the condition of credit in the district in which such closed bank
is located; to enforce the individual liability of the stockholders
and directors thereof; and to wind up the affairs of such closed
bank in conformity with the provisions of law relating to the
liquidation of closed national banks, except as herein otherwise
provided, retaining for its own account such portion of the amount
realized from such liquidation as it shall be entitled to receive on
account of its subrogation to the claims of depositors and paying
to depositors and other creditors the amount available for distribution to them, after deducting therefrom their share of the costs of the
liquidation of the closed bank. If the total amount realized by the
Corporation on account of its subrogation to the claims of depositors
be less than the amount of the estimate hereinabove provided for, the
deposit insurance account shall be charged with the deficiency and.,
if the total amount so realized shall exceed the amount of such estimate, such account shall be credited with such excess. With respect
to such closed national banks, the Corporation shall have all the
rights, powers, and privileges now possessed by or hereafter given
receivers of insolvent national banks and shall be subject to the
obligations and penalties not inconsistent with the provisions of this
paragraph to which such receivers are now or may hereafter become
subject.
"Whenever any State member bank which is a class A stockholder
of the Corporation shall have been closed by action of its board of
directors or by the appropriate State authority, as the case may be,
on account of inability to meet the demands of its depositors, the
Corporation shall accept appointment as receiver thereof, if such
appointment be tendered by the appropriate State authority and be
authorized or permitted by State law. Thereupon the Corporation
shall organize a new national bank,in accordance with the provisions
of this subsection, to assume the insured deposit liabilities of such
closed State member bank, to receive new deposits and otherwise to




[Pus.661

15

perform temporarily the functions provided for in this subsection.
Upon satisfactory recognition of the right of the Corporation to
receive dividends on the same basis as in the case of a closed national
bank under this subsection, such recognition being accorded by State
law, by allowance of claims by the appropriate State authority, by
assignment of claims by depositors, or by any other effective method.,
the Corporation shall make available to such new national bank, in
the manner prescribed by this subsection, an amount equal to the
insured deposit liabilities of such closed State member bank; and the
Corporation and such new national bank shall perform all of the
functions and duties and shall have all the rights and privileges with
respect to such State member bank and the depositors thereof which
are prescribed by this subsection with respect to closed national banks
holding class A stock in the Corporation: Provided, That the rights
of depositors and other creditors of such State member bank shall be
determined in accordance with the applicable provisions of State
law: And provided further, That, with respect to such State member
bank, the Corporation shall possess the powers and privileges provided by State law with respect to a receiver of such State member
bank, except in so far as the same are in conflict with the provisions
of this subsection.
"Whenever any State member bank which is a class A stockholder
of the Corporation shall have been closed by action of its board of
directors or by the appropriate State authority, as the case may be,
on account of inability to meet the demands of its depositors, and
the applicable State law does not permit the appointment of the
Corporation as receiver of such bank, the Corporation shall organize
a new national bank, in accordance with the provisions of this subsection, to assume the insured deposit liabilities of such closed State
member bank,to receive new deposits,and otherwise to perform temporarily the functions provided for in this subsection. Upon satisfactory recognition of the right of the Corporation to receive dividends on the same basis as in the case of a closed national bank under
this subsection, such recognition being accorded by State law, by
allowance of claims by the appropriate State authority, by assignment of claims by depositors, or by any other effective method, the
Corporation shall make available to such new bank, in accordance
with the provisions of this subsection, the amount of insured deposit
liabilities as to which such recognition has been accorded; and such
new bank shall assume such insured deposit liabilities and shall in
other respects comply with the provisions of this subsection respecting new banks organized to assume insured deposit liabilities of
closed national banks. In so far as possible in view of the applicable
provisions of State law, the Corporation shall proceed with respect
to the receiver of such closed bank and with respect to the new bank
organized to assume its insured deposit liabilities in the manner
prescribed by this subsection with respect to closed national banks
and new banks organized to assume their insured deposit liabilities;
except that the Corporation shall have none of the powers, duties,
or responsibilities of a receiver with respect to the winding up of
the affairs of such closed State member -bank. The Corporation, in
its discretion, however, may purchase and liquidate any or all of the
assets of such bank.




16

[PUB. 66.1

• "Whenever the net debit balance of the deposit insurance account
of the Corporation shall equal or exceed one fourth of 1 per centum
of the total deposit liabilities of all class A stockholders as of the
date of the last preceding call report, the Corporation shall levy
upon such stockholders an assessment equal to one fourth of 1 per
centum of their total deposit liabilities and shall credit the amount
collected from such assessment to such deposit insurance account.
No bank which is a holder of class A stock shall pay any dividends
until all assessments levied upon it by the Corporation shall have
been paid in full; and any director or officer of any such bank who
participates in the declaration or payment of any such dividend may,
upon conviction, be fined not more than $1,000, or imprisoned for not
more than one year, or both.
"The term 'receiver' as used in this section shall mean a receiver,
liquidating agent, or conservator of a national bank, and a receiver,
liquidating agent, conservator, commission, person, or other agency
charged by State law with the responsibility and the duty of winding
up the affairs of an insolvent State member bank.
For the purposes of this section only, the term national bank'
shall include all national banking associations and all banks banking
associations, trust companies, savings banks, and other banking institutions located in the District of Columbia which are members of
the Federal Reserve System; and the term State member bank'
shall include all State banks, banking associations, trust companies,
savings banks, and other banking institutions organized under the
laws of any State, which are members of the Federal Reserve System.
"In any determination of the insured deposit liabilities of any
closed bank or of the total deposit liabilities of any bank which is
a holder of class A stock of the Corporation, or a member of the
Fund provided for in subsection (y), for the purposes of this
section, there shall be excluded the amounts of all deposits of such
bank which are payable only at an office thereof located in a foreign
country.
"The Corporation may make such rules, regulations, and contracts
as it may deem necessary in order to carry out the provisions of this
section.
"Money of the Corporation not otherwise employed shall be
invested in securities of the Government of the -United States,
except that for temporary periods, in the discretion of the board
of directors, funds of the Corporation may be deposited in any
Federal reserve bank or with the Treasurer of the United States.
When designated for that purpose by the Secretary of the Treasury,
the Corporation shall be a depositary of public moneys, except
receipts from customs, under such regulations as may be prescribed
by the said Secretary, and may also be employed as a financial agent
of the Government. It shall perform all such reasonable duties as
depositary of public moneys and financial agent of the Government
as may be required of it.
"(m) Nothing herein contained shall be construed to prevent the
Corporation from making loans to national banks closed by action
of the Comptroller of the Currency, or by vote of their directors,
or to State member banks closed by action of the appropriate State




[Pus.661

17

authorities, or by vote of their directors, or from entering into negotiations to secure the reopening of such banks.
"(n) Receivers or liquidators of member banks which are now
or may hereafter become insolvent or suspended shall be entitled
to offer the assets of such banks for sale to the Corporation or as
security for loans from the Corporation, upon receiving permission.
from the appropriate State authority in accordance with express provisions of State law in the case of State member banks, or from the
Comptroller of the Currency in the case of national banks. The
proceeds of every such sale or loan shall be utilized for the same
purposes and in the same manner as other funds realized from the
liquidation of the assets of such banks. The Comptroller of the
Currency may, in his discretion, pay dividends on proved claims at
any time after the expiration of the period of advertisement made
pursuant to section 5235 of the Revised Statutes (U.S.C., title 12,
sec. 193), and no liability shall attach to the Comptroller of the
Currency or to the receiver of any national bank by reason of any
such payment for failure to pay dividends to a claimant whose claim
is not proved at the time of any such payment.
"(o) The Corporation is authorized and empowered to issue and
to have outstanding at any one time in an amount aggregating not
more than three times the amount of its capital, its notes, debentures,
bonds, or other such obligations, to be redeemable at the option of the
Corporation before maturity in such manner as may be stipulated in
such obligations, and to bear such rate or rates of interest, and to
mature at such time or times as may be determined by the Corporation: Provided, That the Corporation may sell on a discount
basis short-term obligations payable at maturity without interest.
The notes, debentures, bonds, and other such obligations of the Corporation may be secured by assets of the Corporation in such manner
as shall be prescribed by its board of directors. Such obligations
may be offered for sale at such price or prices as the Corporation
may determine.
it
(p) All notes, debentures, bonds, or other such obligations issued
by the Corporation shall be exempt, both as to principal and interest,
from all taxation (except estate and inheritance taxes) now or hereafter imposed by the United States, by any Territory, dependency,
or possession thereof, or by any State, county, municipality, or local
taxing authority. • The Corporation, including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all
taxation now or hereafter imposed by the United States, by any
Territory, dependency, or possession thereof, or by any State, county,
municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, Territorial, county,
municipal or local taxation to the same extent according to its value
as other real property is taxed.
"
(q) In order that the Corporation may be supplied with such
forms of notes, debentures, bonds, or other such obligations as it may
need for issuance under this Act, the Secretary of the Treasury is
authorized to prepare such forms as shall be suitable and approved by
the Corporation, to be held in the Treasury subject to delivery, upon
order of the Corporation. T6 engraved plates, dies, bed pieces, and
Pub. No.66-3




18

[Pun.661

other material executed in connection therewith shall remain in the
custody of the Secretary of the Treasury. The Corporation shall
reimburse the Secretary of the Treasury for any expenses incurred
in the preparation, custody, and delivery of such notes, debentures,
bonds, or other such obligations.
"(r) The Corporation shall annually make a report of its operations to the Congress as soon as practicable after the 1st day of
January in each year.
(s) Whoever, for the purpose of obtaining any loan from the
Corporation, or any extension or renewal thereof, or the acceptance,
release, or substitution of security therefor, or for the purpose of
inducing the Corporation to purchase any assets, or for the purpose of
influencing in any way the action of the Corporation under this section, makes any statement, knowing it to be false, or willfully overvalues any security, shall be punished by a fine of not more than
$5,000, or by imprisonment for not more than two years, or both.
"(t) Whoever (1) falsely makes, forges, or counterfeits any obligation or coupon, in imitation of or purporting to be an obligation
or coupon issued by the Corporation, or (2) passes, utters, or publishes, or attempts to pass, utter, or publish, any false, forged, or
counterfeited obligation or coupon purporting to have been issued
by the Corporation, knowing the same to be false, forged, or counterfeited, or (3) falsely alters any obligation or coupon issued or
purporting to have been issued by the Corporation, or (4) passes,
utters, or publishes, or attempts to pass, utter, or publish, as true,
any falsely altered or spurious obligation or coupon, issued or purporting to have been issued by the Corporation, knowing the same
to be falsely altered or spurious, shall be punished by a fine of not
more than $10,000, or by imprisonment for not more than five years,
or both.
(u) Whoever, being connected in any capacity with the Corporation, (1) embezzles, abstracts, purloins, or willfully misapplies
any moneys, funds, securities, or other things of value, whether
belonging to it or pledged, or otherwise intrusted to it, or (2) with
intent to defraud the Corporation or any other body, politic or
corporate, or any individual, or to deceive any officer, auditor, or
examiner of the Corporation, makes any false entry in any book,
report, or statement of or to the Corporation, or without being duly
authorized draws any order or issues, puts forth, or assigns any
,
note, debenture, bond, or other such obligation, or draft, bill of
exchange, mortgage, judgment, or decree thereof, shall be punished
by a fine of not more than $10,000, or by imprisonment for not
more than five years, or both.
44
(v) No individual, association, partnership, or corporation shall
use the words Federal Deposit Insurance Corporation', OT a combination or any three of these four words, as the name or'a part
thereof under which he or it shall do business. No individual, association, partnership, or corporation shall advertise or otherwise
represent falsely by any device whatsoever that his or its deposit
liabilities are insured or in anywise guaranteed by the Federal
Deposit Insurance Corporation, or by the Government of the United
States, or by any instrumentality thereof; and no class A stockholder of the Federal Deposit Insurance Corporation shall




[PUB. 66.]

19

advertise or otherwise represent falsely by any device whatsoever
the extent to which or the manner in which its deposit liabilities are
insured by the Federal Deposit Insurance Corporation. Every
individual, partnership, association, or corporation violating this
subsection shall be punished by a fine of not exceeding $1,000, or
by imprisonment not exceeding one year, or both.
"(w) The provisions of sections 112, 113, 114, 115, 116, and 117
of the Criminal Code of the United States (U.S.C., title 18, ch. 5,
secs. 202 to 207, inclusive), in so far as applicable, are extended to
apply to contracts or agreements with the Corporation under this
section, which for the purposes hereof shall be held to include loans,
advances, extensions and renewals thereof, and acceptances, releases,
and substitutions of security therefor, purchases or sales of assets,
and all contracts and agreements pertaining to the same.
"(x) The Secret Service Division of the Treasury Department is
authorized to detect, arrest, and deliver into the custody of the
United States marshal having jurisdiction any person committing
any of the offenses punishable under this section.
"(y) The Corporation shall open on its books a Temporary Federal
Deposit Insurance Fund (hereinafter referred to as the 'Fund'),
which shall become operative on January 1, 1934, unless the President shall by proclamation fix an earlier date, and it shall be the
duty of the Corporation to insure deposits as hereinafter provided
until July 1, 1934.
"Each member bank licensed before January 1, 1934, by the Secretary of the Treasury pursuant to the authority vested in him by the
Executive order of the President issued March 10, 1933 shall on or
before January 1, 1934, become a member of the Fund; each member
bank so licensed after such date and each State bank trust company or
'
mutual savings bank (referred to in this subsection as 'State bank',
shall also include all banking institutions located in
which term ''
the District of Columbia) which becomes a member of the Federal
Reserve System on or after such date, shall, upon being so licensed
or so admitted to membership, become a member of the Fund; and
any State bank which is not a member of the Federal Reserve
System, with the approval of the authority having supervision of
such State bank and certification to the Corporation by such authority that such State bank is in solvent condition, shall, after examination by, and with the approval of, the Corporation, be entitled
to become a member of the Fund and to the privileges of this subsection upon agreeing to comply with the requirements thereof and
upon paying to the Corporation an amount equal to the amount that
would be required of it under this subsection if it were a member
bank. The Corporation is authorized to prescribe rules and regulations for the further examination of such State bank, and to fix
the compensation of examiners employed to make examinations of
State banks.
"Each member of the Fund shall file with the Corporation on or
before the date of its admission a certified statement under oath
showing, as of the fifteenth day of the month preceding the month
in which it was so admitted, the number of its depositors and the
total amount of its deposits which are eligible for insurance under
this subsection, and shall pay to the Corporation an amount equal




20

[Pus.661

to one-half of 1 per centum of the total amount of the deposits so
certified. One-half of such payment shall be paid in full at the
time of the admission of such member to the Fund, and the remainder
of such payment shall be subject to call from time to time by the
board of directors of the Corporation. Within a reasonable time
fixed by the Corporation each such member shall file a similar
statement showing, as of June 15, 1934, the number of its depositors
and the total amount of its deposits which are eligible for such
insurance and shall pay to the Corporation in the same manner an
amount equal to one-half of 1 per centum of the increase, if any,.
in the total amount of such deposits since the date covered by the
statement filed upon its admission to membership in the fund.
"If. at any time prior to July 1, 1934, the Corporation requires
additional funds with which to meet its obligations under this
subsection, each member of the Fund shall be subject to one additional assessment only in an amount not exceeding the total amount
theretofore paid to the Corporation by such member.
"If any member of the Fund shall be closed on or before June 30,
1934, on aicount of inability to meet its deposit liabilities, the Corporation shall proceed in accordance with the provisions of subsection
(1) of this section to pay the insured deposit liabilities of such member; except that the Corporation shall pay not more than $2,500
on account of the net approved claim of the owner of any deposit.
The provisions of such subsection (1) relating to State member banks
shall be extended for the purposes of this subsection to members of
the Fund which are not members of the Federal Reserve System;
and the provisions of this subsection shall apply only to deposits
of members of the Fund which have been made available since
March 10, 1933, for withdrawal in the usual course of the banking
business.
Before July 1, 1934, the Corporation shall make an estimate of
the balance, if any, which will remain in the Fund after providing
for all liabilities of the Fund, including expenses of operation
thereof under this subsection and allowing for antiCipated recoveries.
The Corporation shall refund such estimated balance, on such basis
as the Corporation shall find to be equitable, to the members of the
Fund other than those which have been closed prior to July 1, 1934.
"Each State bank which is a member of the Fund, in order to
obtain the benefits of this section after July 1, 1934, shall, on or
before such date, subscribe and pay for the same amount of class A
stock of the Corporation as it would be required to subscribe and
pay for upon becoming a member bank, or if such State bank is
not permitted by the laws under which it was organized to purchase such stock, it shall deposit with the Corporation an amount
equal to the amount it would have been required to pay in on account
of a subscription to such stock; and thereafter such State bank shall
be entitled to such benefits until July 1, 1936.
"It is not the purpose of this section to discriminate, in any
manner, against State nonmember, and in favor of, national or
member banks; but the purpose is to provide all banks with the
same opportunity to obtain and enjoy the benefits of this section. No
bank shall be discriminated against because its capital stock is less




66.1

21

than the amount required for eligibility for admission into the
Federal Reserve System."
SEC. 9. The eighth paragraph of section 13 of the Federal Reserve
Act, as amended (U.S.C., title 12, sec. 347; Supp. VI, title 12, sec.
347) is amended to read as follows:
".Any Federal reserve bank may make advances for periods not
exceeding fifteen days to its member banks on their promissory
notes secured by the deposit or pledge of bonds, notes, certificates of
indebtedness or Treasury bills of the United States, or by the
deposit or pledge of debentures or other such obligations of Federal
intermediate credit banks which are eligible for purchase by Federal reserve banks under section 13 (a) of this Act; and any
Federal reserve bank may make advances for periods not exceeding
ninety days to its member banks on their promissory notes secured
by such notes drafts, bills of exchange, or bankers' acceptances as are
eligible for rediscount or for purchase by Federal reserve banks under
the provisions of this Act. All such advances shall be made at rates
to be established by such Federal reserve banks such rates to be subject to the review and determination of the Federal Reserve Board.
If any member bank to which any such advance has been made
shall, during the life or continuance of such advance, and despite
an official warning of the reserve bank of the district or of the
Federal Reserve Board to the contrary, increase its outstanding
loans secured by collateral in the form of stocks, bonds, debentures,
or other such obligations, or loans made to members of any organized
stock exchange, investment house, or dealer in securities, upon any
obligation, note, or bill, secured or unsecured, for the purpose of
purchasing and/or carrying stocks, bonds, or other investment
securities (except obligations of the United States) such advance
shall be deemed immediately due and payable, and such member
bank shall be ineligible as a borrower at the reserve bank of the
district under the provisions of this paragraph for such period as
the Federal Reserve Board shall determine: Provided, That no
temporary carrying or clearance loans made solely for the purpose
of facilitating the purchase or delivery of securities offered for
public subscription shall be included in the loans referred to in
this paragraph."
SEC. 10. Section 14 of the Federal Reserve Act,as amended (U.S.C.,
title 12, secs. 353-358), is amended by adding at the end thereof the
following new paragraph:
"(g) The Federal Reserve Board shall exercise special supervision
over all relationships and transactions of any kind entered into by
any Federal reserve bank with any foreign bank or banker, or with
any group of foreign banks or bankers, and all such relationships
and transactions shall be subject to such regulations, conditions, and.
limitations as the Board may prescribe. No officer or other representative of any Federal reserve bank shall conduct negotiations of
any kind with the officers or representatives of any foreign bank
or banker without first obtaining the permission of the Federal
Reserve Board. The Federal Reserve Board shall have the right, in
its discretion, to be represented in any conference or negotiations by
such representative or representatives as the Board may designate.
A full report of all conferences or negotiations, and all understand-




22

[PuB.66.1

ings or agreements arrived at or transactions agreed upon, and all
other material facts appertaining to such conferences or negotiations,
shall be filed with the Federal Reserve Board in writing by a duly
authorized officer of each Federal reserve bank which shall have
participated in such conferences or negotiations."
SEC. 11. (a) Section 19 of the Federal Reserve Act, as amended
(U.S.C., title 12, secs. 142, 374, 461-466; Supp. VI, title 12, sec. 462a),
is amended by inserting after the sixth paragraph thereof the following new paragraph:
"No member bank shall act as the medium or agent of any nonbanking corporation, partnership, association, business trust, or individual in making loans on the security of stocks, bonds, and other
investment securities to brokers or dealers in stocks, bonds, and other
investment securities. Every violation of this provision by any
member bank shall be punishable by a fine of not more than $100
per day during the continuance of such violation; and such fine
may be collected, by suit or otherwise, by the Federal reserve bank
of the district in which such member bank is located."
(b) Such section 19 of the Federal Reserve Act, as amended, is
further amended by adding at the end thereof the following new
paragraphs:
N
o member bank shall, directly or indirectly by any device whatsoever, pay any interest on any deposit which is payable on demand:.
Provided, That nothing herein contained shall be construed as prohibiting the payment of interest in accordance with the terms of any
certificate of deposit or other contract heretofore entered into in
good faith which is in force on the date of the enactment of this
paragraph; but no such certificate of deposit or other contract shall
be renewed or extended unless it shall be modified to conform to this
paragraph, and every member bank shall take such action as may be
necessary to conform to this paragraph as soon as possible consistently with its contractual obligations: Provided, however, That this
paragraph shall not apply to any deposit of such bank which is
payable only at an office thereof located in a foreign country, and
shall not apply to any deposit made by a mutual savings bank, nor
to any deposit of public funds made by or on behalf of any State,
county, school district, or other subdivision or municipality, with
respect to which payment of interest is required under State law.
"The Federal Reserve Board shall from time to time limit by
regulation the rate of interest which may be paid by member banks
on time deposits, and may prescribe different rates for such payment on time and savings deposits having different maturities or
subject to different conditions respecting withdrawal or repayment or subject to different conditions by reason of different locations. No member bank shall pay any time deposit before its maturity, or waive any requirement of notice before payment of any
savings deposit except as to all savings deposits having the same
requirement."
(c) Section 8 of the Act entitled "An Act to establish postal
savings depositories for depositing savings at interest with the
security of the Government for repayment thereof, and for other
purposes ", approved June 25? 1910, as amended (U.S.C., title 39,
sec. 758), is amended by striking out the first sentence thereof and




iPuB. 66.]

23

inserting in lieu thereof the following: "Any depositor may withdraw the whole or any part of the funds deposited to his or her
credit with the accrued interest only on notice given sixty days in
advance and under such regulations as the Postmaster General
may prescribe; but withdrawal of any part of such funds may be
made upon demand, but no interest shall be paid on any funds so
withdrawn except interest accrued to the date of enactment of the
Banking Act of 1933: Provided, That Postal Savings depositories
may deposit funds in member banks on time under regulations to be
prescribed by the Postmaster General."
(d) The second sentence of section 9 of the Act entitled "An Act to
establish postal savings depositories for depositing savings at interest
with the security of the Government for repayment thereof, and for
other purposes approved June 25, 1910, as amended (U.S.C., title
39, sec. 759), is amended by striking out the period at the end thereof
and inserting in lieu thereof a colon and the following: "Provided,
That no such security shall be required in case of such part of the
deposits as are insured under section 12B of the Federal Reserve Act,
as amended."
SEC. 12. Section 22 of the Federal Reserve Act,as amended (U.S.C.,
title 12, sees. 375, 376, 503, 593-595; Supp. VI, title 12, sec. 593), is
further amended by adding at the end thereof the following new
paragraph:
"(g) No executive officer of any member bank shall borrow from
or otherwise become indebted to any member bank of which he is
an executive officer, and no member bank shall make any loan or
extend credit in any other manner to any of its own executive officers:
Provided, That loans heretofore made to any such officer may be
renewed or extended not more than two years from the date this
paragraph takes effect, if in accord with sound banking practice.
If any executive officer of any member bank borrow from or if
he be or become indebted to any bank other than a member bank
of which he is an executive officer, he shall make a 'Written report to
the chairman of the board of directors of the member bank of which
he is an executive officer, stating the date and amount of such loan
or indebtedness, the security therefor, and the purpose for which
the proceeds have been or are to be used. Any executive officer of
any member bank violating the provisions of this paragraph shall
be deemed guilty of a misdemeanor and shall be imprisoned not
exceeding one year, or fined not more than $52000, or both; and any
member bank violating the provisions of this paragraph shall be
fined not more than $10,000, and may be fined a further sum equal
to the amount so loaned or credit so extended."
SEC. 13. The Federal Reserve Act, as amended, is amended by
inserting between sections 23 and 24 thereof (U.S.C., title 12, secs.
64 and 371; Supp. VI,title 12, sec. 371) the following new section:
"SEC. 23A. No member bank shall (1) make any loan or any
extension of credit to, or purchase securities under repurchase agreement from, any of its affiliates, or (2) invest any of its funds in the
capital stock, bonds, debentures, or other such obligations of any
such affiliate, or (3) accept the capital stock, bonds debentures, or
other such obligations of any such affiliate as collateral security for
advances made to any person, partnership, association, or corpora-




24

[Pus.68.1

tion, if, in the case of any such affiliate, the aggregate amount of
such loans, extensions of credit, repurchase agreements, investments,
and advances against such collateral security will exceed 10 per
centum of the capital stock and surplus of such member bank, or
if, in the case of all such affiliates, the aggregate amount of such
loans, extensions of credits, repurchase agreements, investments, and
advances against such collateral security will exceed 20 per centum
of the capital stock and surplus of such member bank.
"Within the foregoing limitations, each loan or extension of credit
of any kind or character to an affiliate shall be secured by collateral
in the form of stocks, bonds, debentures, or other such obligations
having a market value at the time of making the loan or extension
of credit of at least 20 per centum more than the amount of the
loan or extension of credit, or of at least 10 per contum more than
the amount of the loan or extension of credit if it is secured by
obligations of any State, or of any political subdivision or agency
thereof: Provided,.That the provisions of this paragraph shall not
apply to loans or extensions of credit secured by obligations of the
United States Government, the Federal intermediate credit banks,
the Federal land banks, the Federal Home Loan Banks, or the Home
Owners'Loan Corporation, or by such notes, drafts, bills of exchange,
or bankers' acceptances as are eligible for rediscount or for purchase
by Federal reserve banks. A loan or extension of credit to a
director officer, clerk, or other employee or any representative of
any such affiliate shall be deemed a loan to the affiliate to the extent
that the proceeds of such loan are used for the benefit of, or transferred to, the affiliate.
affiliate shall include
'
"For the purposes of this section the term'
holding company affiliates as well as other affiliates, and the provisions of this section shall not apply to any affiliate (1) engaged
solely in holding the bank premises of the member bank with which
it is affiliated, (2) engaged solely in conducting a safe-deposit business or the business of an agricultural credit corporation or livestock
loan company, (3) in the capital stock of which a national banking
association is authorized to invest pursuant to section 25 of the
Federal Reserve Act, as amended, (4) organized under section
25 (a) of the Federal Reserve Act, as amended, or (5) engaged
solely in holding obligations of the United States Government, the
Federal intermediate credit banks the Federal land banks, the Federal Home Loan Banks, or the Home Owners' Loan Corporation;
but as to any such affiliate, member banks shall continue to be subject
to other provisions of law applicable to loans by such banks and
investments by such banks in stocks, bonds, debentures, or other such
obligations."
SEC. 14. The Federal Reserve Act, as amended, is amended by
inserting between section 24 and section 25 thereof (U.S.C., title 12,
secs. 371 and 601-605; Supp. VI, title 12, sec. 371) the following
new section:
"SEC. 24A. Hereafter no national bank, without the approval
of the Comptroller of the Currency, and no State member bank,
without the approval of the Federal Reserve Board, shall (1) invest
in bank premises, or in the stock, bonds, debentures, or other such
obligations of any corporation holding the premises of such bank




IPus. col

25

or (2) make loans to or upon the security of the stock of any such
corporation, if the aggregate of all such investments and loans will
exceed the amount of the capital stock of such bank."
SEC. 15. The Federal Reserve Act, as amended, is further amended
by inserting after section 25 (a) thereof (U.S.C., title 12, sec.
611-631) the following new section:
"SEC. 25. (b) Notwithstanding any other provision of law all suits
of a civil nature at common law or in equity to which any corporation
organized under the laws of the United States shall be a party, arising out of transactions involving international or foreign banking, or
banking in a dependency or insular possession of the United Sates,
or out of other international or foreign financial operations, either
directly or through the agency, ownership, or control of branches or
local institutions in dependencies or insular possessions of the United
States or in foreign countries, shall be deemed to arise under the laws
of the United States, and the district courts of the United States
shall have original jurisdiction of all such suits; and any defendant
in any such suit may, at any time before the trial thereof, remove
such suits from a State court into the district court of the United
States for the proper district by following the procedure for the
removal of causes otherwise provided by law. Such removal shall
not cause undue delay in the trial of such case and a case so removed
shall have a place on the calendar of the United States court to
which it is removed relative to that which it held on the State court
from which it was removed.
"Notwithstanding any other provision of law, all suits of a civil
nature at common law or in equity to which any Federal Reserve
bank shall be a party shall be deemed to arise under the laws of the
United States, and the district courts of the United States shall have
original jurisdiction of all such suits; and any Federal Reserve bank
which is a defendant in any such suit may, at any time before the
trial thereof, remove such suit from a State court into the district
court of the United States for the proper district by following the
procedure for the removal of causes otherwise provided by law. No
attachment or execution shall be issued against any Federal Reserve
bank or its property before final judgment in any suit, action, or
proceeding in any State, county, municipal, or United States court."
SEC. 16. Paragraph "Seventh" of section 5136 of the Revised
Statutes, as amended (U.S.C., title 12, sec. 24; Supp. VI,title 12, sec.
24), is amended to read as follows:
"Seventh. To exercise by its board of directors or duly authorized
officers or agents, subject to law, all such incidental powers as shall be
necessary to carry on the business of banking; by discounting and
negotiating promissory notes, drafts, bills of exchange, and other
evidences of debt; by receiving deposits; by buying and selling
exchange, coin, and bullion; by loaning money on personal security;
and by obtaining, issuing, and circulating notes according to the
provisions of this title. The business of denimg in investment securities by the association shall be limited to purchasing and selling such
securities without recourse, solely upon the order, and for the account
of, customers, and in no case for its own account, and the association
shall not underwrite any issue of securities: Provided, That the association may purchase for its own account investment securities under




26

(PUB.66.)

such limitations and restrictions as the Comptroller of the Currency
may by regulation prescribe, but in no event (1) shall the total
amount of any issue of investment securities of any one obligor or
maker purchased after this section as amended takes effect and held
by the association for its own account exceed at any time 10 per centum
of the total amount of such issue outstanding, but this limitation shall
not apply to any such issue the total amount of which does not exceed
$100,000 and does not exceed 50 per centum of the capital of the association, nor (2) shall the total amount of the investment securities of
any one obligor or maker purchased after this seCtion as amended
takes effect and held by the association for its own account exceed at
any time 15 per centum of the amount of the capital stock of the
association actually paid in and unimpaired and 25 per centum of its
unimpaired surplus fund. As used in this section the term investment securities shall mean marketable obligations evidencing indebtedness of any person,copartnership, association, or corporation in the
form of bonds, notes and/or debentures commonly known as investment securities under such further definition of the term investment
securities' as may by regulation be prescribed by the Comptroller of
the Currency. Except as hereinafter provided or otherwise permitted by law, nothing herein contained shall authorize the purchase
by the association of any shares of stock of any corporation. The
limitations and restrictions herein contained as to dealing in, underwriting and purchasing for its own account, investment securities
shall not apply to obligations of the United States, or general obligations of any State or of any political subdivision thereof, or obligations issued under authority of the Federal Farm Loan Act, as
amended, or issued by the Federal Home Loan Banks or the Home
Owners' Loan Corporation: Provided, That in carrying on the business commonly known as the safe-deposit business the association
shall not invest in the capital stock of a corporation organized under
the law of any State to conduct a safe-deposit business in an amount
in excess of 15 per centum of the capital stock of the association
actually paid in and unimpaired and 15 per centum of its unimpaired
surplus."
The restrictions of this section as to dealing in investment securities shall take effect one year after the date of the approval of
this Act.
•
SEC. 17. (a) Section 5138 of the Revised Statutes, as amended
(U.S.C., title 12, sec. 51 Supp. VI, title 12, sec. 51), is amended to
.
read as follows:
SEc. 5138. After this section as amended takes effect, no national
banking association shall be organized with a less capital than
$100,000, except that such associations with a capital of not less than
$50,000 may be organized in any place the population of which does
not exceed six thousand inhabitants. No such association shall be
organized in a city the population of which exceeds fifty thousand
persons with a capital of less than $200,000, except that in the outlying districts of such a city where the State laws permit the organization of State banks with a capital of $100,000 or less, national
banking associations now organized or hereafter organized may, with
the approval of the Comptroller of the Currency, have a capital of
not less than $100,000."




[PUB. 66.j

27

(b) The tenth paragraph of section 9 of the Federal Reserve Act,
as amended (U.S.C.,title 12, sec. 329), is amended to read as follows:
"No applying bank shall be admitted to membership in a Federal
reserve bank unless it possesses a paid-up unimpaired capital sufficient to entitle it to become a national banking association in the
place where it is situated under the provisions of the National
Bank Act, as amended: Provided, That this paragraph shall not
apply to State banks and trust companies organized prior to the
date this paragraph as amended takes effect and situated in a place
the population of which does not exceed three thousand inhabitants
and having a capital of not less than $25,000, nor to any State bank
or trust company which is so situated and which, while it is entitled
to the benefits of insurance under section 12B of this Act, increases
its capital to not less than $25,000."
SEC. 18. Section 5139 of the Revised Statutes, as amended (U.S.C.,
title 12, sec. 52; Supp. VI, title 12, sec. 52), is amended by adding at
the end thereof the following new paragraph:
"After one year from the date of the enactment of the Banking Act
of 1933, no certificate representing the stock of any such association
shall represent the stock of any other corporation, except a member
bank or a corporation existing on the date this paragraph takes effect
engaged solely in holding the bank premises of such association, nor
shall the ownership, sale, or transfer of any certificate representing
the stock of any such association be conditioned in any manner
whatsoever upon the ownership, sale, or transfer of a certificate representing the stock of any other corporation, except a member bank."
SEC. 19. Section 5144 of the Revised Statutes, as amended (U.S.C.,
title 12, sec. 61), is amended to read as follows:
"SEC. 5144. In all elections of directors, each shareholder shall
have the right to vote the number of shares owned by him for as
many persons as there are directors to be elected, or to cumulate
such shares and give one candidate as many votes as the number of
directors multiplied by the number of his shares shall equal, or to
distribute them on the same principle among as many candidates as
.he shall think fit; and in deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each
share of stock held by him; except (1) that shares of its own stock
held by a national bank as sole trustee shall not be voted, and shares
of its own stock held by a national bank and one or more persons as
trustees may be voted by such other person or persons, as trustees,
in the same manner as if he or they were the sole trustee, and
(2) shares controlled by any holding company affiliate of a national
bank shall not be voted unless such holding company affiliate shall
have first obtained a voting permit as hereinafter provided, which
permit is in force at the time such shares are voted. Shareholders
may vote by proxies duly authorized in writing; but no officer, clerk,
teller, or bookkeeper of such bank shall act as proxy; and no shareholder whose liability is past due and unpaid shall be allowed to vote.
"For the purposes of this section shares shall be deemed to be
controlled by a holding company affiliate if they are owned or controlled directly or indirectly by such holding company affiliate, or
held by any trustee for the benefit of the shareholders or members
thereof.




28

[PUB.66.1

"Any such holding company affiliate may make application to the
Federal Reserve Board for a voting permit entitling it to cast one
vote at all elections of directors and in deciding all questions at
meetings of shareholders of such bank on each share of stock controlled by it or authorizing the trustee or trustees holding the stock
for its benefit or for the benefit of its shareholders so to vote the same.
The Federal Reserve Board may, in its discretion, grant or withhold such permit as the public interest may require. In acting upon
such application, the Board shall consider the financial condition of
the applicant, the general character of its management, and the probable effect of the granting of such permit upon the affairs of such
bank, but no such permit shall be granted except upon the following
conditions:
"(a) Every such holding company affiliate shall, in making the
application for such permit, agree (1) to receive, on dates identical
with those fixed for the examination ,of banks with which it is
affiliated, examiners duly authorized to examine such banks, who
shall make such examinations of such holding company affiliate as
shall be necessary to disclose fully the relations between such banks
and such holding company affiliate and the effect of such relations
upon the affairs of such banks, such examinations to be at the
expense of the holding company affiliate so examined; (2) that the
reports of such examiners shall contain such information as shall be
necessary to disclose fully the relations between such affiliate and
such banks and the effect of such relations upon the affairs of such
banks; (3) that such examiners may examine each bank owned or
controlled by the holding company affiliate, both individually and in
conjunction with other banks owned or controlled by such holding
company affiliate; and (4) that publication of individual or consolidated statements of condition of such banks may be required;
"(b) After five years after the enactment of the Banking Act
of 1933, every such holding company affiliate (1) shall possess, and
shall continue to possess during the life of such permit, free and
clear of any lien, pledge, or hypothecation of any nature, readily
marketable assets other than bank stock in an amount not less than
12 per centum of the aggregate par value of all bank stocks controlled by such holding company affiliate, which amount shall be
increased by not less than 2 per centum per annum of such aggregate
par value until such assets shall amount to 25 per centum of the
aggregate par value of such bank stocks; and (2) shall reinvest in
readily marketable assets other than bank stock all net earnings
over and above 6 per centum per annum on the book value of its
own shares outstanding until such assets shall amount to such 25
per centum of the aggregate par value of all bank stocks controlled
by it;
"(c) Notwithstanding the foregoing provisions of this section,
after five years after the enactment of the Banking Act of 1933, (1)
any such holding company affiliate the shareholders or members of
which shall be individually and severally liable in proportion to the
number of shares of such holding company affiliate held by them
respectively,in addition to amounts invested therein, for all statutory
liability imposed on such holding company affiliate by reason of its
control of shares of stock of banks, shall be required only to




[Pus.68.1

29

establish and maintain out of net earnings over and above 6 per
centum per annum on the book value of its own shares outstanding
a reserve of readily marketable assets in an amount of not less than
12 per centum of the aggregate par value of bank stocks controlled
by it, and (2) the assets required by this section to be possessed by
such holding company affiliate may be used by it for replacement of
capital in banks affiliated with it and for losses incurred in such
banks, but any deficiency in such assets resulting from such use shall
be made up within such period as the Federal Reserve Board may
by regulation prescribe;
"
(d) Every officer, director, agent, and employee of every such
holding company affiliate shall be subject to the same penalties for
false entries in any book, report, or statement of such holding company affiliate as are applicable to officers, directors, agents, and
employees of member banks under section 5209 of the Revised
Statutes, as amended (U.S.C., title 12, sec. 592); and
"(e) Every such holding company affiliate shall, in its application
for such voting permit, (1) show that it does not own, control, or
have any interest in, and is not participating in the management or
direction of, any corporation, business trust, association, or other
similar organization formed for the purpose of, or engaged principally in, the issue, flotation, underwriting, public sale, or
distribution, at wholesale or retail or through syndicate 'participation, of stocks, bonds, debentures, notes, or other securities of any
sort (hereinafter referred to as 'securities company '); (2) agree
that during the period that the permit remains in force it will not
acquire any ownership, control, or interest in any such securities
company or participate in the management or direction thereof;
(3) agree that if, at the time of filing the application for such permit,
it owns, controls, or has an interest in, or is participating in the
management or direction of, any such securities company, it will,
within five years after the filing of such application, divest itself
of its ownership, control, and interest in such securities company
and will cease participating in the management or direction thereof,
and will not thereafter, during the period that the permit remains
in force, acquire any further ownership, control, or interest in any
such securities company or participate in the management or direction thereof; and (4) agree that thenceforth it will declare dividends
only out of actual net earnings.
"If at any time it shall appear to the Federal Reserve Board that
any holding company affiliate has violated any of the provisions of
the Banking Act of 1933 or of any agreement made pursuant to this
section, the Federal Reserve Board may, in its discretion, revoke any
such voting perniit after giving sixty days' notice by registered mail
of its intention to the holding company affiliate and affording it an
opportunity to be heard. Whenever the Federal Reserve Board shall
have revoked any such voting permit, no national bank whose stock
is controlled by the holding company affiliate whose permit is so
revoked shall receive deposits of public moneys of the United States,
nor shall any such national bank pay any further dividend to such
holding company affiliate upon any shares of such bank controlled
by such holding company affiliate.




30

(Pus.66.1

"Whenever the Federal Reserve Board shall have revoked any
voting permit as hereinbefore provided, the rights, privileges, and
franchises of any or all national banks the stock of which is controlled by such holding company affiliate shall, in the discretion of
the Federal Reserve Board, be subject to forfeiture in accordance
with section 2 of the Federal Reserve Act, as amended."
SEC. 20. After one year from the date of the enactment of this Act,
no member bank shall be affiliated in any manner described in section 2 (b) hereof with any corporation, association, business trust, or
other similar organization engaged principally in the issue, flotation,
underwriting, public sale, or distribution at wholesale or retail or
through syndicate participation of stocks, bonds, debentures, notes,
or other securities.
For every violation of this section the member bank involved shall
be subject to a penalty not exceeding $1,000 per day for each day
during which such violation continues. Such penalty may be assessed
by the Federal Reserve Board, in its discretion, and, when so
assessed, may be collected by the Federal reserve bank by suit or
otherwise.
If any such violation shall continue for six calendar months after
the member bank shall have been warned by the Federal Reserve
Board to discontinue the same,(a) in the case of a national bank, all
the rights, privileges, and franchises granted to it under the National
Bank Act may be forfeited in the manner prescribed in section 2 of
the Federal Reserve Act, as amended (U.S.C., title 12, secs. 141, 222225, 281-286, and 502), or, (b) in the case of a State member bank,
all of its rights and privileges of membership in the Federal Reserve
System may be forfeited in the manner prescribed in section 9 of the
Federal Reserve Act, as amended (U.S.C., title 12, secs. 321-332).
SEC. 21. (a) After the expiration of one year after the date of
enactment of this Act it shall be unlawful—
(1) For any person, firm, corporation, association, business trust,
or other similar organization, engaged in the business of issuing,
underwriting, selling, or distributing, at wholesale or retail, or
through syndicate participation stocks, bonds, debentures, notes, or
other securities, to engage at the same time to any extent whatever
in the business of receiving deposits subject to check or to repayment
upon presentation of a passbook, certificate of deposit, or other
evidence of debt, or upon request of the depositor; or
(2) For any person, firm, corporation, association business trust,
or other similar organization, other than a financial institution or
private banker subject to examination and regulation under State
or Federal law, to engage to any extent whatever in the business of
receiving deposits subject to check or to repayment upon presentation
of a passbook, certificate of deposit, or other evidence of debt, or upon
request of the depositor, unless such person, firm, corporation, association, business trust, or other similar organization shall submit
to periodic examination by the Comptroller of the Currency or by
the Federal reserve bank of the district and shall make and publish
periodic reports of its condition, exhibiting in detail its resources
and liabilities, such examination and reports to be made and published at the same times and in the same manner and with like effect




643.1

31

and penalties as are now provided by law in respect of national
banking associations transacting.business in the same locality.
(b) Whoever shall willfully violate any of the provisions of this
section shall upon conviction be fined not more than $5,000 or imprisoned not more than five years, or both, and any officer, director,
employee, or agent of any person, firm, corporation, association,
business trust, or other similar organization who knowingly participates in any such violation shall be punished by a like fine or
imprisonment or both.
SEC. 22. The additional liability imposed upon shareholders in
national banking associations by the provisions of section 5151 of the
Revised Statutes, as amended, and section 23 of the Federal Reserve
Act, as amended (U.S.C., title 12, secs. 63 and 64), shall not apply
with respect to shares in any such association issued after the date
of enactment of this Act.
SEC. 23. Paragraph (c) of section 5155 of the Revised Statutes, as
amended (U.S.C., title 12, sec. 36), is amended to read as follows:
"(c) A national banking association may, with the approval of the
Comptroller of the Currency, establish and operate new branches:
(1) Within the limits of the city, town or village in which said
association is situated, if such establishment and operation are at the
time expressly authorized to State banks by the law of the State in
question • and (2) at any point within the State in which said association is situated, if such establishment and operation are at the time
authorized to State banks by the statute law of the State in question
by language specifically granting such authority affirmatively and.
not merely by implication or recognition, and subject to the restrictions as to location imposed by the law of the State on State banks.
No such association shall establish a branch outside of the city, town,
or village in which it is situated unless it has a paid-in and unimaired capital stock of not less than $500,000: Provided, That in
States with a population of less than one million, and which have no
cities located therein with a population exceeding one hundred
thousand, the capital shall be not less than $250,000: Provided, That
in States with a population of less than one-half million, and which
have no cities located therein with a population exceeding fifty
thousand, the capital shall not be less than $100,000."
Paragraph (d) of section 5155 of the Revised Statutes, as amended
(U.S.C., title 12, sec. 36), is amended to read as follows:
"(d) The aggregate capital of every national banking association
and its branches shall at no time be less than the ag-gregate minimum
capital required by law for the establishment of an equal number
of national banking associations situated in the various places where
such association and its branches are situated."
SEC. 24. (a) Sections 1 and 3 of the Act entitled "An Act to provide for the consolidation of national banking associations ", approved November 7, 1918, as amended (U.S.C., title 12, secs. 33, 34,
and 34a), are amended by striking out the words"county, city, town,
or village" wherever they occur in each such section, and inserting
in lieu thereof the words "State, county, city, town, or village."
(b) Section 3 of such Act of November 7, 1918, as amended, is
further amended by striking out the second sentence thereof and
inserting in lieu thereof the following: "The capital stock of such




32

[PUB.66.]

consolidated association shall not be less than that required under
existing law for the organization of a national banking association
in the place in which such consolidated association is located.
Upon such a consolidation, or upon a consolidation of two or
more national banking associations under section 1 of this Act, the
corporate existence of each of the constituent banks and national
banking associations participating in such consolidation shall be
merged into and continued in the consolidated national banking
association and the consolidated association shall be deemed to be
the same corporation as each of the constituent institutions. All the
rights, franchises and interests of each of such constituent banks
and national banking associations in and to every species of property, real, personal, and mixed, and choses in action thereto belonging,
shall be deemed to be transferred to and vested in such consolidated
national banking association without any deed or other transfer and
such consolidated national banking association, by virtue of such
consolidation and without any order or other action on the part of
any court or otherwise, shall hold and enjoy the same and all rights
of property, franchises, and interests, including appointments, designations, and nominations and all other rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, committee of estates of lunatics and in
every other fiduciary capacity, in the same manner and to the same
extent as such rights, franchises, and interests were held or enjoyed
by any such constituent institution at the time of such consolidation:
Provided,however,That where any such constituent institution at the
time of such consolidation was acting under appointment of any court
as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates,assignee,receiver,committee of estates of lunatics
or in any other fiduciary capacity, the consolidated national banking
association shall be subject to removal by a court of competent jurisdiction in the same manner and to the same extent as was such
constituent corporation prior to the consolidation, and nothing herein
contained shall be construed to impair in any manner the right of
any court to remove such a consolidated national banking association
and to appoint in lieu thereof a substitute trustee, executor, or other
fiduciary, except that such right shall not be exercised in such a
manner as to discriminate against national banking associations, nor
shall any such consolidated association be removed solely because
of the fact that it is a national banking association."
SEC. 25. The first two sentences of section 5197 of the Revised
Statutes (U.S.C., title 12, sec. 85) are amended to read as follows:
"Any association may take, receive reserve, and charge on any
loan or discount made,or upon any notes, bills of exchange, or other
evidences of debt,interest at the rate allowed by the laws of the State,
Territory, or District where the bank is located, or at a rate of 1
per centum in excess of the discount rate on ninety-day commercial
paper in effect at the Federal reserve bank in the Federal reserve
district where the bank is located, whichever may be the greater and
no more, except that where by the laws of any State a different rate
'
is limited for banks organized under State laws, the rate so limited
shall be allowed for associations organized or existing in any such
State under this title. When no rate is fixed by the laws of the




[Pm

State, or Territory, or District, the bank may take, receive, reserve,
or charge a rate not exceeding 7 per centum, or 1 per centum in excess
of the discount rate on ninety-day commercial paper in effect at the
Federal reserve bank in the Federal reserve district where the bank
is located, whichever may be the greater, and such interest may be
taken in advance, reckoning the days for which the note, bill, or other
evidence of debt has to run."
SEC. 26. (a) The second sentence of the first paragraph of section
5200 of the Revised Statutes, as amended (U.S.C., title 12, sec. 84;
Supp. VI, title 12, sec. 84), is amended by inserting before the period
at the end thereof the following: "and shall include in the case of
obligations of a corporation all ''obligations of all subsidiaries thereof
in which such corporation owns or controls a majority interest."
(b) The amendment made by this section shall not apply to such
obligations of subsidiaries held by such association on the date this
section takes effect.
SEC. 27. Section 5211 of the Revised Statutes, as amended (U.S.C.,
title 12, sec. 161; Supp. VI, title 12, sec. 161), is amended by adding
at the end thereof the following new paragraph:
"Each national banking association shall obtain from each of its
affiliates other than member banks and furnish to the Comptroller of
the Currency not less than three reports during each year, in such
form as the Comptroller may prescribe, verified by the oath or affirmation of the president or such other officer as may be designated by
the board of directors of such affiliate to verify such reports, disclosing the information hereinafter provided for as of dates identical
with those for which the Comptroller shall during such year require
the reports of the condition of the association. For the purpose of
this section the term 'affiliate' shall include holding company affiliates as well as other affiliates. Each such report of an affiliate shall
be transmitted to the Comptroller at the same time as the corresponding report of the association, except that the Comptroller may,in his
discretion, extend such time for good cause shown. Each such report
shall contain such information as in the judgment of the Comptroller
of the Currency shall be necessary to disclose fully the relations
between such affiliate and such bank and to enable the Comptroller
to inform himself as to the effect of such relations upon the affairs of
such bank. The reports of such affiliates shall be published by the
association under the same conditions as govern its own condition reports. The Comptroller shall also have power to call for additional
reports with respect to any such affiliate whenever in his judgment
the same are necessary in order to obtain a full and complete knowledge of the conditions of the association with which it is affiliated.
Such additional reports shall be transmitted to the Comptroller of
the Currency in such form as he may prescribe. Any such affiliated
bank which fails to obtain and furnish any report required under
this section shall be subject to a penalty of $100 for each day during
which such failure continues."
SEC. 28. (a) The first paragraph of section 5240 of the Revised
Statutes, as amended (U.S.C., title 12, sec. 481), is amended by
inserting before the period at the end thereof a colon and the following proviso: "Provided, That in making the examination of any
national bank the examiners shall include such an examination of




34

[Pus.86.1

the affairs of all its affiliates other than member banks as shall be
necessary to disclose fully the relations between such bank and such
affiliates and the effect of such relations upon the affairs of such
bank; and in the event of the refusal to give any information
required in the course of the examination of any such affiliate, or in
the event of the refusal to permit such examination, all the rights,
privileges, and franchises of the bank shall be subject to forfeiture
in accordance with section 2 of the Federal Reserve Act, as amended.
(U.S.C., title 12, secs. 141, 222-225, 281-286, and 502). The Comptroller of the Currency shall have power, and he is hereby authorized, to publish the report of his examination of any national banking
association or affiliate which shall not within one hundred and twenty
days after notification of the recommendations or suggestions of the
Comptroller, based on said examination, have complied with the same
to his satisfaction. Ninety days' notice prior to such publicity shall
be given to the bank or affiliate."
) Section 5240 of the Revised Statutes, as amended (U.S.C., title
12, sec. 481), is further amended by adding after the first paragraph
thereof the following new paragraph:
"The examiner making the examination of any affiliate of a
national bank shall have power to make a thorough examination of
all the affairs of the affiliate, and in doing so he shall have power
to administer oaths and to examine any of the officers, directors,
employees, and agents thereof under oath and to make a report of
his findings to the Comptroller of the Currency. The expense of
examinations of such affiliates may be assessed by the Comptroller
of the Currency upon the affiliates examined in proportion to assets
or resources held by the affiliates upon the dates of examination of
the various affiliates. If any such affiliate shall refuse to pay such
expenses or shall fail to do so within sixty days after the date of
such assessment, then such expenses may be assessed against the
affiliated national bank and, when so assessed, shall be paid by such
national bank: Provided, however, That,if the affiliation is with two
or more national banks, such expenses may be assessed against, and
collected from, any or all of such national banks in such proportions
as the Comptroller of the Currency may prescribe. The examiners
and assistant examiners making the examinations of national banking associations and affiliates thereof herein provided for and the
chief examiners, reviewing examiners and other persons whose services may be required in connection with such examinations or the
reports thereof, shall be employed by the Comptroller of the Currency with the approval of the Secretary of the Treasury; the
employment and compensation of examiners, chief examiners, reviewing examiners, assistant examiners, and of the other employees of the
office of the Comptroller of the Currency whose compensation is paid
froxn assessments on banks or affiliates thereof shall be without regard
to the provisions of other laws applicable to officers or employees of
the United States. The funds derived from such assessments may be
deposited by the Comptroller of the Currency in accordance with the
provisions of section 5234 of the Revised Statutes (U.S.C., title 12,
sec. 192) and shall not be construed to be Government funds or
appropriated monies; and the Comptroller of the Currency is
authorized and empowered to prescribe regulations governing the




[PUB.66.]

35

computation and assessment of the expenses of examinations herein
provided for and the collection of such assessments from the banks
and/or affiliates examined. If any affiliate of a national bank shall
refuse to permit an examiner to make an examination of the affiliate
or shall refuse to give any information required in the course of any
such examination, the national bank with which it is affiliated shall
be subject to a penalty of not more than $100 for each day that any
such refusal shall continue. Such penalty may be assessed by the
Comptroller of the Currency and collected in the same manner as
expenses of examinations."
SEC. 29. In any case in which, in the opinion of the Comptroller
of the Currency, it would be to the advantage of the depositors and
unsecured creditors of any national banking association whose business has been closed, for such association to resume business upon the
retention by the association, for a reasonable period to be prescribed.
by the Comptroller, of all or any part of its deposits, the Comptroller is authorized, in his discretion, to permit the association to
resume business if depositors and unsecured creditors of the association representing at least 75 per centum of its total deposit and
unsecured credit liabilities consent in writing to such retention of
deposits. Nothing in this section shall be construed'to affect in any
manner any powers of the Comptroller under the provisions of law
in force on the date of enactment of this Act with respect to the
reorganization of national banking associations.
SEC. 30. Whenever, in the opinion of the Comptroller of the Currency, any director or officer of a national bank, or of a bank or
trust company doing business in the District of Columbia, or whenever, in the opinion of a Federal reserve agent, any director or officer
of a State member bank in his district shall have continued to violate any law relating to such bank or trust company or shall have
continued unsafe or unsound practices in conducting the business
of such bank or trust company, after having been warned by the
Comptroller of the Currency or the Federal reserve agent, as the
case may be, to discontinue such violations of law or such unsafe
or unsound practices, the Comptroller of the Currency or the Federal
reserve agent, as the case may be, may certify the facts to the Federal Reserve Board. In any such case the Federal Reserve Board
may cause notice to be served upon such director or officer to appear
before such Board to show cause why he should not be removed
from office. A copy of such order shall be sent to each director of
the bank affected, by registered mail. If after granting the accused
director or officer a reasonable opportunity to be heard, the Federal
Reserve Board finds that he has continued to violate any law relating
to such bank or trust company or has continued unsafe or unsound
practices in conducting the business of such bank or trust company
after having been warned by the Comptroller of the Currency or
the Federal reserve agent to discontinue such violation of law or
such unsafe or unsound practices, the Federal Reserve Board, in its
discretion, may order that such director or officer be removed from
office. A copy of such order shall be served upon such director or
officer. A copy of such order shall also be served upon the bank of
which he is a director or officer, whereupon such director or officer
shall cease to be a director or officer of such bank: Provided, That




36

[Pus.66.1

such order and the findings of fact upon which it is based shall not
be made public or disclosed to anyone except the director or officer
involved and the directors of the bank involved, otherwise than in
connection with proceedings for a violation of this section. Any
such director or officer removed from office as herein provided who
thereafter participates in any manner in the management of such
bank shall be fined not more than $5,000, or imprisoned for not more
than five years, or both, in the discretion of the court.
SEC. 31. After one year from the date of enactment of this Act,
notwithstanding any other provision of law, the board of directors,
board of trustees, or other similar governing body of every national
banking association and of every State bank or trust company which
is a member of the Federal Reserve System shall consist of not less
than five nor more than twenty-five members; and every director,
trustee, or other member of such governing body shall be the bona
fide owner in his own right of shares of stock of such banking association, State bank or trust company having a par value in the
aggregate of not less than $2,500, unless the capital of the bank
shall not exceed $50,000, in which case he must own in his own right
shares having a par value in the aggregate of not less than $1,500,
or unless the capital of the bank shall not exceed $25,000, in which
case he must own in his own right shares having a par value in the
aggregate of not less than $1,000. If any national banking association violates the provisions of this section and continues such violation after thirty days' notice from the Comptroller of the Currency,
the said Comptroller may appoint a receiver or conservator therefor,
in accordance with the provisions of existing law. If any State bank
or trust company which is a member of the Federal Reserve System
violates the provisions of this section and continues such violation
after thirty days' notice from the Federal Reserve Board, it shall be
subject to the forfeiture of its membership in the Federal Reserve
System in accordance with the provisions of section 9 of the Federal
Reserve Act, as amended.
SEC. 32. From and after January 1, 1934, no officer or director
of any member bank shall be an officer, director, or manager of any
corporation, partnership, or unincorporated association engaged primarily in the business of purchasing, selling, or negotiating securities, and no member bank shall perform the functions of a correspondent bank on behalf of any such individual, partnership,
corporation, or unincorporated association and no such individual,
partnership, corporation, or unincorporated association shall perform
the functions of a correspondent for any member bank or hold on
deposit any funds on behalf of any member bank, unless in any
such case there is a permit therefor issued by the Federal Reserve
Board; and the Board is authorized to issue such permit if in its
judgment it is not incompatible with the public interest, and to
revoke any such permit. whenever it finds after reasonable notice
and opportunity to be heard, that the public interest requires such
revocation.
SEC. 33. The Act entitled "An Act to supplement existing laws
against unlawful restraints and monopolies, and for other purposes ",
approved October 15, 1914, as amended (U.S.C., title 15, sec. 19), is




(Pm 88.1

37

hereby amended by adding after section 8 thereof the following new
section:
"SEC. 8A. That from and after the 1st day of January 1934, no
director, officer, or employee of any bank, banking association, or
trust company, organized or operating under the laws of the United
States shall be at the same time a director, officer, or employee of a
corporation (other than a mutual savings bank) or a member of a
partnership organized for any purpose whatsoever which shall make
loans secured by stock or bond collateral to any individual, association, partnership, or corporation other than its own subsidiaries."
SEC. 34. The right to alter, amend, or repeal this Act is hereby
expressly reserved. If any provision of this Act, or the application
thereof to any person or circumstances, is held invalid, the remainder
of the Act, and the application of such provision to other persons
or circumstances, shall not be affected thereby.
Approved, June 16, 1933, 11.45 a.m.




••

0•

X-7541

(INTERPRETATION OF BANKING ACT OF 1933)
Copies to be sent to all Federal Reserve Banks.
August 4, 1933.

Mr. W. S. Johns, Acting Governor,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia.
Dear Mr. Johns:

Reference is made to your letter of July 26, 1933, in which you
make inquiry with regard to the effect of section 9 of the Banking Act
of
1933, which amends the eighth paragraph of section 13 of the Federal
Reserve Act, as amended.
You point out that section 28 of the Emergency Farm Mortgage Act
of May 12, 1933 amended the eighth paragraph of section 13 of the Federal
Reserve Act so as to authorize Federal reserve banks to accept Federal
farm loan bonds as security for advances to member banks on their promisso
ry
notes under the authority of that paragraph; you refer to the fact
that
the eighth paragraph of section 13, as amended and reenacted by section
9
of the Banking Act of 1933, approved June 16, 1933, omits the reference
to Federal farm loan bonds; and you state that, in the opinion of your
General Counsel, such omission amounts to a repeal of the authorit
y to
accept such bonds as security for such notes.

In view of the numerous

inquiries which you have received you request a ruling on this
point.
The Board concurs in the view expressed by your General Counsel
on this subject.




Very truly yours,

(Signed) Chester Morrill,
Secretary.

01

F
.

IWO 4

ror Approval
Coy.
ItAnInn
Mr. brivA .„

Uri
5. John, Acting Govern:r,
Federal Reserve sank of Atlanta,
Atlnnta, .eorffis.
Denr Yr. Johns:
Reference is facade to your letter of July 26# 193% in which you
make in-2uiry with regard to the effect of section 9 of the .91nkinc Act of
193", which aends the eighth parnLraph of section 13 of

he Federal Re-

serve Act, as amended.
You -oint out that section 28 of the Emergency Far. Mort age Act
t
of

ay 12, 193

amended the eighth psrag-aph of section 13 of

he Feckral

Re!erve '%ot so as to aut orize Fed /*al rPs(rve banks to accept Federal
far:, lonn bonds se security for advances to uember banks on their promissory
notes under the authority of that paragraph; you refer to the fact that
the eight. paragranh of section 13, as id.ended and reenacted by section
9
of the Panking Act of 1931, approved Tune 16, 1931, omits the reference
to Federal farm loan bonds; and you state that, in the opinton of your
G neral Counsel, such omission amounts to a repeal of the authority to
accept such bonds as secur14 for Buell notes.

In vi,w of the numerous

inquiries which you }I've rc?ccived you recuest a ruling on this
point.
The Poard concurs in the view expre, ed by your
General Counsel
on this subject.
Very truly yours,

‘T
t•

GHC




133
Chester Morrill,
ey

0 BEQ,2UEOGRAFHFD

GgFeGlp

•

REcrf.tvEL"
rt •-• r
4

FEDERAL RESERVE BANK
or

ATLANTA

JUL 28 1931 . 1
)
414;###

OFFICE OF

e

DEPUTY GOVERNOR

July 26,

Mr. Chester Morrill, Secretary,
Federal Reserve Board,
Washington, D. C.

1533

7
17

Dear Mr. Morrill:

Under Section 2g of the Emergency Act of Congress
approved May 12/1933, the eighth paragraph of Section 13
of the Federalqteserve Act, as amended, was amended to in
clude pledge of bonds issued under Section 21 of the Emergency Farm Mortgage Act of 1933, it being the intention of this
Act to make such Federal Farm Loan bonds eligible to secure
a member bank's direct note.
Under Section 9 of the Banking Act approved June
16, 1933, the eighth paragraph of Section 13 of the Federal
Reserve Act was anended and states what is eligible to secure a member bank's direct note and Federal Farm Loan bonds
above referred to are not included.
Mr. Robert S. Parker, our General Counsel, has
stated that in his opinion Section 9 of the Banking Act
repeals Section 2g of the Emergency Act.
We have received a number of inquiries from our
member banks with reference to pledging Farm Loan bonds
behind their direct notes and in view of the large number
of these inquiries, I will appreciate a ruling by your office.

Very truly yours,

W. $.'Jhns,
Acting Governor.
WSJ:CLB