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F.D. 12A.3 9

0 02-1.2

No

Federal Reserve Bank

875tiova

District No. 2
Correspondence Files Division

P#4,2672S

SUBJECT

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December 11th,191,.
.lemorandum for

mt. Porter and :Ir. Strong

At the Aetropolitan Club after tr. Vanderlip's speech
I promised to look up and sen0 a memorandum in support of my
contention on the greenback situation.
I find that the $346,681,016. outstanding greenbacks
secured by gold reserve fund of $150,000,000. are redeemable in
gold upon presentation, but the Secretary is required

To restore the gold coin to the reserve fund immediately
out of the gold coin in the general funds of the Treasury,
if any, and place the greenbacks in the general fund, thus
restoring the gold reserve to 150,000,000.,

He may exchange the greenbacks for
the public at the Treasury, or
3.

or

gold coin

presented by

If necessary, he may go out and purchase gold coin "at such
rates and upon such terms as he may deem most advantageous
to the public interest," but he must pay therefor in the

greenbacks.
4.




If he fail to maintain his $150,000,000. reserve fund intact

by the foregoing methods and the fund falls below 0100,000,000.
then it is his duty to restore the fund to 0150,000,000. by
selling bonds and purchasing gold with the proceeds.
Finally the ,law of 4areh 14th,1900, also contains a clause,
"that U.3.notes when redeemed in accordance with provisions
of this section dhall be re-issued but shall be hold in reand the
serve until exchanged for gold as herein provided;
gold coin and bullion in the reserve fund together with the
reOeemed notes held for use as provided in
at no tine exceed the maximum sum of $150,000,000.

this section shall

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Summary_

Page paragraph

2;

Criticism of Democratic platform.

4

1

Large powers of Secretary of Treasury.

4

2

Committee hearings;

1
3

5-7
8

witnesses

limited in

testimony.

Pujo investigation.
2

General statement of defects in regional system.
Inability of regional banks to care for needs of districts

9

10

Improper basis of loans.

11

Insurance feature.

12

Lack of mobility of reserves.

13

Comment on

14

System of circulating notes;

15

Distribution of circulating

15-16

Powers of Chairman.

17

Unavailability of circulating

17
18-19

Advisory Council.
Government guarantee.

notes by

Federal Board.

notes for

certain settlements.

3

ProteCtion of country's gold supply.

20

Exemjrations.

21

Publicity of maturities.

22

Necessity of hanks

22

Suspension of

22-23

Insurance feature.

continuing present relations with
city correspondents.
payments (7)

districts.

24

1

Making new

24

2

Competition for location,

24

3

lerious results if many Eat. Banks terminate charters.

25
1

Q1-sec. 1.


Restoring money to circulation.

Summary - 2.

Page,

12sEasEL

25

2

Nat. banks must give assent before knowing in what
located.

25

3

Liability of stockholders in Nat, banks increased.

district

Ql-Sec. 2.
26

Stock cannot be
Ql-Sec. 2,
1

Severe penalty for failure to signify acceptance, and
shifting of reserves,

2

26

sold.

27 - 26

Q1-.Sec, 3.
29

3)

29

)

Charters forfeited,

Q2-Sec. 14
29

Penalties to Directors, and breach of contract with 3them.
Q2_9ec. 2,

30

2
Banks to subscribe for stock.
Q2..Sec. 3,

31-a

31-a
31-b

Government to buy stock.

2

31-a

Secretary of Treasury to sell stock.
3
Q2-Sec. 4.

4)
Powers of Federal Board;
Q3-Sec. 1 & 2.

32-

Establishment of

3

Voting

branches -

subscription

control.

inexact,

necessary.

32-

Stock
Q3-Sec. 3.

33

Question of insolvent bank continuing 20-year term.
Q3-Sec. 4.

5

2

33

3

Jurisdiction of Courts.

33
34

4

Issue of circulating notes.:

Obligation of when ?
Retirement .1'9,000,000 monthly

Authority to print
Amount limited.

Q3-Sec. 5.
Q5-Sec. 1,

Comptroller to decide on bank opening.

35

2

35
36 - 37

3)
)

Q4-Sec, 2.



Federal R. Board to operate regional banks.
Right of member banks to proportionate discounts.
Dual position of chairman.

Summary - 3.

Page Paragraph
37

38-39
39
39

Selecting local board
of Secretary of Treasury to be dominant.
Federal Board electing all directors.

2 )

Possibility
Possibility of

3:

06-Sec.2
'
r5-So ..
3

2
Dhfair manner of group division.

3
Q6-Seo.2

Dual position of chairman.

40

2

Impossible duty of Organization Committee.

40

4

Capital to be proportionate to that of banks of distriot.

41

2

Stock aoquired not to be

41

3

Dividend adjustments.

1

Circulation and capital

42

sold.

fluctuation.

Q6-Seo.3.

42

Impairment of oapital.

42

3

Capital of member banks may be reduced only if regional
bank reduces.

Q6-Sec.4. Attitude of foreign bankers towards regional banks of
small capital.

43

3

Insurance fund for

net.

bank deposits.

Q7-.Sec .2

44

1

Secretary of Treasury to use Insurance Fund in his discretion.

44

2

Secretary Of Treasury to use earnings in purchase of
Government debt.

45

3

Terms of office of Fed. R. Board.
possible.

Politioal control

Q8-Seo.l.

46

3

4

46

Secretary of Treasursrauthority to distribute public funds.

Advertising maturities

or

paper.

QB-Seo.2.

47

2
Q8-Seo.3

49

2
q9-Sec.2.




Rediscounting feature. 1Tecessity of regional banks
borrowing in normal times.

Tax

(indefinite provisions).

Page Paragraph
50

Summary -

4.

Reference to retaining reserve and central reserve cities.

2

Q10-Sec. 3.

50

3

Power of removal.

I10-8ec. 4.
51

Ditto

2

51

Rediscounted notes to count as reserve.

8

Q10-Sec. 5.
52

Delegation of legislative powers.

3

Q11-Sec. 1.
52

4
Federal Advisory Council.
Qll-Sec. 2.

53

2
Calls for information by Council.
Q1].-Sec. 2.

53

Items that may be deposited with Fed. R. Bank.

3

Q11-Sec. 2..
2

System for collection of checks, etc.

2

,54

Discount privilege tinlimited.

Clearing Functions.

Q12.

55

Q13-Sec. 1.

Speculation in commodities impossible.

56

2

Q13-Sec. 2.
56
57

3

Discounts prohibited for carrying stocks and bonds.

2
Fed. R. Bank limited in discounting to half its capital.
Q13 -Sec. 3.

58

2

Nat. Banks authorized to accept drafts having 6 mos. sight
but to rediscount only 90 days. maturity, etc.

Q14-Sec. 1.
58

3

Unlimited loaning power of regional banks to members.

Q14-Sec. 2.
59

Federal Board to prescribe rules, etc.
2
Q14- Sec. 3.

59

3

Q14-Sec. 4.
2

60
Q15

61



2

Q16- Seca.

Fed. R. banks permitted broad privileges: to buy commercial
paper in open matket, etc.
Fed. R. Banks permitted to
purchase foreign bills.
Protection of gold supply

0

Summary- 5

page paragraph
2

63

Purchase of revenue notes of municipalities,

Q16-Sec.2.
1

64

Q16-Sec.3.
2

65

Authority of Fed. R. Board to review rates ad paper
Foreign Exchange Bills.
Foreign Agencies authorized.

Q17.-Sec .1.

2

66

67-68

Authority of Seely. of Treasury over distribution of Government
fuhds. Favoritism to localities.

Q17-Sec .2.
Q18-Sec .1.

68

2

Postal Savings Funds.

Q18-Sec.2.

Government guarantee of notes.

69
Q19 -Sec.1.

70

2

Custody of notes placed with Fed. R. Yoard.

Q18,-Sec.3.

70

3

Use of circulating notes in settlements, and consequent value
of issuing ability?

Q19 -Sec.2.

71

2
Q20-Sec.2.

In redeeming notes, who pays transporation charges?

72

2
QgO-Sec.3.

Interest charge on notes ddvanced by Government.

4

73

Domestic exchange operations - circuitous and expensive.

74-76
Q21-Sec.2.
Q22-0ec.l.
78

1

0,000,000. a month (?)

Q22-Sec .2.

3

78

Lawful money deposited with Treasurer by Nat.Banks to retire
circulation to be redeposited by Seely. of Treas.

Q22-Sec.3.
Q23-Sec.l.
79

2
Q23-sec .2.
79
3
80
1

Q23-Sec.3.



Circulating notes issued under same terms, etc. as Nat.Barlir notes.

Exchange of U. S. Bonds for circulating notes.
(See Seely. of Treas. authority;

Q24-Sec.1)

0c

Summary - 6

3.2=
80

paragraph

2
q24-Sec.2.

81

2

Q24-Sec.3.
82

2

Reserve against Time

Reserves

Deposits.

to be similar between country banks and banks in
reserve cities.

Connercial paper may constitute half reserve.

Q25-Sec.2.
83

with

2

4

83

Interference

Indirect benefit to non-members prohibited.

present State regulations.

Q26-Sec.2.
2

84

System extended to possessions and territories.

26-Sec.3.
85

1

Retirement of circulation of Nat. Banks.

Q27-Seca.
Special examinations;

85

2
Sec,y. of Treas. authority.

Q27-Sec.2.
86

2

Restrictions on directors of Nat. Banks.

86

3
(2377Sec.3.

Liability of stockholders in Nat. Banks.

86

4
n28-Sec.2.
w

Farm loans, etc.

87

Segregation of catttal for fpreign branches.
Q28-3ec.3.




2

0,st 11

(%)

Secretary of Traaaary.
!ay Sell Stock of Bank.
Page 8, Lines 16 - 21. "Said United States stock shall be
paid for at par out of anzr_maney in the Treasury not otherwise uppro-eriated, and shell be held by the Secretary of the Treasury and
disposed of for the benefit of the United States in such manner, at
such times and at such arice not less th.t:n par as the Secretary of
the Treasury shell determine."
Is thie unrestricted authority warranted, 'xhen it might
as readily be provided. that the stock awned by the Government be Gold
to thc highest bidder upon public offering, with no opportunity for
discrimination or favoritism ?
DiscretionariPower to Distribute Insurance

fund.

Page 26, lines 3 - 7. "the money to be kept in and losses
from failures to be paid from it as a depositors insurance fand
under a division of the Treasury to be constituted and maneFed under
such reRvlations as may be prescribed by the iiecx!la_ty_af the Treasury.
Can Use Earnings to Purchase Government Debt.

Page 26, Lines 7 - 12. "All net earnings derived by the
United States from Federal reserve banks shall be applied to the
reduction of the outstsillii indebtedness of the United States

uncitrIliEJ:ILITil.

to be prescribed bv

the Secretary of the ireas.E.L11."

The Secretary of the Treasury may buy from his friends, at
any price that he fixes.



This is an unwarranted, indiscreet delegation

S.T.

2

of authority to an officer of the Government, which even private
corporations would not countenance today.

Authority to Distribute Public hinds, and Authority to Overrule the
2ederal Reserve Board

which he is a member.

Page 35, Lines 5 - 13. "Nothine in this Act contained
ehell be constYued as takinie con0,7 any :poeers heretofore vested by

ley in the Secretary of the Treasure which relate to the supervision,
management and contro3 of the Treasury DeAirtment and bureaus under

such department, and whenever ay power vested by this Act in the
Federal Reserve Board or the Federel reserve clant appears to conflict
with the powers of the Secretary of the Treasury, such powers shell
be exercised eubject to the supervision and control of the Secretary."

Simply another indication of the intention to make the
Secretary of the Treasury the supreme authority in the monetary affairs
of the eountry. It certainly has the effect, in connection with other
provieions referred to, of giving him absolute unrestricted control
over the distribution of Federal funds. In 1907, the distribution
of the general fund at the time of the panic was the subject of
Congressional inouiry. Going back to the days of Andrew Jackson,
"pet" banks have been a recurring cause of scandal. The present system

is bad enough, and such bad features as it has will be magnified under

the provisions of this bill.
Additional Authority to Distribute Government Funds.
Page 47, Linos 7 - 18. "Sec. 15. The moneys held in the
Keneral fund of the Treasuey, except the five_per centum fund for the



S.T.

3

redemption of outstandins national-bank notes and the funds_provided in
this Act for the reeemption of Federal reserve notes may, upon the
direction of the Secretau,pf.th.e Treasery,_be deposited in Federal
reserve banks, which .banke, when required by the Secretary Of the
Treasury, shall act as fiscal agents of the United States; and the
revenues of the Government or ail, part thereof mu be deposited in
euoh banks, and distureemento may he made by chocks drawn egeinst such
deeosits."
,

The Secretary of the Treasury i.e placed in unrestricted
eontrcl of over t200,000 ,000. of Govornvent fands to be deposited
with the Federal reeerve banks, of which 0,00C,000. is now on
deposit with national banks. Ile may say where it shall be so
deposited, or whether it shall continue to be deposited in Netional
banks or hold in lawful money in the Treasury. No single officer
of the Government should have this power. Ar eteted before, the
exercise of the power nor vested in the Secretary of the Tretsury,
whether lawful or not, is unwise. This rill simply make it worse.

Favoritism to localities is possible. The use of thc Government's
fundn for political or partisan purposes as to section e of the
country is possible. N6 such construction could enter into the
handling of the Government's deposits with a central bank.
The Secretary of the Treasury would have a power, unEer
this provision, that would make it poesible for bin to nullify sound
banking in the regional banks and make it dangerous banking. 1337 being
in a position to transfer such large sums from one regional bank to
another and from one part of the country to another, he could upset
all of the arrangemente of any or every regional bank. If the
vederal Reserve Board would not yield to his demands because they
did not agree with his opinions,- which, while entirely honest



3.T.

4

might be dangerous to the country,- be could carry out his opinions in
suite "of it. For instance, suppose the Federal Reserve Board, of which
the Secretary of the Treasury was a member, feeling that a certain
regional hank was unduly inflated and should net be allowed to borrow
from other regional banks, but should be forced to curtail its
operations, and every member of the Board with the exception of the
Secretary of the Treasury co voted, this majority opinion could be
rendered void through the action of the Secretary of the Treasury in
transferring baleaces of the Government in other regional banks, to
the regional bank under criticism. If this particelar regional bank

happened to be situated in a district strongly of the political belief
of the Secretary of the Treasury, great pressure could be brought to
bear upon him.
Again, if such regional district happened to be a
crucial one., as far ae its votes for President were concerned, the
ereesure might even be stronger to help it out.
It has been admitted by those favoring this Bill that the
preeent pcwer of the Secretary of the Treasury, in being able to
depceit mcney with such Lational tanks as be might see fit, is
subject to abuse, and it has been cjaimed in scme quarters that this
power has been abused.' The extent of such abuse, however, at present

is limited in the case of each favored institution, to its capital
and the security it can put up, and no such eetraordinary amount can
be placed with one bank as will be poseible in the case of a regional
bank, where the Secretary of the Treasury could, if he wished, place
$2-00,000,000. with a bank having a capital of $3,000,000.
Every
change of Administration involving a large difference in policies
strongly affects business. How much greater will such changes of
policy influence business. if any system is grafted upon this country



S.T.

5

that will subject our whole banking syrtom to action based upon the
whims of one individual ?
Special Examinations.

Page 69, Lines 16 - 21. "Sec. _21._ Every member bank shall
be examined by the Comptroller of the Currency at least twice in eaoh
calender year and as much oftener as the Federal Reserve Board shall
consider necessary."

As to special examinations, this places the Comptrorler of
the Currency under the direction of the Federal Reserve Board, although
he is now by law subject to the directicn of the Secretary of the
Treasury.
As the Secretery of the Treasury, in the paragraph on
Pape 35, Lines E to 13. (emoted on page 2 of this memo.), is authorized
to act in opposition to any provision of this Act which might curtail
hie exieting rights, he Tould, under this provision, again be able to
overrule the Federal Reserve Board fc he so desired. The Comptroller
of the Currency is placed at the service of the Federal Reserve Board
and the power is apparently given to them to require such exeminations.
If S17 members of the Federal Reserve Board voted to have any special
examination made, and the Secretary of the Treasury voted against it,
be would be able to prevent the examination, as his instructions to
the Comptroller would be greater authority than these cf the Federal
Reserve Board.
General Powere.

You will find, upon analysis of this Bill, that the Secretary of the Treasury is giver a power beyond that accorded the President



S.T.

6

of the United States, the King of England, or the Emperor of Germany,

In his relation to the financial matters of the country. The Secretary of the Treasury, who is not elected by the people and whose
personality is unknown to them when they elect the man who appoints
him, is given such power that he could, of his on volition, in
collusion with some banker, cause the failure of any regional bank,

or of all of them, and could bring a panic upon this country, if he
wished to abuse the power that he would have, such as has never been
seen in the history of the world.




QUMTIONS

,age 3, Lines 17 -

Z.

If ',,tional banks elected to resign their

charters, and lawful money was deposited
with the Treasury Devartment for their
circulation, and this money was then paid over to regional banks whose
stock
cnned by the government, not having been subscri,-ed for by
either banks or the public, how would such lawful money get back into

kage 5, Lines 8 - 14.

circulation ?

.ige 4, Lines 11 - 17. Can the board of directors of a Jational
bank fairly assume any such liability
under such conditions I ,Jo salable
investment is being suggested, but in effect an additional capital

liability.
_age 4, Lines 1E3 - f."2.

Will it not only not be vise, but necessary,
for National banks IT in the United States

in reserve cites, in order to protect
themselves, to immediately begin to curtail their lines, in order to
make it possible for them to meet any condition that may arise that

calls for a transfer of the reserve deposits that they may hold ?
Would not their greatest safety lle in refusing to go into
the system I?

And could they, in justice to their depositors, go into the
system uncler such circumstances

Those depositors have a right, under custom and exist,,ng
arrangements with their bankers, to borrow. If such borrowings are
to be curtailed because of the establishment of a regional bank

system, must not the banker, in order to fairly live up to his duty,




Questions

2

resign his National charter ?
.,:age 5, Lines B - 14.

Would it not be necessary, under the terms

of this Act, for suit to be brought at the
end of sixty days after its passage, if a
National bank had not et that time signified it intention to become
a member bank ?

l'age 5, Lines 14 - 20. What would the penalties to Directors
consist of
That dollar amounts would they
probably amount to ?

When a director of a National bLnk takes the oath of office,
he enters into a contract with the Government to live uj to the
requirements of his office, in accordance with the TTt=itional BPnk Act.

IP Congress justified in breaking this contract before its expiration ?
Cennot it be expected that many directors of banks will
resign rather than subject themselves to any such liability ?
keg° 6 Lines 1 - 10.

If any considerable portion of stock is
not token by banks, and the success of
the regional banks is uncertain, what
possible reason could the public have for subscribing for the
stock ?

Pare 7, Line 4.



Why is the Secretary of the Treasury given
this unwarranted power ?

Questions
.-age 7, Lines 15 - 14.

3

Could not a political Administration, by
increasing the oapital of any properly
organized regional bank, all the stock of

which was owned by member banks, to such an amount that the voting
trustees could elect all of the Clnss A end Class B directors ?

iege 7, Lines 15 - 18. If such rules and regulations are unfair,
who can review them ?

Are Netional banks going to be
obliged to accept them before they sea them ?

iecee 9, Lines 7 - 4.

How could a regional bank be organized

if less that five banks accepted the
system in a district, snd the balance
of capital were subscribed by the public and or the Government ?
1-ege 10. Lines 14 - 17. If a regional bank suffers sufficient

losses to wipe out its capital and
surplus, could it not still continue
to do business, under the law, for its full period of twenty years ?
J2eF!e 11, Lines 12 - U. What is to be the character and form of
the notes Issued by regional banks
against United States bonds ?
Are these notes to be guaranteed by the United Stites
Government 1'

Must regioral banks maintain a reserve against such notes ?
If not, when they are presented for redemption, how is the
regional bank going to keep its reserve good against its deposit and




Questions

4

circulating note liabilities ?
Does the limitation of the National Bank At apoly to the
volume of notes, so that each regional bank may only issue notes to
the amOunt of its capital ?
If so, what is the object or necessity of this provision,
as only $106,000,000 of the notes, based on National bank capitalization, could be issued, or about one-seventh of the total issue of
National bank notes now outstanding ?
If such limitation is not intended, are the regional banks
to issue such notes proportionately to their capital until the
whole 700 odd million of National bank notes are retired,

or can

any regional bank issue them to any amount ?

Page la:, Lines 8 - 15.

Could not the

Federal reserve board,

upon being appealed to by a member bank
who had boon refused discount for proper
reasons in the opinion of the directors of a

regional bank, overrule

such regional bank and demand that the discount be made ?

Would any banker who is obliged to keep his reserve with
such regional bank, feel jtistified in doing so under such circumstances ?

Is it necessary or advisable to give the Fe6eral board such
power, when it has its own agent as acting chairman of a regional
bank, who can gat up out of his chair as a regional director and
walk over to his corner as Federal agent and ask himself what he
thinks about it ?

Under this provision, would not the directors of every
regional bank be obliged to stop their discounts to each member
bank when



its proportion of the whole had been asked for ?

uestions

5

Is it not true that solvent bankers may differ in their
loan requirements very materially at the same time, and that therefore this 'provision will curtail the mobility of the reserves of
each regional bank and defeat one of the purposes for which the bill
Is supposed to be drawn ?
rage 12, Lines 22

5.

Miy the third director in Class B
be a banker ?
Who is to decide whether Glass B

directors are qualified for office, under this provision ?
If two groups of bankers both desire to elect a Class B
director who represents agricultural interests, Which group takes
Precedence ?

How is it eoing to be possible, under the system of

election provided for in the bill, for the three different grouPs
to elect men engaged in the three different kinds of pursuits
mentioned, ?

Page 13, Lines ,7 - 14. Is it right and fair to allow the
small institutions, Which would
have to assume the smallest

in making deposits with the regional bank, to elect two directors
out of three, while the largest banks Who would have the most involved
in the regional bank could only elect one director, and then probably
only in conjunction with a number of smell banks ?
Even if, through the jugglery of words, this could be

figured out as being fair, is it safe to allow smell institutions to
elect two men, who would be obliged to handle immense amounts of

money, all out of sroortion with the natural business that has been




Questions
who could outvote the

6

done by these men before their election, inntxxxatxxone who presumably

may have had experience in large matters ?

.age 15, Linos

- 12.

Is it desirable or safe to have the chairman of the board of directors of a
regional bank

the principal represent-

ative of the Federal board, having control as he would, as agent of
the Federal board, of all the gold and securities that he as chairman of the regional bank had placed with himself as Federal agent ?

Does not the only reason for such an outrageous condition
lie in the attempt to bring this regional system into line with a
central bank ?

ickes 17 and 18. Sec. 5.

If a regional bank has outstanding
circulation, issued under the provision
of page 11, lines 12 to

rl, and such

circulation is based upon its capital, how is it going to handle
such circulation in connection with the fluctuations of its capital ?

.rage 18 (all) and
i'age 19, Lines 1 - 11.

Can foreign bankers, who arc naturally
suspicious of alien institutions and who
deal with them without any feeling of

patriotism, but merely for such profit as they can make out of them,
ever be induced to place any confidence in a system of regional banks,
some of which are capitalized beneath their notice, realizing that
even such capital as the regional banks may have can be

dissipated

without the directors or management having the slightest control in

the matter; and, further,
the failure



that such dissipation may occur through

of member banks, of whose condition and financial

Questions

7

standing they know nothing: and, further, that such failures might
not alone result in reducing the capital stock of a regional bank,
but might also affect other assets if the failed bank was indebted

to it ?
How can institutions so organized be expected to take their
part in the international markets of the world, in protecting our
gold supply ?
kage 19, Lines 13 - 25. The insurance fund suggested would only
build up gradually during a course of
years, even provided there were no failed
banks. Such being the case, how is it going to be nossible to use
this insurance fund in case of failure of several banks whose total
losses,' that would have to be paid from the insurance fund, would
exceed such fund ?

Would the precedence of failure be of any value to the
depositors of failed banks ?
If not, in whet rossible manner could en adjustment be
made, while in the very process of adjustment another bank might

fail ?
Again, it is not known at the date a bank fails what the
loss to depositors is going to be. If Precedence of failure is
to be used as a basis for adjustment, how is it ever going to be
possible to determine how to proportionately divide up a changing
insurance fund that does not equal the liabilities it is to cover ?
If Precedence were of value, so that every bank would be
induced to fail early end avoid the rush, suppose a second bank
failed, and the emouet of deficiency became known a year or so
before the deficiency in the case of the first bank was determined;




how would this adjustment be made ?

C:41estion5

Page 24, Sec. 10.

8

Would it not be possible for a President,
during a single term, to change the political
complexion of the Federal board ?

This being true, would not this be a direct invitation to
tale advantage of such an opportunity, and would it not greatly
multiply the rower for disaster that any unfortunate choice for
a ''resident might entail ?
.age 28, Lines 18 - 23.

Is it not extremely dangerous to
tublish the maturities of the paper

of a regional bank, which might make
it possible for any member of the community who did not understand
the banking business but who was of en Inquiring turn of mind, to

see in Such figures at certain -eriods a condition that would
appear dangerous to him and that might be the basis for starting a
serious xxx story concerning the regional bank ?
Would not the publishinf: of such statistics necessarily
at times seriously handicar the directors in their operation of the
bank ?

Is not the present banking system, under
which bankers in one district, say, for
instance, in the South, arrange directly
to discount with bankers in That would be another district, say

Page 28, Par. (b).

safer and better, carrying with it as it
does an opportunity for the bankers in the discounting districts
to be entirely familiar with the standing of these to whom they
Chicago or New York,

make loans, than the system proposed of permitting the Federal

board to force regional banks to discount paper with which they




Questions

9

are not familiar ?
Would not a central banking system be far better and much
safer than either our present system or the proposed regional bank
system ?

Bow could a regional bank whose assets are wholly

based

upon the capital and resources of the banks in its district, which
is situated in a district such as that comprising the territory,
say, East, West and North of New Orleans, pass through the season
during which practically all of its member bunks would be obliged
to borrow from it, when such member banks as they are constituted

today are obliged to borrow outside of this district during the
crop-moving season inamounts approximating 4200,0u0,000 ?
.

Would not such a regional bank be obliged to borrow every

year ?

age 29, Par. (c).

As the dividend is cumulative to stock-

holders, this tax must be paid out of that
portion of the profits that would otherwise
#o to the Government.

Such being the case, would there be any

objection whatever on the part of the directors, even those that
represented member banks, to the tax suggested ?

Is it intended that this tax shall be paid to the Governmerit

If so, would it not

in reality be an operation that would

be represented by the Government taking money out of one pocket

and putting it into another ?
This being true, after the tax is paid, does not every one
concerned stand inexactly the same relation as to profits that they



Q.uestions

10

did before ?

Thie being true, of what possible use is te tax ?
sAge 29, Lines 6 - 11. What member banks, under the bill, are
required to keep the same reserves as
the Federal reserve bank ?
Are not such banks the only ones that could be charged a
tax, under the provisions of this paragraph as it is worded ?

Page 29, Lines 18 . 23. Are the reserve cities and central

reserve cities still to be maintained
because it is realized that the regional
bank system will not do the work recjlired of it, as would a central
bank ?

Lines 24 - 25
Page 30, Lines 1 - 2.

?a,cre 29

Is it wise or safe to make it possible

for a banker who has applied for a loan
and has been refused by an officer of
his regional hank for geed cause, to be able to go over the heads

of the board of directors of the regional bank in his district and
demand of a politically constituted board,- or, if you prefer to
call it a board that may upon occasion be polit!cally constituted,and obtain the discharge of such officer?
page 30,

Par. (k).

If the Federal reserve board should
authorize member banks to carry Federal
reserve notes as reserve, how would it be

possible to retire such notes from circulation ?



Questions

11

(1). Can Congress, under the Constitution, delegate
legislative power such as is contemplated in

Pape 30,

this provision ?
Pape 31, Lines 16 - fl. What possible good could come from calls
for information that might be made by
the Advisory Council upon the Federal
Board ?

If the Federal Board was acting improperly, would it not
and could it not answer sue' cel]s for information with any sort
or a report it might choose to meke ?

Is not the power to call for information nullified unless
those who make the call can check it up ?
Such being the case, would not this Advisory Council give
a false sense of secutity to bankers connected with the system ?

age 3L, Lines 1 -.11. ITow would clerks in member banks and
tellers in regional banks be able to
check up their deposits as they were
being made, and find out whether all the banks that items were
drawn upon were
()Nv

member banks ?

would it be possible for such clerks and tellers to

keep themselves informed as to which member banks had failed ?
Again, and what seems possibly more difficult to answer,
how would such clerks and tellers, after having looked up these
items and found that they were drawn upon member banks, and had
by telegraphic communication or otherwise found that such banks

were still in existence, be able to determine whether such banks,
though still in operation, were solvent ?



Questions

12

1B it intended that we shall have two systems for the
collection of checks in this country: one for items drawn upon
members and cnotLer for items drawn u7on all oter tixag banks,
corporations, firms, and individuals ?




-;luestions

Pe,Fe 32, Linos 11" - 7.
Page 33, Linos
1

13

Is it wise to allow members to borrow
from regional banks without any limit

in respect to their oapital
Page 32, Lines 22 - 26. Is it intended thut this provision

shall make it possible for ii of li.ose
interests who may desire, to purchase
and carry in warehouse for future sale and delivery, agricultural
and other products Y

If it is not so intended, how, in viow of tLi provision.
can a regional bank prevent aiding cteculators who desire to carry
agricultural or ot;,er roduot for peculutive purposes ?
If regional bank in an nricultural district boomo so
1oade0 up with bills of exchange iscmed against warehouse commodities

that it could not not the curren needs of its dlatrlot, is it
going to be fAlowed to borrow from other regional banks and aloo

curtail their ability to meet current business
.f.p7e 33, Lines 8 - l5.

y are Federal banks autYorize to
mho lotns to member banks against
bills of exchange which de not boar am

to the full amount of their capital, or to rn urlilAted
amount if the intent of the Act is so construed, on0 are only
allowed to loam to th extent of one-.elf the capital and surplus
acceptance

of t member bank when the bir.s of axe-hence bEwr te additionla

security of tn acceptnce ?
Is it not possible that ti c provision rnlLt seriously
curtail the ability of regional bans to derJ in foreign exchange ?






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Questions

15

Explain how recional bA-tnks are Fotng to work tosotler in
the foreign marhot.
Nhich one of these bsnks srould take rocelence over tho

ot. ors. should forein operntions be necossary or advloable 9
Which. regional bank would st-nd such looses ss night occur

through a necessity that might arise requiring the dissossl of foreign
exchange held by sll of them ?
Would the bsnk handling the operstion hnve to stand the

loss, the other locnks turning over their exc,onge to it, psosided,
of cosrse, tat any means is fovsd to require a joint c;erstion
Might it n6t be fsir to arrortion the loss smong nll of the
regional banIcs, whe'ner they were cssrying on a foreign bvsiness or
not

If this were done, would it bP fair to those Who wore not
Is the foreign business, to subject them to losses beyond their
control ?
Agin, would it be fair to a regional bank whose msnsger
had hsndled his exchenge in such manner as to enable him to take ;art
in the oseration without lose, to have to stand a portion of such
looses as might occur through the operstions of some other manager
WitS a number of regional ban'ss, all doing a foreign
business, would they not of necossity,- esch Torkinr for himself,
based
on the reserve situation and neods of membes banks,- be
working along lines directly opposed to each other ?

Is it not true that in the csre of n central bsnk, Rll
of tsose serious matters would be olininated absolutely ?
2se.e 35, Lines 18 - P5.



Please exnlain hos eight or toelve
recioml banks, all authorized to

Questions

16

o-serate in the sold msrket, can do so effectively and economically ?
Would not a central bank solve all of the difficulties
surrounding these important operations both economically and
effectively ?

Is it not extremely dangerous to authorize
a board that may be politically constituted,
to purchase securities issued by oolitical
subdivisions ?
Should not the tendency to borrow, on tile yart of ,olitical
subdivisions such as those mentioned in this section, be discouraged
ratLer than encouraged, on qeneral rinci-los ?
What is to be gained through allowing reional banks to
compete wtth meMber banks for business of this nature ?

:Age 36, par (b).

Are not member ban'ss situated in the oliticul di7isions

mentioned, better able to judge, not alone of the safety of such
issues, but as well of the advisability of encouraging teir
issusnce ?

Page 36, par (d). Are all classes of Faper that regional banks
are authorized to purchase intended to be
covered in this _Tovision
Ii not, what classes of paper are to have special rates
applied to them, and ich classes are to be exempt from t is extraordinary measure ?
coul

regional tanks over purchase foreigribills of'

excllange on rates establishec by the ?ecleral reserve boa:T-(1



?

Questions

17

Page 36, par (e). Please explain how ettLt or twelve regional
banks with branches ebroad could operate
fectively and economically "for exchange
purposes" ?
There is no question but what a central bsnk could do

business along these lines economically and with advantage to to
country, but how is it going to be 7ossible for eight or twelve

regional institutions to aa

o

not

Would the representatives of the different Federal banks
have to 7!ork for the benefit of their own institutions, and would
not tIliT of necessity result in their operating against each oti;er
a large fIrt of the time ?
Page 37, Lines 6 - 15.

If t'

.::ederal reserve bonrd voted

six to one against autorizinz a
rerior,1 bank which was over-extending

itself i--prorerly, from borrowing of otter regional banks, and the
one nef,ative vote was cast by the Secretary of the Treasury, could

he not, under the provisjons of this bill, nullify the action of
the Federal reserve board by transferrinp Gove-nment deposits from
other regional banks to thg- ore asking for itiC
If the regional bank asking for the accommodation was in
a district whose vote might decide a rapidly approaching presidential
election, might not the pressure upon the Secretary of the Treasury
to hel;-, out such district be almost too great to be resit/teal"!
Would rot such condition of extension be more t to
-

occur in the fall, just before s presidontisl election, ,articulsrly
if 'latform -olicies were involved that mit:)t represent serious



uestionL

difference of opinion,thwi at slmos

18

eny oter period, taken ir

connection wft* t!le fact that te fall is
."ye to be moved sne wben root roroy 19

tek

7ime wi,er

crops

re,atta

IS it not true that t. .!s united an unrarrentcd rower
would not be possible

in the coas of a central bank ?

Is it also not true tl-at money derosited in a central brnk

by the Governmert,ou3e. be far safer than money that might he -Joeed

with reelonel barks in sumg fer exceeding the capital of Eueh banks ?

Page $7, Lines 16 - 22.

Postaa savings,repreaerting the do'i,osts
of

tLe

people in the localities where

.V.ley are made, and auch people beving

eatabli.shed by ler systems of '.7ttite banks to carry on the17r buainess,

is it riht or justifiable to exclude 3tate banks from actin-* as
depoclitarics for postal savincs, w'.en ano. docrIlts are nr-de against

collateral satisfactory to the Government ?

May there not be mriny commuities tbrouhout the country
ore thero ere no member banks., which would result in taking the

2ontal avvings of such Counities into other dfstricts, snd defat
the provisions of the postal savings law intended to keep such funds
at home ?

lecl 37, Linea

4 - 25.

On what ground do you justify the
plac1n7 in the hands of

which may be made ur

rl

Federal board

of individuals who

have no financial resonsibility, and which as a boord isS, no f1nane1t4 standing, of circulatin7 notes


machinery,


that

aro reedy for issuance ?

Is not this the introduction of another rdoco of dangerous
nocessery in order to make a central bank of a regional

PE-c-e 37, Soo. 16.

Questions
19
Does the Government of the United 6tates own lc

the .old and collaterf.1 that is to be held by

the FeC.eral reserve board as security for
the note issues of regional banks ?
This Question having been answered in the negative, does
not the guarantee of tese notes by the Government then become a
fivt guarantee 9
In case of the failure of a regfonal bank that had
outstanding a very large issue of notes, end it was found that the
Yedeval reserve agent had disi,osed of the gold and security in his
care, would tot the Vrited States be placed in exactly the same
mition in regi,rd to tie redemption of these notes tLat it would
be if it had issued its own flat notes pure and simple, without
tLe intervention of any bank in betwe:n ?

IPte 38, Lines 1 - V.

meITIer banks borrow of a regional

bank until it reserves are exhausted,
and suc"c, toirowings are desired in
ere its and not in circulating notes: that member banks draw drafts
upon t) ese credits, whicI t,re 0-'esented to the regional bank and,

if

in gold or lawfu] money, would de lete its reserves. Would
the regional bank, under this act, he authorized to pay such settlements in a Clearing Foume or direct in regional bank circulation,
f.rovided it were not desired by Le]dors of the drafts ?
Even if regional banks were authorized to make settlements
in TI-C1' manner. could not t:oce who rec ived the circulating notes
rresent them to the bank and demand

cld and lawful money ?

Under such conditions, of what value to the regional hank
would be Its note-isouing ability ?



uestions

20

not this regional bank system, representimt merely
the consolidation of district demandn, its apt to be simultaneous,
instead of giving such demands a mobility country-wide, without

friction, loss of time or expense, as would be true in the case of a
central bank ?

Is it intended that Federal reserve
banks receiving circulating notes of
otner regional banks shall pay the
trans ortation charges upon such notes when returning them for
redemption, or are such charges to be paid by the issuing bank ?
2age 39, Lines 19 -

age 41, Lines 1 - 7. This provision stltes that the bank
shall be charged with the amount of such
notes, and shall ray such rate of intert,st
on said amount 88 may be established by the Federal reserve board.
Under this provision, would not a regional bank to be obliged to
pay interest upon such notes as it might have in its own vault

or in the vaults of it branches ?
Should not such-interest be paid only upon such amount

of circulation as might be outstanding ?

no would this interest be paid to ?
If to the Government, what possible difference would it
make whether any interest were neid or not, for if the regional
banks were successfnl, the proportion of the profit that would accrue
to the Government would be the part reduced through the payment of
interest. The Government would not lose, therefore.
'Amid this not mean that instead of t'a Government's
,rofit from the regional banks being represented through payment of



Questions

21

dividends alone, it eould be divided up into three eorts of -ayments,
repreeented by dividends, taxes and intereet, all of whioh togethor
would, exactly eual. the dividends ?
Under such eircumstences, who would have the slighteet

objection to te eaying of thie interest, which is apparently
intended to act to prevent over-expaneion
Page 44, Lines 7 - 13,

Ie it not true, under this provle'on.
in connection with the first paregraph

ofotion 13, thet a regional hark
tuated in Ohicago could forwerd exchange on banks, members of
the New Orleans regional bare-r, to New Yor'k, for exchanEe Eury9008,
in order to make New Yor eechange, if w Grleane eechunce were

at a diseount ?
Is it not also true that the 7!oe York regionsl bank
could then forward theee items to 3t. Lcuis for collection, if it
needed St. Louis exchange?

Is it not true that the St. Louis reEional bank,
reeniring Chicago exchange in preference to riew Orleans exchange,
could then send these items to Chicago for eechange purpoees ?

Is it not true that this circle might he kept up
indefinitely, while New Orleane exehanoe was at a dieeount in

these throe cities ?
is it not true that the regional banks would naturally
handle the items in this way, for their own profit, as ne one
of them would feel that it was the one called upon to stand the
lose in exchange ?



7s it not true that in the case of a central hank, it

Questions 2E

would havo everything to lose and nothing to gain if it handled
the items in this way,- for, if the Chicago branch forwarded the
items to the New York branch, and the New York branch to the

St. Louis branch, and the St. Louis branch to the Chicago branch,
etc., etc., the central bank as a whole would be out of.tbn money
while the items were in transit,and it would therefore collect
them as rapidly as pom:ible ?
Is it not trne that the currants of domestic exchange,
due to seasonal operationn, arc well defined in this country,
without any consideration of our banking sytem 1

Such being the case, is it not true that regional banks,
in trying to meet those exchange conditions, would first use up
their balances with other regional banks, and then be obliged to
ship lawful money for their credit,thich would deplete their
reserves, although such lawful Loney would, of course, increase
the reserves cf some other regional bank

lc it not true that in the case of a central bank, whore
the 1w:fill money in every branch would count as reserve, there
would be no necessity of such shipments ?

Is it not true, therefore, that a regional cystom would
be such more expensive to the country in the handling of domestic
exchange, as well as in handling foreign exchange
Page 45, Sec. 18.

.ould not such transactions be limited
to 49,0()0,000. a month ?

Page 46, nines 5 - 13.



is it intended
as might be deposited with the Treasurer

Questions

23

of the United States by National banks, may be deposited by the
Secretary of the Treasury in regional banks ?
If such authority is not intended, might not a larp.e amount
of lawful money be withdrawn from circulation ?
If the Secretary of the Treasury is considered to have
authority to deposit such funds with the regional banks, would net
this add unknown proportions annually of 700 odd million dollars

that he would be able to place at his discretion in any regional
bank in the country ?
Is it safe or right to the business interests and people
of the United States, to place such absolute power in the bands
of one man ?

Page 47, Lines 4 - 5. If these circulating notes are issued
under the same terms and conditions as
National bank notes, is there any
authority that could compel the regional banks to maintain a
reserve against such issues ?
2age 47, Lines 5 - 9.

Does not this provision, reading, "that

United States bonds bought by a Federai
reserve bank, against which there are no
outstanding National bank notes, may exchange," etc., leave the
power Open to Federal reserve banks to act under the provision 021(

rage 11, Section 8, Lines 12 to 21,
), and issue
circulating notes against any bonds of the United States, whether
they at present bear the circulating privilege or not, thus
increasing the amount of notes that might be outstanding against



(

Questions

24

United States bonds from $743,000,000. to 4966,000,000., thus
adding further to the power of the Secretary of the Treasury and

also to the liability of regional banks that might not need to be
covered by reserve ?

Page 47, Lines 14 - 17
Lines 22 - 24.

That possible use can there be of
demanding that bankers hold reserves
against time deposits,when they know

the date of materity of such deposits and are in position to make
loans against them that mature in time to meet such deposits ?
Is it not really a tax upon time deposits that directly
takes away from the bank the ability to pay the high rates of
interest that depositors have a right to expect when they agree
to leave money on deposit for a stated length of time
Page 48, Lines 3 - 25
Page 49, Lines 1 - 21.

If the regional bark system works
as wen as a central bank would, and
bankers situated in cities where
regional banks or their branches were maintained could go to such
banks at a moment's notice and secure further till money to meet
emergency, or further revery() money, why are banks in such cities
reoulred to keep a laroor reserve than country banks ?
Is it not true that such country banks aswefre situated
in towns were there was no regional bank, or branches, would
not be able to obtain additional till money, or reserve money, in
case of emergency ac cuickly as bank in reserve or central reserve
citfos, out would reouire several hours, and in many cases a full



Questions

25

dny's the, before being able to do so?
auch being the case, is there any ground whatever for
reouiring banks in reserve and central reserve cities, to keep a
larger reserve than country banks, unless, I repeat, it is realized
by those who create this bill that the regional banks cannot do
the work that is expected of tlem
'age 49, Lines 22 - 25. Why should not member banks always
maintain ono-half of the reserve
required in the ioederal reserve bank
in commercial parer, under this provision, no they could do so
entirely without cost ?
This being true, do not the reserves reeuired of banks
resolve themselves into three kinds: Cash in vault, crefAts with
the regional bank, and segregated eligible paper
What difference does it make whether a bank segregates

eligible paper in its own vault or in the vaults of a regional
hank, as far as its value as s reserve is concerned ?
Is not this a dangerous provision, that might induce banks

to feel that they were better protected than they really are, for
the comiercial paper could not, of course, be used as security
to discounts, and until discounted would not really be of any value
In case of emergency ?
Why should not member banks be obliged to discount such

.,Japer and have the proceeds credited to their reserve accounts with

reional banks, and so be obliged to pay for this privilege, and
make it to their interest to reduce the amount of paper so deposited
at overy opportunity 9



Questions

26

Is not this provon bad banking, which accomplishes
nothing,other than to
xximaaxit give,: a false sense, of seourity
sage 50, i.ines 13 - 16.

how is it going to be possible for a
State bank becoming a member bank,

to do business with any other State
bank and at the same time borrow from a regional, bank ?

Is it not truo that many State banks are organized with
capital that would not make them eligible to join the system ?
Is it not true that such State banks do businese with
other State banks which might be authorized to join the system i
Is it not true, if member State banks loaned to any
State bank not a member, if in the course of its business it were
required to borrow from a regional bank, that beyond question it
could be said that the -5tate bank which. was not a member bank was

deriving indirect benefit from the system ?
Does not this provision make class legislation, intended
only for the benefit of eligible banks as against all other banks
and such part of our people az deal with them ?
Page 51, Lines 5 - 9.

Viould not a central bank with ellch
branches as it would be possible
inexpensively to maintain in Alaska

or ether points outside of the Continental United tates, be able to
deal with and protect member banks in such localities with more
certainty and greater safety than is possible in the regional bank
system contemplated ?



Questions

27

Will not this provision operate unfairly
as hanks issue circulation in varying
percentages to their deposits ?
Is it fair to any banks, and particularly to those who msy
signify their intention of going into the system, to discri:Anato
against them in this manner, after they tali() made purchases of bonds
at high rates in order to furnish circulation to the country, at
euestionable profit, with the privilege of counting their five
per cent fund as reserve ?
Of what possible value to the new system of banking is
this unfair reeuirement ?
Page 51, Sec. 20.

Is this provision intended to place the
office ef the Comptroller of the Currency
under the Federal reserve board, instead.
of under the Secretory of tte Treasury
'age 51, Sec. 21.

If such is the intention, is it not nullified by the
)
provision in Page 27, Lines 11 to 19
In other words, if six members of the Federal reserve
board voted to have the Comptroller make a special examination of
some institution, and tte Secretary of the Treasury voted against
it, would not his power outside of the Feceral reserve board enable
him to overrule them ?
What possible excuse is there for giving any one man
(

such power ?

Page 56, Lines 5 - 16.




Is it not only possible, but very
probable, that an individual will
not care to own stock of a National bank,

,"onestions

26

under such oirounstanocs, on Le can invest tic money in °tier
ways that might bring him as good or a better return, when be
knows. tLut if he b000mos dionatinfied with the Lanagemont and

fearful as to ti o standing of the bank, and', having too sonell an
amount of stool-, maybe, to control its operations, he desires to

sell, that le oannot do so without rotaining hi8 liability for
sixty days

Is not this provision, through inducing fear on tIol part
tho public to hold stock in 'iotional bunks, going to do more
harm tLan good

2age 65, Sea. 24.

Pater them tie up tho funds of commercial
banlre in longtime paper of this charactor,
would it not be far better to create a new

class of institutions for tho special purposo of loaning on
mortKages T

Page 66, Soc. 25. Boy is a National bank to cot aide a certain

proportion of its capital 82 security for
business to be undertaken by 8 branch of
such bunk, and prevent liabilities assumed by the branch from
applyiws to `tat portion of the capitol oupposo6 to be saved for
thin country t
If it rore poosible to accomplish tLis, how could any
National bank expect It branch to do buoiness in a fore4n country

with the branch capital so limited, particularly in competition
with banks Laving capital many times that of the entire capital
of the National banl



estions

29

Would net ttie provision, if it wore possible to carry it
out, which is doubtful, be apt to induce carelessness on the part
of those managing the bank in this country as to those managing the
foreign branch ?
ight not they be willing to have the foreign manager
accept larger risks than might be warranted, if the profit apreared
unusual and the liability was limited to a small amount of segregated
capital 1'
Of what possible use iP such a provision Y
Could not a bank operate with greater safety, facility

and effectiveness, if it were in position to use such portion of
its capitalpahroae or at home, as firancisl conditions might
reduire ?




4,s

Reasons why,Neponal Banks would not oars to become members

of a regional bank system.
Page 2, Line 25.

Districts may be readjusted in a manner that
might materially affect the business interests
of country bankers along te borders.

Page 3, lines 17 - 23. Bankers cannot determine before agreeing
to join the system whether it is going to
be a success or a failure; what the capital
of their regional bank is to be, or the capital of other regional hanks
or the assets of any o2 them; as they will be required to render
their decision within sixty days of the enactment of the bill.
Bankers must also give assent before knowing what district
they are to be in, which might mean a serious matter in many cases.
Page 4, Lines 11-17.

The liability of stockholders in National
banks is to be increased from a double

liability on the whole stock, to a triple
liability on 6%, plus a farther triple liability on such percentage
of the stock as is represented by the proportion between the surplus
and capital.
Stock of a regional bank owned by a National bank cannot be

sold, and, bearing a double liability, it might represent a real
burden.

If a National bank did not approve of the management of the
regional bank, or such regional bank did not work out successfully,
the Uational bank would have no means of disposing of its stock without

relinguishlng its charter.



V

2

Page 4, Lines 18 - 22. Outside of a central reserve city, a
National bank cannot determine whether it

is gbing to be able to retain, even for
a time and while the regional system is being devel(4ed and its usefulness tested, its present banking relations with its reserve agent
or not.
Page 5, Lines 14 - 20. Additional liabilities are placed upon
directors of -National banks that are unfair
and that they should not be asked to assume.
Pace 7, Lines 15 - 18. A voting trust is possible of organization
that might outvote member banks in any
regional bank.

rage 12, Lines 8 - 15. The reserve deposits of 'National banks
would apparently have to be used to make

lane to banks of questionable standing,
which might result in disaster, as long as such banks kept within the
law.

The credit standing of member institutions who might borrow
from the regional bank would seem to be secondary to that of the
right to borrow.

National banks in the central reserve and
reserve cities would rot have any power
of electing. any director of the regional
bank in which they were obliged to take stock and place reserves made
up of the money of their depositors.
Under the group d&vision of el.Ition outlined, only the small
banks would have the power of election. For instance, on an average
Page 13, Lines 7 - 14.




N3

basic of eight regional banks, including se members all of the 7,488
National bunks mentioned in the report of the Comptroller for 1913,
we find that each group, for voting purposes, would comprise 312
=mbar banks. In thee groups, under the system outlined, bunks
having a capital of from $250,000. up would be placed in conjunction
with banks having a capital of 4100,000. to $260,000. in the ratio
of 85 to 227.
In the next eroup, hanks with a capital of from
450,000. to 1100,000. would have 26,4 votes out of 312. In the last
group, banks having a capital of $25,000. would have 254 votes out
of e total of 3,12.
Figuring this in connection with the amount of

atock that each institution would have to buy and the deposits that
would have to be placed with regional banks, it shows that considerably over half of the entire capital stock in amount and of deposits
would only have a voice in eleoting one director, and that a minority
voice.

Page le, Lines 9 - 15. The capital of a regional bank would be
subject to reduction, and. its standing
in connection with the business of the
country might be soriously curtailed, and member banks would have no

power to prevent it or to leave the system and retain their charters
if they desired to.
Page. 19, see. 7.

The insurance of deposits feature would
unquestionably result in the establishment of
banks by irresponsible parties, to compete
with our present banks upon a false basis. The money to pay the
depositors of such dishonest competitors would be earned from the use
of the deposits of member banks in the regional bank.



N

Page 24, Sec. 10.

4

The terms of office of tte members of the
?ederal Reserve Board are such that political
control would be possible, which might endanger

the entire system.
Page 28, Par (b). National banks would not wish to be compelled
to put the money of their depositors, or to
take etoek, in any bank whose essets could be
used at will by some third party to make loans to another regional
bank.

Page 29, Lines 18 - 23.

Banks in tLe reserve and central reserve

cities are discriminated against in the
amount of reserves that they axe obliged
to maintain, even though the reserve& that thee are at present carrying are to be tel7en away from them, which is the only reacon that
they are today obliged to maintain higher reserves than countel banks.
Page 29, Lines 24 - 25.
30,

"

1 - 2. Officere of a regional bank might fear
.

to eNereice their 2'111 judgment in refusit
ing dangeroue lecne, as politeoians whom
they refusod. might appeal over the heads of the directors 0; 1014 tank to
the rederal Board. Thie Aold of necessity weeIen the safety and
standing of a regionel bank in which :ational banks might have to
maintain deposits.

Page 34, Lines El - 22.

i]omber banke might borrow of a regional'e

bank to any number of tinee their cap-

ital if they could pat up paper, which
might result in limiting the ability of those who might not take out



I5
loan early in any particalar

to obtain thorn; and, under this
provision, it would be imporsible for the direotore of a regional bank
to figure out any way of living up to the provision demanding, in
eaeon

effect, that they treat all banks alike.
Page 35, Lines 9 - 17. Regional banks are put into direct competition with Vational banks in the open
market.

Page 35, Lines 18 - 2t. A regloral system of banks would not

r salt in protecting the gold supply,
under ery syntom ontlined in this section
of the bill or any other. It is apparently implied that the regional
banks will protect our gold supply, but its futility to do so is
apparently recognized by those who created the bill, as they have made
no attempt to give any powers of regulation to the rederal Board in
this matter, probably knowing that they would not work.
Page 37, Soc. 15.

The Secretary of the Treasury is empowered
to transfer Government funds in a way that would.

mako it possible for him to force the suspenaion of any regional bank. The only possible way that the directors
of a regional bank oould: protect themselves from the action of the
Secretary of the Treasury, would be to let Government deposits lie
in their vaults unusued The faot that the ordinary 8eoretary of the
Treasury might not have used this privilege would be all the more
dangerous in case some Secretary die so, for it would lead regional
banks to invest the Government funds.
This is only one of many powers given to the Secretary of the

Treasury that altoeether would make him a dictator in the financial



A

6

affairs of this country, and would make him the most powereal individual in the world in money matters.
Page 37, Sec. 16.

The Government gaarentee of notes is recognized by bankers as being unsound and unsafe,

and they would prefer not to be a party in
authorizing such a syetom by becoming membere of a regionel bank.

e'age 44, Lines 7 - 13.

The domestio exchaage operatione oat-

lined ere such that items might be in
transit before presentation many days,
and, if enyment were refused, member banks might meet with annsaeEsary

loss.
- 25
1 - 21. This le an exact statement of the differeeoes in reserve to be required
between central reserve citiee, reserve
cities, and eoeutry banks, and is unfair if tee two forzier clasees
are to be shorn of their powers ae reserve cities.
Page 48, Lines
"

49,

"

Page 56, Sec. 26.

Bach banks as might be interested le3eauso of the
authority given to open foreign branehes could
not make use of such authority. because of the

division of capital requirei:.
In general,- If a :atonal banker decided to have his
Institution becomo a menber in u regionel bank, be would in effect
be turning over a portion of his deposits to be managed ene controlled
by those not interested in his bank, and who might exercise such
control In a manner entirely foreign to his ideas of safe and oonserv


N7
ative banking, and, further, be subjecting such deposits to tie
arbitrary opinions of another separuto body of men with whom he
might not have the slightest acquaintance, ana who could, in effect,

lean such fends to another set of bankers in distant parts of the
A banker in joining the syeter, tterefore, weuld be
country.
deliberately releasing the power of control over a certain percentage
of his depositors money, which had been placed with him for oefekeeping, largely because such depositori had confidence in his
pertieular integrity and ability to guard their money safely.
Fan a banker any right to so dispose of resporribility entrusted
to his care ?
Under our present stem a banker can select his own reserve
agent from many others, picking out tie one where tie interests of
himself and his depositors would seem to teP bast served. As business
continues, should ne consider that he had made El mistake and finds

tha facilities offered or the security afforded were not satisfactory,
he could change to eome ether reserve agent. Ile is free at al) times
to use his judgment to protect his customers. In sedition to this,
he car withdraw all funds with his reserve agent and place them in Ms on vaults. Foe different 'ill be his position if he joins
the regional evetem, and is obliged to tie up money Jr stock that he
cannot sell, end is then obliged to put his reserve deposits in a
bank from which they cannot be drawn, and under the control of men
whose judgment may materially differ from his, and where he has
absolutely no power of discretion.




Memoranda reg_WinK Answers

The euestions which I propounded to the chairman of the
Uommittee on 2an;cing and Ourrency, althouCe given careful attention
and consideration, were not all satiefrIctorily answered. The

answers to tnr cucetiens would lead one to lelieve that the Aderal
Reserve Boerd rre to be ellercerful and act in eccordance with
its judpment in all matters thct ern not oleerl,; state,: in the
bill ane about ich there is nonfusion or uncertainty as to intent.
This is so marVer' that it might eirlost seem as if the bill cculd be
dieceroed entirely, tith tbe eeeeptien of the formetion of the
Feerel ir eserve Ford, who might be told to go ahead and run the
banlin edsine ee cf the eountry under eaah rules as they mie.tt
care to promulgate.
This Tederal Reserve Board, made up of
unkne.e individuals,
:.onsidered to have unerring judgment and
-pee_oe, 'enowleage of the theoi7 and practice of han'eing. There
would seem to be no cuestion whatever but that this wonEorful
board, as it appears to the imagination b-foro any human belne

are connected eith it, is going to he el-le to unravel every knotty
problem that comerf before it, without regard to the provisions of
the act, many of which it must apearently ignore.
in looking: over the queetienz and anevers we find that
no satiefactory reason hey been given rly the rederal recerve Board
shoeld not crgenire the regional banks instead of an organization
cotmi ttee

in Questlon 3, the Senator from Colorado seemed to think
that the Federal Reserve Board supplanted the ergenization committee

after the oreanization of one regional bank.
The Senator from
Oklahoma stated elmoet positively that this wee true. The bill,



A

2

however, does not say so; and it must be presumed, therefore, from
the statement

of the Chairman of the Senate Committee of Banking

and Cursency, that the Federal Board is to usurp this power when
it is reedy to do so.
Question 4.

No answer whatever was made as to where

payments for stock subscriptions are to be
Question 5.

lodged.

No satisfactory explanation was made as to

whether sixty days is sufficient time to give a bank to decide whether
It shall enter the syetem or not.

Question 7.developed the fact that it is expected by those
who created the bill, that a National bank will immediately resign

its charter if

there is any difference of opinion between it and

the ?ederal Reserve Board as to its rights under the charter, rather
than allow itself to be sued.

The arguments upon this question, show-

ii g the expectation and intention of the provision

referred

to,

make it seem more unfair to banks and apt to do them greater wrong
than would at first be supposed upon reading the bill.
Question 10.

This question was answered by stating that

a portion of the rational Bank Act was copied; but such portion of
the National Bank Act applies to the provisions under the National
Bank Act and not to any provision under this new act.

The dis-

cussion brought out the fact that directors of National banks, under
the proposed act, would have to determine all over again what their
liabilities would consist of, and, further, in case of

a difference

of opinion between such directors and the Federal Reserve Board,
that the directors would in effect have no defense,



for the Senator

A

3

from Oklahoma states that, in case the Federal Reserve Board said
that a bank must forfeit its charter, the bank would Undoubtedly

feel obliged to do so without contesting the ruling, in order to
save itself from bankraptcy, because of the position that it would
be in should it be sued. Instead, therefore, of directors of
National banks being able to protect themselves by a satisfactory
defence, their bank would have to suspend operations, and any
losses that might occur would have to be paid by the directors.

Or, if the National bank took out a State charter and lost any
considerable amount of money because of being obliged to sell its
Government bonds at a discount or at a less price than it had paid
for them, the directors would have to personally pay such loss.
Are National bank directors going to be willing to assume such
unknown and undetermined liabilities, even tf the Federal Reserve
Board, before its actual appointment, is expected to contain
super-men

The Federal Reserve Board is expected to
answer and to decide upon when subscriptions are to be openee, to the
public, and for how long, and when the Government subscription is
to be made.
To be sure; the bill does not give them any such
authority, nor does it seem to authorize the Federal Reserve Board
to spend the money of the United States for regional bank stock
whenever they may see fit to do so; but the answers to the celestion
would lead one to believe that they were going to assume this power.
&Restion 11.

iatEtlapL11.

The answer to this question made it appear

that reserve cities and central reserve cities are to maintain their
present status, even though the act takes away from them their
authority to act as reserve agents,- which was the only reason that



4

A

they have

been designated as reserve

and central reserve cities.

The fairnees or necessity of this provision was not explained.
kliestion 16.

Again the Federal Reserve Board is to sonder

all decisions as to how and when branch offices are to be established,
which continue

further the sectional strife which is sure to ensue

in this regional system, and does not alone confine it to the
question of districte, but to branches within districts.

while the bill states that every Federal Reserve

further,

Bank which may heve

been suspended, etc., which, in as plain English as poesible, demands

that if cne of twelve regional banks fails, the other eleven must
esteblieh branches in its district,
Committee states that only one suoh

branch

yet the Chairman of t'ee 6enate

regional bank

need establish a

in the district and that the Federal Reserve Board will select

such 'regional betake

must break the law.

In other words, they:ether ten regional banks

If the intention of the Ccmmittee is to

authorize the :Federal Peserve Board tc pick ont a regional bank

and force it to open a branch in a bankrupt dietrict, and subject
itself to all the risks and dangers that would probably ensue
should anything as serious ns a reeional bank failure occur,
does not the bill say so ?

why

Where in the bill is the Federal

Reserve Board given authority to ignore the language of the bill
and render decisions in opposition to it ?
Question 18.

The E....newer to this

caestion clearly demands,

in case the public is obliged to subscribe for Peeern1 stook,-

and erovii 3 for each subeoeietion seems to admit Its possible
necessity,- and, further, that in case the Government is obliged
to eubecribe for a portion or all of the stock, because such a
contingency; is seen to



be poseible,

that, after the

building of

A

5

such machinery and the carrying out of the provision, there would
be no way whatever of organizing the bank.
Again, the Federal Reserve Board is supposed
to have power beyond the provisions of the act. The section referred
Question 19.

to distinctly continues the life of a regional bank twenty years,
unless itsefranchise becomes forfeited by some violation of law,
A regional bank might lose all of its capital through bad banking,
without having broken any law. Its reserves might be maintained
entirely in accordance with law; and, under such circumstances, the

act specifloally provides that the life of such bank shall continue
for twenty years. In spite of this fact, the Chairman of the
Senate Committee states in effect that, ii in its judgment the
Tederal Reserve Board considers it advisable. it will ignore this
provision of the law and suepend the operation of the Federal
Reserve Bank.

This was answered merely by a repetition of
the statement that the Federal Reserve Board woulu ignore the law
If it saw fit and suspend a bank that became insolvent, even though
Question 20.

the act doeo not specifically authorize it to do so.
Question 22.

This question is answered by applying so much

of the rational Bank Act as the creators of the bill consider
desirable, even though the bill does not make it clear as to where
the line is to be drawn. Admitting the construction put upon the
provision by the chairman of the Committee, which is that the words,
"such notes to be issued under the same conditions and provisions of

law which relate to the issue of circulating notes by Bational
banks," etc., a proposition in banking is authorized that is Against



A

6

all principles of banking as outlined in theory and practice. A
Federal bank with a capital of say $3,000 000., would, under this
provision as construed, be able to issue, in connection with the
provision upon page 61, over 0900,000,000. in notes secured by
Suppose cthealderal Board were largely constiGovernment bonds.

tuted of gentlemen of fiat faith, so to speak,- and we will, I think,
all have to admit such a possibility, when we consider some of the
suggestions that have been made regarding this bill,prevent such a board from using this

what is to

power to put out $900,000,000.

in notes, and, if certain regional bank directors refused to act
upon the instructions of such Federal Reserve Board without making

so much friction that the Board decided to ignore them, would not
the Board be in position to have such notes issued by any one of
the Federal Reserve banks, the directors of whom were in accord
The result would be the issue of ;900,00U,000. of
with it.
notes by a bank of say $3,000,000. capital.

This

must

not be

looked upon as unlikely as it would seem, when we consider how
absurd and foolish it appears upon the face of it, for we all

evidence before as in the hearings before the Senate and
Committees that tends to.abow that there

have

Congressional

are many advocates of

fiat

money still extant, and that to such there is no ouestion but that
bond secured circulation would appear to be secured above all manner

of necessity, even though the bank that pat it out might not be able
to redeem it upon presentation and might not be able to sell its
Government bonds in order to be able to do so, without loss.
A bond secured circulation, divided up among 7,000 odd banks in
proportion to their capital, is capable of constant redemption upon
On the other hand, a bond
presentation, and is safe on that account.



A

7

secured circulation that exceeds the capital of a bank by a tremendous percentage, might force the suspension of such bank if presented even for temporary redemption in the natural course of business in great volume. What effect would it have upon the country
If a bank, having a capital of 63,0e0,00., $5,000,0e0. or
$10,0e0,030., had to suepend kende/ euch conditiens und hce oetstanding
cured
.700,300,000., $b00,000,000. or I:900,e3C,2.. of nete
by United States bonds Y The notes could. nct be paid unti'l the
bonde %aro sold, and who woule buy sucb an amount of bccee ander

Don't ehie your
heads, gentlemen, at the absurdity of thic proposition, because it
i2 a far. safer one than woulo be true in the °ace of fiat money,
such a-condition that would be sure to develop Y

and ee :hive some of the strongest advocates of such money in our

public life today.
The right of appeal to tho Pederel Reserve
tacitly aemitted, in ()ace a member bank is refused a loan
aeax.
Thie unrucetionably will put tremendous
by a reglonel bank.
preesure upon oe:',oere and eirectore of regional banks at times,
hen some member bank owned by a uclitician of the political faith
of thn Adminieteration may apply for a eaeetioeable loan. The ofiicers
an direceore of the regicaal bank would know that their vetion in
reiesing suoh loan might be reviewed with prejudice by a politically
:fonatituted roeional board such ae this bill clearly Mal,'ES poyeible,
and it would be very difficult for them to use their unbiased
Ilogment in ooneieering such a loan.
Coasetion 23.

,

elestion 24. The erovieionein regard to the oclection of
eireceote are inceneistent and unworleable, and no answer was elven
to show that they would be otherwise. Class B directors woeldIave



A

8

to be selected from a list of directors of banks, even though they
would not be authorized to act. Again, no way has been suggested
that would make it possible to disqualify any one of three agricultural mon who might be elected at the same time by three
agricultural communities in the same district.




A

t
I

Before considering the bill in detail we will now take
up a general discussion of a central bank vs. regional banks.
This country is confronted with a problem in currency
refer, unicue in tle hietory of banking and unprecedented in the
ciaracter and number of complications to be dealt with. The only
instance in history comparable to ours is tlat of the German
empire. Follcwing the consolidation of the German states, banking
and currency reform wee undertal,en by tie Empire, the Act under which
the Reichsbank was incorporated buying been promulgated larch 14,
1875, the gold standard having been definitely established by the
At that date there were $1 quasi-public
Coinage Act of July 1673.
banks of iseue opereting under Governmental charters, iseued by
twenty-two Uere.an state or municipalities. Au in the ease of
'ngland, where the Bank of 17:ng1and has gradually absorber', the right

o note issue, loavieg but a negligible volume of notes of other
"Ls in circulation, so in ...;esrmany the Reichebank, by the proviBi'le of the Act of 1075, has gradually been able to substitute
its oa notes in place of the note of over thirty original banks
Of 255116
The contraet -with conditions in *ale country is marked.
Germany hkd established the geld standard by the Coinage Act, and
consolidate, it paper money issues into one form of note, supported
by the oredit of the Reichebank. God and the notes of the
eichsbank, wi negligible exeeptione, constitute the currency of
the nation.
he United States has 7,500 banks of issue, operating
under ieederal charter, twenty thousand odd State banking and credit
institutions conducting their business under divergent lame of
forty-eight different States, and seven forms of circulating



2

odium:

Bational bank notes, United States gold certificates, United

States silver certificates, United states notes, treasury notes,
gold coins, and silver coins.
While the situation in :;ermany wan vastly more simple
thun the one we have to meet in this country, yet we Enr considering
further complicating our system through the introduction of a
proposed complex and untried syetem of regional banks, whose faults
can plainly be seen and whose points of advantage arc not apnvrent,
inatead of forming a central bank upon principles th soununoos of
which have been thoroughly establiehed.
The principles of u central
bank, both in theory and in practice, have been proved beyond
question as being capable of upholding tte commercial transactions

of a nation. It can be soon, loth with the eyes of theory and
nractice, that a central bank established in the United states
would successfully meet every barking and currency problem that
we have before us, whereas there are grave doubts about the

successful operation of a system of regional banks in respect to
many necessary functions that a public utility hank should possess.
In noneidering the detail of the Owen bill, it will
be found that, in general, a possibility of abuse of political
:power in the case of regional banke is very groat and that the
one man power placed in tho hands of the Secretary of the Treasury
ia appalling. In the case of a central bank, there would be no
necessity of subjecting the business interests of the country,-

which include all interests,- either to conflicting political
policies or the persona/ opinions of an incompetent Secretary of
the Treesury.



Aleng the lines of banking practice, one central bank with

3

branches could be used more effectively to 'bring about currency
reform and banking reform, than a eeries of regional banks, eight
or twelve in number. The points of differentiation are chiefly

along the fellwing lines:
gobilization of reserves.
Equitable, stable, and uniform discount rates.
Management, and sectional or partisan differences.
Uniform note issues.
The gold movement.

(b)
(9)

The croeit of the Government.
The fiscal agency.
Refunding operations.
Clearing functions and domestic exchange.

"Mobility" means
Mobilisation_efeseryps.
"the quality or state of being movable, with elAreme fluidity,"
and, as applied to banking reserves, it means the ability to loan
money in one pert of the country that is not needed in some other
part or the country, with speed, without friction, and without
:Lobility of reserves exists in a central bank with
expense.
branches, to a greater degree of perfection than it ie possible to
(1)

conceive

in any other system.

Re sere

that may be held by any

and all branches are still the reserves of a central bank. They
may be shipped from the largest city to the smallest city, at
distant ends of the country, and if held within tht control of
branches of tho central bank, they count as reserve for the
central bank. It i.e possible, therefore, to 1Gan money at any
branch of a contral bank, no matter how small that branch may he,



4

or where eituated in the country in relation to ether branches,
and have it measure in its effect upon the reserve egninet the
total reserves of the central bank, instead of ageinst a small division of such total as ;ould be represented in a regional bank.
The percentage of effect in such a transaction, therefore, would
be vastly less in the case of a central bank than In the case of
regional banks.

In the United States we have a number of

districts clearly marked in their nature as to the kind of
business. All of the banks in certain districts, such as those
which grow corn, wheat and cotton, are obliged to borrow money
at the same time or the year. A number of other districts have
Under our present
money to loan during this same period.

system, series of banks in one district, say the cotton district,
borrow from a series of banks in another district, say the 1:ew
York district, involving vast transfers of actual cash. Under a
regional banking system, some of the demands of the cotton district
would be consolidated into the regional bank (all of them could
not be because the bank would not be large enough) ,and the only
difference between LLe 'present system and the regional bank

system in this connection eould lie in reducing the number of
clannels of borrowing from the present number of borrowing banks

in the cotton district to the same number of banks under the
regional system, less those which wore able to obtain their
requirements from the regional bank, which itselS would then be
obli ed to borrow from the New York district regional bank,
exactly as every other borrowing institution in the same district
might be doing from its Uew York correspondent. In a central
banking system, notes ti-at might be issued at its rew Orleans,



5

Galveston, Houston, Dallas, Atlanta, and other branches in the
6outh, would be based upon all of the reserves of e central bank
wherever hold, and a perfection of mobility would be obtained not
possible under our present cystem and net possible under a regional
The power of t.e Peneral reserve board to force the
bank syntem.
Ne% York rcgional bank to lien to the New Orleans regional bank
would not, and could not, place the reserves of the 'Jew York
regional bank behind the note issues of the Uew Orleans regional
bank. There o4ou3d be, therefore, no greater mobilization of
reserves under e regional bank system tan there is tudey, even
though the nulober of banks in the New Orleans district w'ich
borrowed Crom the New York district vould be reduced.

In connection with the mobilization of reserves, and
preliminary to its succeosful operation, we must have concentration
of reserves. In a central bank, such conoentration is again
pertect. In a regional syutem such as has been proposed, it not
only lacks perfection, but it actually extends the separation,
for we are oropostng to increele our syrtem of three central reserve
cities, which has been 'wanting in concentration, to eight or

twelve central reserve cities in effect. The Owen bill in
attempting to fortler centralize 14 greater deoentralizOion.
Harmony exists in the minds of practical bankers and economists upon the necessity of an effective assembling of the lawful
money reservos of all of tla Nntional banks, and the creation of

an institution or inutitutions for this purpono vaict can be made
avnilable ss reserve dppositury for State banking institotiOns,
upon the pansape of state enabling Acts involving a minimum
rotofore, credit strains
modification of state banking laws.



v/7

premiums for currency or gold have been distinguished by the
inevitable hoarding process, wtich has added to the distress by
reouiring a further curtailment of credit. Analyses of these
occarronces indicate a sharp difference, both An character and
eatent, of such a tendency in till, country and in Germany and France.
In the United States, during 1907, 1890 and 1894, and 1873, hoarding
of gold and currency was eonducted on a large scale by bankers and
banking Institutions and was accomplished, first, by the withdrawal
ol reserve depoeits from other banks, and, second, by reouiring
a contraction of loans and diecounts. A certain amount of withan

of gold ana currency was effected by inaividuals, but this
v/
was insianificant as compared with the instant withdrawal, under
stress, of reserve money by banking institutions. This phenomenon
abroad ha z been vuite the reverse in characteristics. Inaividuals
withdraw money from the tanks,- generally ignorant people of small
means,- and lock it up in their homes. In this country the strain
of such a process is unevenly distrantod among the 2b,000 institutione. Fear controls the action of the banker, and his disposition
Is to save himself at all hazard, without regard for the welfare of
his neighbor or his competitor. Ms portfolio contains notes and
bills which are not available for new credits, and, at the period
when he should be able to negotiate his bills an' use his reserves,
he requires payment of his bills and increases his reserves. In
Germany, where a certain boarding process has been noticed at
intervals for the peat two years, the phenomenon is quite different.
The Reiehsbank is able to increase its discount account, meet demands
for currenoy by increased circulation, and protect its store of gold,
at least temporarily, by the judicious use of a discount rate which
drawal




7

it makes effective in all parts of the empire.

The banks of Germany

which depend upon the Reichshank in time of strain, are able to

discount bills with that institution, and have a strong incentive
to co-operate with the policy of the bank in protecting their own
and ite credit and reserve position. in this country, we cannot
hope by a stroke of the pen to bring about the chnrecter of
co-operation with a central bank, such as eaists in Germany, and,
to a considerable eltont, in England. The 20,000 State institetions
cannot at once be brought into co-operation with such new system as

is established. State institutions are, however, so largely
dependent today x upon the National system,- the National banks
being their chief i .sitaxima reserve depositaries,- that sound

currency legislation which will strengthen the position of the
rational banks will in turn enable the National banks to carry the
load which is now imposed upon them by the State institutions, and
which will continue for a long period under whatever system is
adopted.
Bo system of regional banks will prevent competition
e/
for gold and currency in time of credit strain, as effectively
as may be clone by a. central bank. With eight or twelve regional
Institutions, etch section will seek the protection of its own district
and the members of that district as distinguished from any other
section and its members. Bad there been eight regional banks in
1907, it is inevitable that the powers of a central board of control
would have been exercised to effect a readjustment of reserves beteeen
the regional banks by enforced reeiscounts, and the very act on the
pert of the Federal board of enforcing sueh rediscounts would have
accentuated the rivalry between these sections for the accumulation
of reserves.



8

It must be borne in mind what actually happened in 1907
in order to undorstend why such lloard4wou1d uncuestionsbly have occurred
in the case of regional banks. No boarding was done by the banks of
New York City, as is so commonly believed.
Instead, such banks
not alone shipped currency to their banking correspondents, ret,reIf
sented by the amount of money that such corrosrondrets bad on deposit
in New York, but they added to such deposits millions of dollars in
loans, in order to accoamodate the West and south. They reduced
their reserves through shipments to about one-half of the pereontRgo
that the law required them to maintain. What Was done with this
money that was shipped into the country ? Was it used to carry on
business ? No; it found its wny into the vaults of the banks in
the West and South_ until their reserves were built up to from
,(1

40% to 50%.

It seems to be quite popular to attribute all this

hoarding to VcAi York City, but the actual facts,- and they may be
proved by reference to the Comptroller's report showing the reserves
held by the Western and Southern tanks at that time,- show that the
hoarding was not in New York City but in the country and smaller
reserve mitilix city banks of the United 'States. If bankers were so

frightened that they felt it necesoary to build up their reserves,
oven asking for currency against loans in order to do so, knowing
that such requests must of necessity increase the stringency, but
hoping that they might be able to save themselves oven if all the rest
of the country were forced into bankruptcy, how can we e.y.pect that
they are going to view a condition of stringency which Nay aprenr in
their regional Lank which carries v part of their reserves in time
of stress
not they present regional reserve notes for gold
and laviful money as rapidly as they can obtain them, and build up



9

their own cash reserves as nuickly as possible ? Woald not the
anxiety be increased if the Federal reserve board, in order to
alleviate such condition, oven suggested taat bankers carry notes
issue( by the Federal reserve banks as part of their as reserve ?
What bank would want such notes in its reserve under such conditions ?
Now, a point for your consideration. Under our prevent
system bankers may withdraw every, dollar that they have with their
reserve agent and carry it in cash in their awn vaults. New York
benke have been criticised on the floor of this senate for not
paying out such deposits on demand, and yet we are deliberately
contemplating the forming of a system of regional banks in which
the banks must deposit reserves that they are told before their
Of
deposit they cannot withdraw.
at possible value are reserves
xiYtkaiekima that cannot be used, place e aith a regional bank
in a district where all members may wish to borrow at the same time ?
In a large institution such as b central bank, where the reaerves
held by every branch counted for all, there would never be any euestion
as to its standing or its ability to meet the renuiremente of member
banks. In other words, it would be far more valuable to member banks
to be obliged to keep a portion of their reserve in such central
bank, knowing that every other National bank in every part of the
couatry were also required to keep a portion of its reserve in the
central bank, than to be able to draw it out; because it would
have the advantaac of being able to borrow against the reeerves of
every district in the country that were not being used in that
district; whereae in a regional bank system no such condition
could exist, even on a compulsory discount basis.
Tie defects of the regional eastern are admitted on the
Ince of the Owen bill. If this country is so vat in territory



10

and its interests so varied in charKeter as to recuire rgional
institutions to meet local conditions, why then require that they
must be linked together through the exercise of arbitrary powers
which must be exercised in conflict with economic conditions ?
One institution holding all the reserves will make every dollar of
reserve money the property of every section, avellable to every
member, affording protection at all times tc all the members, whether

lodged in the vaults of
17e,

the branch in San Prancisco, the branch in

York, or the main institution in Washington.
(2)

Zouitable, Stable and Uniform Lisoount Rates.

the -eichsbank recently reduced its rate from

Cs%

WLon

to 5-1/2:Z, that

rate became effective to every one ot the 70,000 custovers of the
bank in every part of the 6orman empire.

The Bank of France has

maintained unchanged a discount rate of 3% for es 'lone a period as
seven years.
ferent rates,

The Unite' States

toP

no discount market.

as nany osury laws as there erre 6tats,

26.00C difae many

penalties as there are usury laws, and a ranee of cates oxtonding
from a condition where money is unioanable to a maximam of over
100-7t. per annum, notnithdtanding the fact that this country has the

largest store of gold, the greatest nature) resoorces, the largest
power Of

production, and the largest vo_ume of

nation of the world.
r.;25,00'),ODO,000.

baking capitel of any

The resources of our banking Pytem are, about
Our 28,0C° hanks support the largest credit

structure known in history.

We are now attempting by the enactmelt

of a bill, which is not even supported by a xajority of the Senate
Committee on Banking and

Currency and

Nhich it is proposed shall be

enacted by a majority of the majority in the Senate, who shall b
reruired to sit in the Senate, chamber until eleven oic1Lc1



every

11

night, to se readjust the Landaelental coreiltions upon which this great
credit establishment has grown, as to bring about uniform rates of
interest, it cannot be done by the bill proposed,either safely or
economically.

Without referring to the shifting and withdrawal of
redeposited reserves required by the terms of the Owen bill, and
assuming that that prodigious task can be accomplished without
convulsion in the period of time allowed, how may it be elpected
that the surplus funds in the regional bank of the community where
there exists a surplus of bank credits, may be made available to

the regional institution in the district where there is a deficit
of banking credits, by the natural economic law of supply and demand.

So far as the regional institutions are concerned, those in seetione
whore tlere is a continual elortage of credit will alseayc be
borrowers; those in sections where there is a surplus of banking
credit will always be seeking outlets for the surplus. If it is
claimed that by the regional system the National banks of the district
where credit is short will still be able to borrow from their
correspondents, how may this be done without imposing upon the banks

of that district the necessity of carrying balances at unprofitable
rates with reserve correspondents just as heretofore, and thereby
impairing the earning power of the country hanks ?

And, on the

other hand, how shall the reserve bank in the district with the
plethora of money employ its funds other than by the purchase of bills
In the open market, thereby bringing about an undue and uneconomic

depression of discount rates ? It is difficult to see, under the
terms of the Owen bill, how t[e country bank is benefitted by having

its reserves at home, in a regional institution, if it must still
maintain a balance with its Ohicago or New York correspondent for



12

purposes of discount.

Certainly such a condition would not exert an

influence towards uniformity or stability of interest rates throughout the different sections of the courtry.

The difference between

the lending cepecity of the creditor sections of the country and the
borrowing needs of the debtor sections will noceeearily fall upon the

regional bankc of the respective districts, sne must be adusted by
the exorcise of the rediscount function between tl-e regional banks,

thereby again

irtroducing an

uneconomic operation, likely to cue

sectional difference of opinion, abuse of power and distract of

With all the reserveo in one institution, the credit of

management.

that institution may be directed, through its branches, towards
these sections where oredit is needed without the intervention of
It may be claimed that the regional bank of

arbitrary power.

Nee York, having a surplus,

welcome the opportunity to rediscount

bills for the regional bank of New Orleans
be developed ?

Who shall fix the rates Y

Lees this bill intend

that every time a difference of opinion arises between New

Orleans and

New York, a hearing in arbitration shall take place in Washington,-

and who are the mon who will hear and arbitrate these differences ?
May their time not be devoted to arbitretion exclusively ? And how
may uniform rates be brought about by mandate or regulation of a
board of control ?
In contradistinction to the regional plan proposed, how simple
would be the problem with a central bank.

Twenty per cent, of the

capital and eurelue of the National banks of the country amounts to
about 4275,000,000.

A rate of discount can be established with due

regard to conditions and to th4a extent to which transfers Of reserves,
Government



deposits, and the general

fund is being affected, which

13

will allow discounts to approximate the maximum seasonal fluctuation
ceased by the harvesting and movement of the crops, which hae been
estimated at 000,000,000.
A central bank, by establiehing a rate

with regard to these factors, would automatically meet the fluctuatien at the eeacon when required, and as to its base or normal
rate through an increase or decrease, would control the extent to
which all member banks would rediscount.

As the demands increased

in any locality or an to any individual member, the rate would
automatically increase to the extent that the demand vas. met. With
no distinguishing mark upon the reserve money in a central bank, no
queetion could arise respeeting the extent to which any locality
was impairing the reeerves of the bank with refereace to the needs
of any ot.er lecality. No grouo of banks in one city, by large

borroaings, coule so affect the rate in that locality as to impose
penalties upon a more conservativoly managed institution which had
been a more moderate borrower, for they would undor the central bank

bill have to pay a higher rate of interest as they increased the
proportion of their leans to capital. Uo elle great institution
overchedowinc, a number of smeller institutions in one 1 cal ity
could ever impose penalties in the way of increased discount rates
upon its Jeep poreafnl competitors or neighbors. Furthermore, those

institutions whose credit wee so high as to be able to borrow in the
cheapest market ronid be able to rediscount pacer throughaat the
naturel channels of rediecount in different sections of the country
ro long as t WW1 profitable to do so, at rates below the rate fixed
by the bnnk.

We cannot expect for many years to bring about

uniform, stable, or low rates of interest throughout this country.
We can, however, establish an institution which, over a lung period



14

of years, will effect a gradual redistribution of credit and banking
reserves, no that both uniformity end stability of rates may come
about by thn natural operation of economic law.

Such uniformity

and stability must be based, first, upon the elimination of
comoptition for bank rooervos in times of strain4 second, upon a
discount market hand upon a sinRle reserve reservoir; third, upon
the creation of in institution of sufficient p war ano of such singleness of purpose that it may exorcise the same influence over internntional exelworze as is now exercised by the three, great central

v/

banks of urope. and the central banks of all of the principal

industrial countries of the world. A pradusted increase in the discount rate on excess discounts over a normal uniform rate upon a
minimum volume of discounts, will apply a brake upon expansion by the

borrower where it will be eflectite, and assist in bringing about both
stability and uniformity, and no such influence can be exercised
either by artitrary nower or by the imposition of t tax upon earnings
which go to the Government an in which the respeotive borro.crs

will Lave but a trifling, if any, interest.
Mmagement, and 3ect1onal or Partican Differences.
harmony of tanaglelaent direoted towards a single purpose is essential
to cope with tte vent probloms and the readjustment of our currency
V/
and monetary laws.
MEI we expect that this ie possible of accomplishment wit:
boarda f clrectors, partisan to their distrioto
A/10 may never moot together for exciange of vies, and who will be
subject to tle orereise of arbitrary powers by a Government board ?
(Z)

to rot this plan contrary to all human experience in the management
of Government or private affairs ? how mny this systom



15

In this country of keen political partisenehip, where each Party
grasps every advantage within ite reach to secure the dominant
poeition, or oaintain it once secured
lay it be expected that
a board of nortrol, upon which it officers of the Government whoee
appointments are partisan an-e. politioal, whieh i$ eubject in many
important respects to the direction or influaneo of the officers of
the Government, to be free from political influenee and fre,4
discrimination, particularly having reger. to the politicel complexion of the: different eeetions of the eountry
The first and_ essential protection aeainst partisanship
v/
muet be a lencl enough. term of office to remove appointees from
the influences of patronaz;e. Those managing dietrict offices muet be

reeponeible to e board of this ehareter, free from politic or
seetional influences, and not responsible to a lecal constituency
or clientele which nay he influenced by political or sectional
prejudices, rivalries or competitions.
With one President having
the power to appoint a mejo ity of s board of control durire one term
of office, and with one or more rembers of the Board merAers of his

official family or subect to ter direction, it le .never impossible
that the powers eIercised by that board may be used for pCitical
or partisan purposes. In the present temper of the people of
this cou-rtry, how would suoh a board resist the preseure for radis0ou ,ts from a eection of the countr,y elfich Fad been guilty of overspeoulation if tle section including Wall 3treet lad resources aveilable
Can it he expected that the distribution of the funda of the
de

.Government throughout twtive resionel tante CC.E1 be effected without
diecord
Such a system ae is proposed inetartly interjects sectionalism and partisanship. A beard of management responsible directly



//

16

to Congress, appointed for long terms, themselves appointing their
1(cal management, would necessarily be free from such influences,
the monies of the Government ioould be assembled in one institution,
no questions of sectionalism or partisanship could arise as to their
distribution, and the credit operations of tho institution would
more surely be directed along economic liras. The very introduction
of the idea of local obnership an manaeomant of regional tanks
implies sectionel rivalry. Ile introduction of a board of oontrel
to regulate the relations betwcen locally owned and managed regicnal
banks, admits the weahness of the regional plan and throws coubt upon

its elective cnaracter.
Uniform tote Issues.
Bere agiin the weakness of the
regional bank system appears upon the face of the bill. A cretit
instrument to circulato freely among the cop le mast be tree from
(4)

doubt us to its goodness and as to the ability of tho obligor to
redeem it in gold. Two regional institutions may not necessarily
be of eeuai credit strength. Twelve institutions rili certainly
very considerably in their strength and resources. Our Natienal bank
notes have a uniform value by reason of the Governmoot bond scourity.

notes secured by paper %ill vary in quality according to the quality
of the security and the percentage of gold reserve. In order that
this vicious regional bank schome aiay be launched end the impediment

of variable credit be removed, the Jolted Ltatos Government, for a

consideroion, is adding Its obligation to the notes. This aspect
of tLe Owen bill reouires soparato ocuooion. The praotical fEntores
oi the plan as to regional banks may, however, be distinguished
from the possibilities under a central bank plan in a nuolber of



'

17

imprtant roupect.
volumo of not

fl.c rc.lation between volue ofdivete and
notes,

issues ounnot to coatrelled ty a tux upon

rtich tax la paid out of t

earnings of tho bank, N17:c:n ttose

applied tc.:, the
earninra eo to the Governcent or even when tbox
enrnin of tLe mezter banks. Inaamnot ae the volama of tha
of noteo by a central bank or regional banks ill depend non the
or;e:ration c the disoount ac:::::unt, it bccOlLea imperative that the
uc z measure (34: contro:
board of control .1.4..:11 exerci
i:iscoutt ratE; os r.111 erablt- it to cl..t?ck unduc ctoxpanion in any
occtlon. row max tlet be efictod without aunin intsrlariag exercisin
poero whith srr:a3nrerra.clted intorfernoe with 9conomio
las of oupply and demenA 1. A graduated ratofqlseount All bogin
to Eopplv a chock in each lccality as tlr. tndoncy devolopc. Ir that
becomos ineffoetive, the ncr:It;1 cr bln!s rato (thtlt Ls, the adv,!,:rtised
.

le direct
bank rnto) can then be raised, the offset of 7(hlot vill
tle Interchange cl:f orstlit fyteen tho totiona of tba countr without.
tiig th voluo of ditc,zunts of a central btnk.
nec,7=art4
Oath a procw.ls, w11a.iF fom.rf4rOje to V-.1at wh:tch occare in GerzLany,

wc,uld haraly be possible ander thr: regiottl tank plan. There are,

in fact, possibilities of notp inflation in ecti'nsct tie ::ountry
where unutel eomanils for cnrrno: arise, rlich, under ti,e proposed
pltn, woold ennually reculre to t)F. nIct b th,s, amerclso of
ob;!octioneble arhltrarx poors.

ome'-t.

Cnrronn legialation 1E. icing
oonnt7y itE tJ17r. rin, for seoror-:.ic reteone, the
ondertaken:in
world 11),L7, 0,treespd an unpartillod ocmotition for ge3d. The
(Li

S.44) Go:id

German hark tat r.deted t1CC,C7,0,00',). to Its toldlne,L



it year.

18

The French bank hac expanded its note iesaes and limited the amount of
ito gold payments, in °roar to conserve ita gole loldifigs. The burden
of readjustment of tto gold supply as largely fallen upon England,
wtore a fren gold market is maintnined, and our gold supply in tlis

pnly been protected to tIo degree tat it las during tle
past to yerra by the provalonce of unusually high rates of intorest.
The market or gold in this country ia absolutely unoontrelled, save
000ntry

ty economio law.

-Lay not the proposed loEislation have suci en
influence upon our otoro of 6o-d az to wouoon our position ratJoar
tho.oa otrengthen it, anc, poscibl4 cause large exportations ? This
is cilia an important: matter that wr nust not lead ooreolves into a

v//

false position blindly. There aan be no doubt but tiat eiott or
tweivo regional tants cannot tot &Al effeotiI;cly to control our gold
supply az central bank.
It woald not ooem to b,? a cueLtion for
argamonL; it lu o apparent. Ihia boing true, the next consideration
is wl tter a oystem of ro61ona1 uanks AOLLIC, bettor our prosont position

or wean it. Ioo,re arc man; rouoono to boliove that it might wealon
It naterially.

any clange in the law wtich mstOes it necessary for
our bonlbAng ayotem 81,3 a %tole to maintoin reserves in gold of any
smaller per3entage than that which now applies to tie stole, sy,tem,

willro:oessarily rooult in 1 4er intorDut rates, expanoion, hie,er
rates of exorange, and gold exports.
It tee beon voriously estimated that foroin invost&ento in our socurities amount to from four
to six billions of ,ollaro. be enforced reparchaes (f these
soculities would impose a strain upon our credit syatem of
unparalleled importance. ioa ave
t enacted a law reducing to
tariff upon iol.porte by nearly 40i. A sharp deolino in our balanoe
of trade, LrotbeM about by a great enlargement of our imports, would



19

likeviise require the export of gold. A considerable reduction in
the activity of business throughout the country may release credits

and reduce rates to such an extent that the rate of interest will
no longer afford protection to our gold reserves. It is important
that the institution or institutions to be created shall be able to
exercise an effective influence upon toe international movement of
gold and to conduct international operations, either throuch its
own agencies or toroogh the agency of its members and correspondents,

which toil' be substantially equal to ttat exercised by the great
central banks of Europe. By the terms of the Owen bill, the eight
or twelve regional tanks may each establish agencies without number
defined, in any an all foreign coontriee, and without uniformity
of purpose or action. Without the consolidation of their foreign

Vv

eredit operations it i.e difficult to conceve tow the influence required to be exercised could posoibly be brought about, and in the eas
of regional banks of voryint financial strength, havinc different
demands from meAer hanks, any method that voult result in their
consolidation seems beyond comorehpreion.

Those rho created the Owen

bill evidently recognized. this fact, for they Lcve not made the
slightest attempt to briog together the foreign operations of the ./
regional banks, but have left than to take care of themselves,
so to speak, apparently hoping that by some mysterious means a way
might be found out of the difficulty. Is it not better to face
this problem before it is too late ? Oan this country afford to de
otherwise

It is not only perfectly clear theoretically that a

co-IA:1 hank ii4ould serve to protect our gtld supply, but actual
practice has prove( beyond ouestion that it would do so. It mey
well be that the bank of the region where most of our foreign operatior
arc conducted willbo able to exerc.se a predominating influence in



20

that class of business, but ehould this be true, it would always be
handicapped by the operations of the other regional banks which
would often be working against it. May it not also develep that
its ability to defer exports of god will be impaired by demands
made upon the other eleven institutions which it does not control,
or, on the other hand, ttat in the import of gold under conditions
rocuiring its purchase abroad, the cost of the operation may all be
borne by the only institution which is able to effect such purchases ? If that is not the case, the cot of such operations must.
once more be arbitrarily enforced by the exercise of mandatory
poters which are contrary to economic law and which will give
rise to distrust and criticism. Are we to create a eyetem where any

one of twelve reservoirs of go]d is free to conduct international
exchange operations, without co-operation or ueity of purpose
If so, let us abandon the idea that this necessary object of
monetary legislation is accomplis'ned under the provisions of the
Owen bill. One institution with a branch in one or more or in each
of the leading countries of Europe, as necessity develops, conducting its dealings on uniform principles and with a single pureoee,
carrying its accounts with rorein7n banks under one control, is
necessary for the protection of our country's store of gold. It
cannot be deied by argument based on theory or practice, end if the
Owen billis passed there is every reason to believe that instead of
strengthening our position in the foreign financial eiarkets, it will
weaken it to the point of disaster.
The failure or mere rumor
of insolvency of any regional bank would blast our credit throughout Europe almost beyond recovery and might result in calling forth.
exports of gold such as the world has never seen. We are playing w



El

with fire Arconsidoring this great national experiment.

Iredit
is the greatest asset of nations, iust as It is of individuals.
If Ito credit is rood, a country may rise an from the depths of
destruction by earthquake or conflagration to reater heights
than ever before, but if its creait is lust, neither magnificent
cities nor vast resources can nrovent sufferine and degradation to

it

people.

The Credit of the Government.
The issue of paper
money, bearing the obligation of the Government, must be examined
(6)

in its historical and economic aspects, and, further, with regard
to the protection of the credit of the Government itself. Discussing only the latter features of tiAos subject, wtat are the possibilities under the Owen-Glass bill of difficulty or disaster as
coptra4ed with the accepted plan common to all the great '&uropean
nations, of a hank note isoue under Government regulation, Out
without the Government oblieation. Should tbis country 'ncome
involved in a foreign war, a ioreat economic disturbance, or, what
is more possible, shiould oar credit situation be subjected to the
dtsturbing influenoes of a great conflict between foreign nations,
ho;. :fiay the demand obligations of the Government created by the Owen
bill affect the credit of our Government

billrovides that the notes shall be redeemable in
go4.O., on demand, at the Treasury liepartment of tbe United Stats,
or in goad or laofni money at any Peoeral reserve tank. The bill
perLits the Tederal rtsorve bank to authorize meriber hanks to use
Federal reserve notes or notes of the National banks as reserves.
Under these conditions, any great eoonomic disturbanoe in this



22

country, or any world-wide disturbance of credit which might react
upon this eountry's credit establishment, involves a danger to the
credit of the Government, so long as the Government's obligation

is attached to the notes, to the extent, in fact, that a saspencion
of the reserve reouirements of the regional banks as permitted by
tin bill might involve a suspension of specie payments by the United
States Government.

iL great European war, necessitating huge

expenditures, would raise rates of interest in fore4n countries
that would react in turn upon our banking system, requiring the

exercise of every possible measnre, first ,to retain our store of
gold; second, to the extent that it became impaired, to enable the
regional banks to pay their notes in lawful money; third, to enable
Will a
system of regional banks, which is the instrument for issuing
untOld millions of Government obligations, be able to protect the
Government inrch an emergency, and is it not the duty of Congress
to see tlFnt any legislatio0 now enacted shall afford every means
which can he devised to that end
A drain upon the gold of the
country in such emergency would be due to the necessery repurchase
of foreign investments, to the interruption of our foreign comnerce
the Government to redeem its lawful paper money in gold.

and the disturbance of the balance of international trade, tc the
floating of foreign loans in this market, to the nithdrawal of
foreign bank credits now extended to ti s country, and to the
position upon our own credit establishment of the bnrden of
inancing trade which is now largely carried by England.
Gold,
in this emergency, would be withdrawn through the presentation of

Federal reserve notes at the regional tanks, so long an ti y, were
able to furnish gold in payment. When unable to furnish gold,
presumably they would exercise their right to pay in lawful money.




The dealand for Eola would tlereby te transferred to the United
3tatei by tie preenntation of tle laAful money. This prooess might
nec. ssitate tLa suspension of tle reserve re(uiremAnts as to the
roKior:al banks throu61out tle courtry. The ability of tlt Government to ;my gold would b.c lia)::ted to t;C,..)_
now hsid in
"

its trust fund reserve, and its ability to obtain gold frur tie
regional banks. By weLat process might tie eovernmert redfsm its
notes in gold if tle regional bf-rke Lad suvmnded tbeir rcs,prve
rosuirements and the Government were forced to rly upon its on
ability to purohacie cold by VAc uor of ite ow n obliutiona ?
markets of Europe %ould be closed. Our gold supply at home coald be
aubcct to influences laresily corresponding to those ,-hich now f,r4.so
in ti.is country in titio/ of panic. ' o will have pcoPibly 2o,000
Loco, to tke
3fate institutions, tho, influo-ced by tie strain
credits of the oountry, due to ec:ditions -eseribf-d ar4 tc tle
ri

suspension of tl:e resrve rqou'remento of tle regional
at, °nee endeavor to strong then their cold reervos, fd:d ti es
by
presenting Tecaral resPrve notes to tic rricnal banT7s snd dettnding
sold for nom. 6houldAyitont be made in lalfal money, the dovand
.lA

woulc be transferred tJ 'no Governu_rnt. Uur t,stem for many yeslre

w;.11 be unable to ovoccom;7 tle in'lu,nce oi to prsi 1 hoarCing
on
pert of Jtate institutions v,11,1;:' aro not eub:ect to eederai
control or to the infL,ence .;re6ion 1 bans.
As contrasted win this -.:ondition,
Ve notes Err tlobli6at1oa ci a central bank, tbe absolute susTension of resr,rvreoairo=nts could be ;.lade witbOut involving t'e=., credic lr
Uiite 6tat36 for the rede:_tption of tc=- nots, and the lact roscrt
of banking practicil could bo
caployed b)fore oo p-nsion of



24

payment in gold would be forced 'upon the Government.

The United

states is already obligated for the redemption on demand in gold
of a sum of paper money greater than the entire funded debt of the
Government. Why add to the peril ?
Why offer gratuitously the
credit of tile Unite C States when it is not required. ? Why create
a note issue with a redemption fund hardly more then one-half
of te amour,t which experience shows to be recuired in urope, and
then attempt to (!.re it defects by the ordoree2xnt of the Government

(7)

The l!'iscal Aency.

The General Fund of the United

States at the present time consists of about W),0,-)0,0.

on

deposit with Government depositaries, nn. approximately :ii:53,(4,0
net in addition, avoi:.bblo for deposit itc regional banks. Ey
an extraordinary provision of the Owen bill, the disposition and

dietribution oi this huge sum is pieced absoiutely vittin the
discretion oi orc ofiioer of the United States Uovernment. It may
be elLic that ttis power is exorcised et tie present tiLe. It might
also 1:e said that powers not autlorized et the present time aro
reciuired to be exercised-in order to make deposits with the Government depositaries by the present syc%em. Is it intended that one
officer of the Government shall be the supreme monetary power of

the Unit;c States ? This bill puts at within the vw,..r of the
Secretary of the Treasury, should he lave the courage to eTeroise
it, to bring about an inglation N in one section oi thas country
suroassind the pe o ihflation possible under ony blii which
has been offered to Congress as the cure of our ourrency and Lionetary
ills. io officer of the U itec States should be empowered to

distribute i200,000,0,0. at will in any section of this country;




25

and to vest that power in the partisan political mentor of the
crioas menace to tLa financial lndeFederal reserve board i
pendenae of ti.e people of this country. 'net may be expected on
the eve of a :National election ? One institution acting as the
Government's fiscal sent woalC. render impossible te character
of abuse vl:ich is only toe poseible atder tie provisions of tie
Owen bill.

no rnfanding of tire Goverr,'Tient bore nov4 3el2ntora1 to ''.tiona1 bank notes, on better te
conducted throat) tle aeoncy el one institution co-trelline the

(fl

Refund1J.1g Operetiona.

Lanoline ot all of to bene.e, tttn
tlmeelvos inoomictitIcn wlth etch oth,r in decline with
mcy
CifAcult probiam.

larket coneidarationa LotA,een

different sectiore of the eoantry, the ability I one bar) to
carry it slam of the batten without 11;8E, Sc cmearea with a tank
in another emotion, the necessity libich one bank au be under of
using short-time Govetr.a.ent obliFations icl tht parchase of gold,
lalon tt.ocn bonds aro sonttcrod in te terdL of trelvA inatitwtions,
all vaF8est a concition tf discord :vatLor than of coLoelong and

an ineffective plan ratter ',Ian t comor,honsivc one.

A really

dan&orcue cituation might feed:4 develop .ith twelve rr,gjonzAl tanks

atiompting to refund bundrede of millions of donetre of of-orations,
am3antinf to na'7 times ti o orApttil of all and ar4 mor' times tle
capitn1 of oaoh. bone of tlf, rogiot,&3 batike an rec4airea to
coneloor tie siso o tieir enpital In eny refardin6 option
authorized under the law. lnstead, it de to 'Lc a tif,rt of hit

propos...Von, eactly ae it true In tho oust of the forel;n
work cut all ri
operctione, with evoxybody hoping that it

or



26

Regional banks with a capital of 43,000,0.A. might be attempting
to refund bonds amounting to one hundred million dollars or more.
The proposition might look feasible to the board of directors
under some conditions, if the reserves were unasoally high and the
demands of member banks seemed to ran light for a period, and they
might feel c sort of pride in sOowinK that they could du more than
their share. CircuTht rij notee thnt would be out out etainst such
bonds as they might be purchased from the National banks in order to
retire the National bank circulation, would represent an outstanding
liability, against which they are apparently oblige( to keep no

reserve in the bill, and that might result in a preemntation for
redemption, in one day, of an amount maoy times the capital of the
bank.
Again, it would seem to be us-:lese and unnecessary to call

the attention of anyone to the great difference in safety to tbo
couotry an in ability to oanole such refunding operations as would
be necessary in order to retire National bank circulation through
a system of regional banks under the terms of the proposed act,
or unaer any imaginable terms that could be drawh up, and a central
bank, that would be large enough to handle all such operations
with safety and without friction.

(9)

Clearingjunctions and Domestic Faohante.
TAiny of
the same reaeons which make for the real mobilization of reserves

in a central bank as against entire lack of such mobilization in
revional banks, apply to clearing functions and domestic eychane.
Under the Oren hill, Federal reserve banks are aottorised to remit
other rA3deral reserve banks clocks of certain deEcriled cJonees



that:they may rooeive on demand from membfr bans.

The methods

untLr which the handling of those cleelis, as authorized nAler the
law,
naturall an logic;relly developed, would chrry nith them
a delay', for tl,o same reasons and in somewrat to same manner as
existo lc our 'present 85ster.
Insteae of accomplishing the
ia-ediate presentation ane colleotion of itemo, a roundabout
collection would continue to he onoouraed.
A regional bank in
ChicaFo, having authorized iteme deposited with it tit were dr!:lwn
upon banks, members of the New Orleans regional district, wduld
uneueotionably forward them to I;ew York for collection, if liew York
exchane worr at a premium and Vey; Orleane exehange Et a disount.
The Clhictwo reAlonal bank would not feel cOled upon to etad tla
loss oi exchane involved. Even ii it charged the customer saoh
!

exoLange, it might, in order to maa it, forward the items to the
The New lork bank might very easily
have /ere of a. demand for Bt. Louie exchange tten for tee Orieans
exol.ange, whieh eould result in suet items then going forward
St. 1,NA8. 'A;st is flare to .0x,:.vent t
t,Louie regional bank
Nev Yor

reEionnl bank-

.

from then foreerding the items to Ohleago, should it require Chicago

exehange, ane ehati tere to prevent thiti circling ok items
whole) period that 74e, Orleans eichaw might be at a
diseount t
in the cave oi a centre,' bank thero would not be the
dro:ine,

slightest teptation to handle the itelis in any Suet %.anner, for
it would t o to 70at interest of the .central bank to have tho clecks
cashed immediately,
Tle division of Interest thet eould be represented in .Lm rolonal banks woule not
in a eentrni
for ee -,eona the Oblcao branch obtained oredit in 'Lew York,
its lose of inture.st vould oeaeo, ai,11 ae soon as the ?Jew -York bank
obtained credit in t. u18 Its loes of Interest would active, and



28

so on,

whereas, in the case of a central bank, its loss of interest

would continue until the items were collected, as every one of its
branches would be in the name relation to it an itself.
Again, in tin handling of the country'c business, a
central bank would be economical and would reduce the shipping of

currency baok and forth between aistricts to a negligible minimum,
whereas, with a regional syetemAiekust of necessity be based
upon dietricte homogeneous as to their line of business, and which
as districts have seasonal trade between Kiel) other, shipments of
currency almost in as large an amount as those at present would
probably occur; while the central bank would count money received
in CIicego and paid out In New Yor17 as reserve, and could censerecently rodeo° its actual cash in hand in te _Nev. York branch to
the smalleet amount thet would handle its natural business before
currency might have to be shipped. Yet similar transactione between
the Chicago regional bank and the ee. York regional beek might
necessitate shipmente of currency back and forth, because money
deposited in tee Chicago regional bark_ would not count as reserve
for tIn New York regional bank, when called upon Le pay it out.
There is no comparison between the two systems as to economy add
facility, and the regional bank system will arn,aestionably put upon

the people as e :hoe a tax that, while unseen, will be many tiees
the cost of clearing items and ma'eing the domestic exchanges that
would be true if these matters were handled through the branches
of a central bank.




4.-e- I




vet- f

/
/*I°

((t,/,,,,6

BENJ. STROEG-, Jr.

?
Present Reserves.

PERSONAL.
Reserves Proposed.

Country Banks.
In Vault.

219,110,588

$182,592,156

With Reserve Agents...4328,665,882

$182,592,156

In Local Association...

$182,592,156

Reserve Cities.
In Vault.

$246,782,394

$197,425,915

With Central Reserve
Agents

$246,782,394

$ 98,712,957

In Local Association

$ 98,712,957

(After three years:
(In Vault

$ 98,712,957)

(In Local

$197,425,915)

Association

Central Reserve Cities.
In Vault

$398,230,116

In Local Association...

$159,292,046
$159,292,046

The above figures are compiled on the basis of the
Comptroller's report on National Banks on April 4, 1913.

The

"present reserve" represents the requirement and not the actual amount held by the banks, in order to make the comparison
a proper one.

The difference, however, is really very slight

between the actual and required reserves.
The cash required in all banks April 4 was
$864,123,098, whereas under the proposed plan it would be
$539,310,117, or $324,812,981 less than is required at present.
The local associations, however, would have deposits of
$539,310,117, against which they would have to maintain a reserve




-2-

that would vary depending

had outstanding, but

upon the amount of currency they

figuring that such reserve would amount

to 50%, or $269,655,058, the total cash reserve would be
$808,965,175, or $55,157,923 less than at present.

The re-.

serves of the present reserve cities and central reserve
cities would, however, be considerably less even under present percentages of figuring, as they would lose deposits to
local

associations amounting immediately to 0440,597,159,

and in three years based on present figures to $539,310,116.

It

is impossible to

state

definitely what reduction in the

cash reserve this would mean, as a portion of the loss in deposits would be met by the reserve agents, who only hold
12 1/2% in cash, and the balance by central reserve agents,
which must hold 25% in cash.

Figuring on an average of 20%,

the amount would be for the present $88,119,431, and in three
years $107,862,023.

Now going back to the cash released, or

$55,157,923, we find that $32,961,508 more could be released
at present and still have the banks' present portion of reserve
and

$19,742,592 more' at the end of three yea

Inflation, based on present deposits, could only
take place at the end of three years on cash reserve of
$163,019,946, which, figuring the average reserve required in
all classes of banks at 8%, would allow an extension of loans
amounting to $2,037,749,325.

The reduction of deposits in the

banks would partially be due to elimination of the duplication




-3-

of deposits, where reserve cities deposited funds received
by them from country banks in central reserve cities.
It would not seem as though the reserves of state
banks would be affected in any particular, except as new
state laws might require or allow.

For instance, if a

state should authorize its banks to count as their reserve
money in local associations, it might have an effect on the
deposits of national banks, or if the banks were prohibited
from counting as reserve notes of the reserve associations,
It would contract the lawful money in circulation by the
amount of national bank notes at present held by state banks
as a part of their reserve.

In some states it might require

a special act of Legislature in order to make it possible
for the state banks to count reserve association notes in
their reserve, but in most states I think there is

nothing

to prevent the state banks from counting such notes as reserve, provided no exception is taken to their action by the
state bank examiner, and even if the examiner did object, he
would not be able to enforce his opinion.

Regarding the effect upon the deposits of central
reserve cities, the proposition is somewhat problematical,
as it is impossible to determine what proportion of the 4%
the country banks would have to transfer from reserve agents
to local associations would consist of balances at present
with reserve agents and with those in central reserve agents.
As New York, Chicago and St. Louis exchange would probably
still be in demand, it might be fair to figure that say 2%




-4-

would be taken from each.

In preparing the figures I will

take this basis, although there is a possibility that the reserve associations might be handled in such manner as to lessen the demand for exchange on.central reserve cities (this
would probably not be true, however, even if some Giro-Conto
system were established).

The reserve required to be held by country banks
with reserve agents April 4, 1913 amounted to $328,665,882.
Of this amount under the proposed plan $146,073,725, representing 4% of the net deposits of $3,651,843,139 would have
to be transferred to local associations.

Figuring that half

of this amount is taken out of central reserve cities, it
would reduce their deposits $73,036,862.

On the same date

the reserve cities had deposits of $1,974,259,154, requiring
a reserve of $493,564,788, of which half, or $246,782,394,
could be carried with central reserve cities.

Under the pro-

posed plan 5% of the deposits, or $98,712,957, may be carried
with central reserve agents instead of $246,782,394, which
would represent a reduction in the deposits in central reserve
agents of $148,069,437 that are at present maintained by banks
To this $148,069,437 must be added the

in reserve cities.

$73,036,862 that would be withdrawn by country banks, making
a total of $221,106,299 in bank deposits, which would be withdrawn from reserve cities immediately when the law went into
operation, and a further reduction of $98,712,957 in three
years, amounting all together to $319,819,256.
national
The total banking deposits of the central reserve
A

cities April 4, 1913 amounted to $563,609,971, and they would



-5-

be reduced at the end of three years to $243,790,715, with a
possible further reduction of $73,036,862 immediately should

the country banks withdraw the whole of the 4% that they must
transfer from reserve agents to local associations.
The cash reserve required by central reserve banks
April 4, 1913 was $398,230,116.

Accepting the reduction in

bank deposits in central reserve cities as being $243,790,715,
their total net deposits would be reduced from $1,592,920,465
to $1,349,129,750.

Under the new plan 10% of this amount, or

$134,912,975, would have to be held in the banks' vaults instead of $398,230,116, or a reduction in cash in the central
reserve cities of $263,317,141.

Of this amount suppose that

$243,790,715 was used to pay off the bank deposits that would
have to be given up.

This would leave $19,526,426 in cash

which could be paid out by the central reserve banks (and still
maintain their cash reserve) toward the $134,912,975 which the
central reserve banks would have to maintain with the local
associations.

This would leave $115,386,549 that would have

to be withdrawn by the central reserve banks from other channels in order to complete their reserve.




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ovieCtaa

pew40p4
e-4 c19

aitetid:
61_4_

treal/tveas____7)wd

AfIIj

evamipleo:ilLIPAlvovo,

&tufo 06,41,

ttmvict
eid,
aiRkww-6

outet--114-4$711A-4-

tka_

ir

ale7(

#444"-r-- 11

ll,14.4 1.,;;

9-X k

/A--Arl

71- A /

(9itt---6(441

cei/t

t0-co; klimer..
aw2/771-4-Pti9

L TT'09.

\9t/rk-ny-ti
4,&4(

ifrierCiaL




',4,12/20telte

Mrls_

1

d4,44.)

Awfrt-o

Afetk,14,614_

le-A.L_

172144__

4rer-c 444J14.07-tikeyaa,1
OW,

44427),?--ak4' tirrYk

0/eAswa,r cud

STRONG,

.

P11:1-610NALA

The development tram day tl (lay of =rims tentative amendments to the Owon-Glaae

Bill by the

IS Condi:too on DoZine and. Ourle_y_17 throws met interesting licht lepton

the rime of the Individual umber() of the Oosemittee that in entructed pith thin import=
locinlation. Batedisre who havo appe-Area before the Oloittteo eerie to be divided into two

ana =fortunately the larcoet, nhoulna interont principally in the prefit

elesoeo -

and loss accounts of t

institutional the other mil erellor oleo° being corarvoed

of thous whe ovidence Lc). honest desire to oontribute to emend intollactual coneideration

of the oubjaot.

4 e clasp, annll in nuelbore, coo= to 1 repreeentod ltIrc,oly by /Ter York

batewre. These centleman. have Given an /men attention to the attitude of the varioue

nerabore of the Committoo.,ae e4ce1ona4 by their queetions, an have the nortborn of the

Conaittee to the propounanc of paint:Ito/dm intorrocationn.

/Tow that the Committoo

ii,131),V121C vp the remit of its labor, a nitration in Oinolonod to thone %lie have foil:mod the roceedings That lo *iz ainoofound inpreemilla

hao boon anemed by Senators OTornan, Ititch000k and Reid.

I rofer 'be the attitude "Vieth
/Tot only have they evidenced

a iiob. wider =0 rore profouni lemorloace of the,...1.2bjeot than hae horotoforo been agpre-

ciatod, but what io etill bettor and /10r0 onceurneing, they wit to be leadinc their
oolleacuen in the Comittoo toward the adoption of cafe, fandenontal principles, notwithetanainc that it involvee imorine on outbarot of :votes* which the Committee han been
forced to hon./Aaron benkern troll' all over the malty/ who are inspired by nolfich and

poe,rtimm, =tiler Urn by patriotic rrtivoe.
meretonteln that in the "bony strac turd; nro neither an rramy nor an con liected

an they appearod to IA before the Marines boren




ne doolnion for a reduction in the

-2-

umber of institutions to be organized, disclosed a leaning on the part of these three
Senators toward the organization of one instead of a number of banks.

This is decidedly

in the right direction. The evidence now afforded., largely by the efforts of the 13 a three
Senators to resist the adbption of a hasty and ill-considered legislative plegrain, has
been the means of protecting the countrj from the consequences of 'hasty action which
might have been serious. The further evidence that they believe that this plam must

be -out into operation by gradual stages, rather than by instant readjustment of the vat
structure of our bmeleang busin.ese,

indicates the eareful consideration which these

gentlemen arc giving to soeuld procedure, as well as sound legislation.

The elirninat/ion

of ex-officio members from the Federal Reserve Board and lengthening the terms of service

of appointees indicates a desire to safeguard the new system from political or partisan con-

trol. Bvery disoussion of popular subscription to the stock of regional banks strengthens the possibibity of a central bank organization, which is much to be desired.

The oountry still awaits, and with anxiety, a disclosure o-f their attitude as to the
obligation of the uovernment upon the currency to be issued,

To the some degree that

this great piece of constructive legislation is receiving the earnest attention of
thoughtfal men all over the country, just to that degree will these Senators, who are
re framing the bill, receive judgment upon the ir fitness or unfitness for the t ask,,

Only history, after the legislation is enacted, can make the verdict the final one.
Present clay opinions will be formed, however, and it is to be hoped that these gentlemen will direct their ability ,notwithstanding oi3eposition from many quarters, to safeguarding the credit of the United States Government




TO the Editor of the New York Times.

The statement from Chairman Glass, of the Committee on Banking and

Currenoy, published

in your

columns this morning, seems to miss or avoid

the point as to the principal features of the plan for currency legislation submitted to the Senate Committee by Mr. Vanderlip last week.

The

principal features at variance with those of the HOMO Bill are:m

Mr. Vanderlip proposes a Board of seven

As to management:

directors appointed by the President, with the advice and consent of

the Senate, with terms of fourteen years eaoh, a director retiring every

whioh would

two years, and with no ox-officio administration members;
seem to assyre

oontinuity of management,

independent

of politioal or

The Owen-Glass Bill provides for a Board

partisan control.

of

seven,

three of whom are officers of the Government, and subject to ohanEp by
each new President;

at least one of the four to be appointed, probably

two, and possibly all four would also be within the appointment of every
This would certainly assure a partisan and political board

President.

of control.
As to note issues:

Mr. Vanderlip proposes that these be issued

by a central bank. The Owen.-Glass Bill provides that they shall be issued

by, and be the obligation of, the United States Government.
be added to the arguments

which

Nothing can

have been made in opposition to any plan

for the Government to lend greenbacks to the banks against collateral to
be provided.

The function of the Government mast be that recognized by

all civilized countries:-

the coinage of metal

money of a fixed standard

of weight and fineness and the protection of its citizens, thereby, from
the imposition of fraudulent standards of value-

The function of the

bank should be to iB51.10 a credit instrvment redeemable in

coin of the standard

established and protected by the Government.

If a Committee o

today arbitrarily fixes 100% of discounted paper, with a 33 1/3% gold

reserve as safe protection, how
may not

do we laeowthat ten years hence they

decide that Flunicipal and State Bonds, or Real Estate

Mortaaaes,

or any kind of bonds, or even stocks, may afford adequate protcotion or
how do we know but what they will be satisfied with a 10% gold reserve,
or none at all?

currency or




The

greatest safeguard

against either an over issue of

a reduction in its credit value is the united judgment of




mog,wa

all the people.

They will daily decide whether a bank note is adequately

protected by collateral, and whether it will be redeemed in gold on
presentation. Therein lies the greatest responsibility of the nanagemeht,
and consequently the greatest insurance to the public that the parity of
the note of the bank with gold will be maintained.
3.

Mr. Vanderlip proposes one institution, with branches;

Glass-Owen Bill 12 separate institutions.

the

These two proposals must be

considered in connection with the difficulty heretofore considered unsurmountable of fixing a uniform discount rate.

The experience of the

Bank of France peculiarly illustrates the advantage of a uniform and
stable rate of discount.
condition;

Sentiment in this country would favor such a

practical considerations seem to :render it impossible.

EX. Vanderlipte plan, however, as contrasted with the Owen-Glass plan,
seems to afford a satisfactory solution of this difficulty, and one
far better than an ineffective tax applied to the earnings of the institution., which in large

part would go

to the Government;

would not afford anrcheok upon expansion.

a tax which

The restraint must be applied

to the borrower and expressed in the discount rate, but should not be
made to penalize institutions

which have not over-borrowed and which

should not be required to pay higher rates because of the over-borrowing of others in their district.

EX. Vanderlipts plan, providing for

one institution, with branches, with a uniform minimum discount rate
applying to a small percentage of the total amount, which a bank is
authorized to

re-discount

and progressively increasing as amounts in ex-

cess of such original percentage are increased, appears to solve the
knottiest practical problem in monetary legislation.

The nsun-tax!' is

applied to each institution as its borrowings increase, and will be

effective in either Checking
money market. This is as it

its borrowings or forcing it to a cheaper
should be.

Er. Glass's statement above referred to misses the point in each
case.

He does, however, raise one point which merits scrims oonsidera,

tion.

If a plan ,embodying as few radical changes as does this one

results in delay in the passage of currency legislation, it is the best

-3evidence that the bill under oonsideration is not acoepted as sound,
and dhouid not be passed.

New York., October 27, 1913.




Banker.

:s/




iko..

tAirt"."

Aida I

ti)

u) hotAing ibr f:lee. 4 AIWA be oftprepriatiez for :tit,AIIIMMiss
Pogo 4s At iOle one,. of Secs 5 It ilbeeld Irovido thzt the earritmo raid lo
oSo rasehree of Olit%ell rUtos bonds.

the MAW atistell *MA be a3.1.

Poirp 5. eth name elatitisr
Paw

Cto

o!loold b

rittan

hotten of M., It 10 IMPVided

aoltdro r4101 ootAe, r.;ettl

Cal.
tho bomk raw lotiao

elioaid oiralitriz 114 Irk,lowored to saa-iet I'M

.sorter," endiAl with Vile wor:lo ''',reelboNe of -7zotectimre Ow*.

Polo 11

ot nUffiairi/Tti,7 deitiolto, t,rti oeuld bo tiolleted b reuantr se

mitten)" t

follows n'tiontifoo of : ::iylentive Clornitteee Iltxt bo mrt111111417 Bus2411.1111 alad alub.

sot than bo

eacfkatttV rommed for MAW by the .1:-Wtti aftor 4110

mime at the Dermot of Mil

SOSO

Ilhon ses...ss

,?piTIOtra of tele 401:0051tOrt

of a district omIromod kr votes of the Bogrda of Arootaro of ou0h 'Wootton,.
tho next lino. botwont It* roordlO nuarsiellv, eel °tate". odd tho
soilmlle *NA 11111re froquont17 If roll:gad 17 tie :Boillrd.0
'Pee() 13.

twrvio

The firot two ilneta Olould Oat, tleeeroirecfl 12:10 dation,

or INInottons o-lvecified or Irrgiod In this Mt."
,t'ficv 14; ozte of 35:to. 12,

if tit:. twooltette crel tratvIt3tifES Ot)d.

de-2egallore (IT *vetoed 10 V14) 117artOt

mtb lomnohes of Ito ben-047 diotriot

vtlit*the," cre1ot, forelm brepohes of .netiionel b4Pall er 3teito bade'
votoulA not bio T-b141 tt,to losolooso with We forkeito br6rIches of tbo Peden&

Ticeorvo N-etto eal cf. fow 'exile at V* eeti Of the nentanet 41,1 .oforreet this

error.
c;oo. 14. Ihe
,

NOD

'-araixtzvii. (oh

lot 'emibm," In Olose of "Oent.,1
"ealoroecont rrtia-spollo4.

L!.t

4VI, Mao ohould mad

,L1r,g8

%G fle Inrwmws,rartt (4) of

Lleci 15 of tIlio Acts"
leet ok..ird In



Not 111-3ra

o.:X1 10 novrol

thie

°

WOrdO .4tbc Oast, alwold be ollercedto thair

wale Slid the 14-zet Ul.r3 or thtt lection should awl ''tte

o;:411 In411kOs"

alp 22;

I So mirk lade Mad b.

tot

,ibrAcs.#

meow**

PIM alit
bo

Stitt

irsuM rot IMMO it eta* or Gut* widow

6iik ILnSS On IT
bonica.t1

Peso aot

rlrat *moo Ibises Z VII,* biotin" aid notio ticommiste ianonme

would ito, 43,1rou1ntins.

wtoo of

4:Zt SOMA 69,13411 tO

und sue-ht4f

71,ctr

oarlike per tartin," oto.

tbilo tint rereirOn..ettt itr4b''
lb* wont IOWA
nip cos WW1 linos Ilb lellb INNS 4.11111111.*"ou
next onro.81:41,,

11ntv4

ee

bo angenelli

tiv 'lord nwrat.rm lare ahrottlil be

tons. "

titA 14*
Pleaao rofor tt,t
01t7 Da& el/ its).
itt 24. '410 Woo la imptikthein
to Prialletten
pit4tP 14*
L5 Inetitubton. I tirt /tat alc, to mole, efKother that le
of v
110064311047 Or not, bat UV DMICOI PIS woad. ettttc- a !lavebr.onvIstviltn
ko

jurisetiollieit et 311624 *mats mr MALMO. bake? it istlits be well to

pat

SUVA*ofdoelsratifil in tint 3111 6$ tit Ithe jesteettetten of tha courts.
?*

Oj

telarologle of pato/MO se

the ,{:oseltilitly of prom

ixtrvoimist in trItar7aerfil deettriottInt of Ow 4enttml !wore of thfs 'Aprat 71'isservo

Mae
nee Z.%



pay.

*.4.

1

11;:-4v;-r not pII(k

t divnetorri eat hag

ome.rnti1 ther an

or bow bean appointed ma :Law inalifiolie

f3lis

DM*

ma be oorresetod Iv a seallim.affi the foot of 11.40$ I et

ft..r.o.p,gonti 4E4 NagNO Itsikt it tslett bo *toe 10 "hase Veis dirtietors

Pederal UMW SOW noaosavrilq citiale of the nited
rervqtwitt 441 ems ts$;A.

3umeet Viet Vte fora or .fivah ,n1.131

to in the Act ALO dukt yeI b7 riee. 5147 of the Ti4ve2e4t
parTraTt, 50, rainco taw Ineetioninrr nin4 4.te to vhetber

Tvim

we have properly dit with Uriotito of tf7A Postal Scrimp Punii. Ilkey are

nerrOSSeri 1ae InWS
1111001,9.

Wgrit tt)

111Zke,

requiro the offleers

lade

tIrtren

UM' VOA

faitre tha the flonerta. izalpip of the Act Mee net
tho Sovartrient to diffturb emistiws twrtrw3ents.

It lattpt bo wen te .000erto.in jItot bow .theseTec aunts are kept, and nos

veletitr

*Uwe weal?! be revli ttrod in 10.w Pill to cover thin sitantica
.Pairtworph 61, etkmote Vat va haw:. no provision in 'the IU otztine

ibo.t tho Padova P41141011M PArit shall not pay intorost uPoa

,5Roctoitta. '14411oh

Shedd be throe" twkd it f#tenid be *MOO Taellitlestlen,

Pace 201 paroart* 600 in roUtiec to 'Vol ,;nnana F-4zal bonds mi,es
questien an VP 14,AttrA*7 'WO 112M esmined witts eaffielent ooze into the

dc.r.stuitse with volatile& to thaw bond tame. end ascertained. .clefinite1r vf-1/thor

our rveurlark?: 40111etIon would extend too far.

Pukr1l 500« 50 dhoold

made to ertend to the refondina bends too

be isnot to rr.Asmi tbe figs.

?am3
AVOTIASii

I beLteve it 'Mutt be vies Uri lade wattle be

90 Mit it dUnot

interfeeil wica: Ve Tirovieliro in the 3111 IA fogpra, to

tbo rirtiroiont otono-1),74fc.ftivl civraation of Batiemal, bents. It tlev- be ti:let

oar Dili awl Zile partxraoh tiro in eenfliot
Tem No

of t'4") bait ow




pare4vrarb 00. in deseribing tibe poomorte for ,;44eitt 'the mew

rooelwd Na omitted Arwerims tor '11:Atale landie.

It Stye, war

liVortest, Isze.os AO* ao well isAre it oonfooli to tIVP was of eke IIMILtonal.
:Mut nat.

that UMBOf ialti Nes pinapidt

Pam 40« P1IN0 04011idert

7.4 hove seed thie4 'words TO4tilstai be,* =Asa Vorinemin the Ma.

It toielt have lyx0. bettor In) hutm pttt in a 41601/1114n of etronIptiszalia
oar raragraOh of dodultions, bn4 attune* Ur Mao "MMILumel

nOtai" 100

notoo- throtktotat We BM«

Age f&t.n providing trAlt rIational Waco rr:f heVe
onelemeat 10 Sae. 6190 of the Bilied Rtnistee.

Ch00.d. oebsoisev14 provide far

fige W. Oar retinale to mei 4161,1001U as defined b the Oemptrolior

tle Amaral*, dhoula tn 601.111 lay refer to the eoetiono Of tNil nUtiona Dark Aot
4.MOctrtnq

rttruAiaTtes

12:2 ore rio so tt hie aeritrAttia Of nOt deeseille

sttht sot imply aimilkina difftwill true tbut alsoadlywribled In Ihe
i7ortlt

Koh 64,1 top of 3,6410.

trotAnont of the

Iftt hrmo °triad my refereroo to VA0 LiI1011
Tryt

ptiftnyttiat rixott

tho norm; of nattelal

loot definite ?timed** to *stoat* a 12,7. reserve and bow It stall be WA to
oostrnry to th

of e. antes *,t
deliorstae

)vi4tOfl

f to nattona 11314c MA.

I osmorit

rAttition

Ui plaoc; it witn the pairs' et tho Naomi nosarvo Nord to

othor vy4r OfOs 01.10ap4iaa nook una

/met now, rtv bo comma m
hallotoOb3ootion.tc Ulla eountine

tv toM 40611116 sat

rest or gm 135 retwvits
OS

'AktroOrgialr

:art of the roemew .0(1161.1 is to be bola

tbvir +Won hitleir own lomat**
Poo Beg vows* 1,?4%. Nlaw ailPINI as sucteLlerrlice, to the oubleet
of utorri.

If the leaorel, rtesorve IX** alveoli*" only for °ono otiose, thtit to,

Nottorita aid state
th



et the tasktry etntratev weal

tiburden at *mole for alooOverts

PaZots Vat V"st. would

NUM ot tko limit of usury

nom the NettingWag, vo,ttiob wad not in
turn inerooloo Om tato tx) its isolisor
Mort, in nothixe
ote do abate tide in the Bill, but it socesino t mtiro

rouriodcen of our

NW otaldis to

tlaxr elm in thls ocAntirr

'Pam 02g illoortiob 14114
Soo. SW.* of t7.)a rioviass ate:butts, Wit It

iZattr 'ammo, *Oat 104 odleaott in *14U1J

IMAM, ethor avairttte

a4)

United States gq,):kly to fraud of tho
atlisaater asseribodin thio sootiest.
Psi* 104$ ps.-4,471,1) Lot. 74) MI. StO flo tilted or Illstosittes
moriaimed
avidatulo movido4 inithsa
mat 091 rtaroertrot 16111. IMS not tram viteifter thin SWUM iliktit

to am

be man

to our av.Tt

eIP the rItirergett of sirottlation.
'Page 12. ',14 should htvo
a ratatelleho unless it hot elroakv 11.7oes raxiss

zg:3117,alat1zs to 3oe. ;5:,11* of tho liwriood !,--tottitoo.
Paco 111*

..Turioaotioto of

'Ate veation in reload win b7 74r4-vmritt 194, a.s tO
(motet ovor thi o ooroflabitibi

ity Moat zTad I Iltiro b

dioeurelsi Sim flsoimavo of Vie 141.1 todow

I 1:avort*Ii tiro to omploills this dlotAtae, but 1v3 will. 41e
co, foil thasoruthor
illooliew MOS toy/other with his orkzeistionn
foLlootte v411, I am tntro,

piotoall Ito

wtn, thA) an*




Nomootionxt

*At hero amoroxso41 to os aireso yait loft for

"W"4:34544111

3.34r.

Ntot 1 of the Bill, :lionV not the word

r608.

nnt

"The*" Follow the wolts

word 'Thor fi110

ie words ,30e0
POW 4. 164m24 ntt thr, word "Mato follAv
tho twee Mloo,

At tno ere et tho nh lino from the botiOne lhe word
ntIone,,niejlt

pessib1, 441 Utter *hanged to *issammelk.

rev

it lino fresaillis

oupitint end

top$ the word Ilearem to spelled firot
in with a oral lottOrs, Xn this
conaciotion,iu12rllottion

thx5 word 010111116*

%gnat) N paws in intv, ittfinitiono

ov.rAtainlii IWOMieID tIA, nu.

Lonyneas, i* not

NIP 15: SeeUe Zsa there olonr authority for thIKK-0. to
divert

aorniiiaot ottritto, *low it so hamxsa OA,

.tLf/.2er t

oun Df 3600100,000-, It woro 41aminielled throult
l00000.
ri 1.4s Soo. 13.s.."M word ''dovolijarirr
it to/.

.osrtrili by

rraue rt.kflohod The

o

rot

word Mirposkillles.."

Paw 15, Ses. 14-

An Matiotimi

inyaoted 14 %wit of to United
t4e. ubloh woro dapOsitel as oroemtrit
for Oirralatiola. tith Vie ,oidov6.

xngfkint, yet the C. Itmildekvm4t44

it

th,4 Oevornmant yiTym14 ovunt alo .ch

ice,*oni fOr 'tut VATly tetAraVa t alnt o4Ltirrao
oootratina
it. Adis Le mount is anal, rot ItAIM must
'',mservii.

oontrielorutlo

amonc bnalvre iffine

Crlatial

Otnuoti.

3X)1 Soo. VS (1). 116.114 net tho
wools VW* triny uot ;Non bolitOit
eatut, .r.vt fmonrity for ;4, otte4P
Ourpme"
a4toli
Mora It)

;eat tAwt gm* slorb tin;

Coubt tve,a110011,

otca1I7, a t ttatevris would oiccrly

inoitopounii it ne t stones: but it !might
lowitont Crittetso 119 birli sew mot
!='f' fixed.




of

(e).

o Unite Ntoto00
34t eAt,I)

o 1,7 tito Mak of 41
YMA A it

oulti b

1110100,1

:41V aaVLMO

If 1t is 13101111101 %hot the be* 0943, leo in

wetnialti

to llorcean4) salh edittaao,
OrY1.60 I t4

tivat

oonntrwod

he loft /4 tt iltztrAD

it &wad bo. COICONti.

.1) 16 (). abOULtw t1i/orto 'This or to
'ortavtioirL
middle
tho thiK Zino; *tine the

w

follow

portation or importation fraN or to the Uhltod - t,Atos of troth's
monsi," eto.

%Mout Cabe words the bank would not be authorised to °Tomtit,

cnuiti

in London t3ir

f04oE,Ance tor worts tad ber*rtd
Lotween foreim ocAtntrio ottomit in tie Loudon
Waft thor wvolel not bon'
14,134

tho Igtfortgi400 or olViorscront of a dopoator.

Pam 17* (f). Zaa first lino rttifAtt better road ar folionit
tron deTtoeitoro, Tor

Sgr

VCIttla

that on
purtiwoocli

posilloso

*Ito of ocrryrim to vrttorit7, or tz' soli," oto., otos

Inv o

onotriatIon 14

pat Ivo the wooticst

sons WINO it wooer/47 for 00 teak to soil mforrithine that it
it Mk, a oinsUoration (loos see 00t11 0 yes reeelne
7111101016,2*

o'hou,14 *tore no it is*
Palm 170

(g).

third lino is 'tors"

1.* let out

'Om 17. W. Litlite
t'tweinn ootintritin,
eionte

'




Uio"mutt oollntries

).rAlso it nielt b

th4 tTAW& that aleagevet

eiveibl elietaly in emotrios Lo V41011 forolm

aommelii

09111101.

(h) lit 01,0 ibjr8 hap,the watt dim-

thctbiThe word. lissiik 14111
soonntine Ohog14tosaild es it

pro4ably be A daliy pOPOSints

Pais' 17.

foram."

Ohl.

eth lino

5th U. Tha word "oudh" uhould bo Oh;:miled to "its
the mord soarrne7

reloulti to MUM** h7

eirate

"sudh.
Paco la. Soo, IT, ?he word "IA" in lino 3 dhould bo

°bawd to MM.

In line 6 tio word "it" ?':hcruld vaso be 11.z-:n3nd to *tflon.**

paco 26. In the: 000,1nt Tessers.N*. iv th* now Immo of borola olccrly
rema4171,1 bY th* letsuo of

Allikerisod In to mopes lie Ohell asocmAilh

Soo. 20 stntoo tIlatsTfarehosdit Shall be 1A40 froll the eovorn1

rational barikeu) to zasountslatmazaw the vier vamp," ote,4 4 and thorlipin
limylkat obeli be responsible for the meetomeost redostrtien tzta, rotsvomoss of

tho rot., of sash sadh Notional bank to the amount of the perehort price of
the inwft, is intimate etc. $upposo aenditien arose mar "inh.bone0'f,4ere
offared to the 3evoulmeat et, ge

vill

r, 904

iftef wqre reedelieed el %hut prift.

If 4100,000 of bondo mire purobmsed mt 90, the bnnk

nemnso liability for

v3117 4,60000 ir !If:Along bAk WWI. It IOW unTmostIonab17 redeem $110#000
of vudh notos, but it would not beompolloA to eo!: go unitor to leroi
Soo. ra, mdor '6a* ',!',xamIrntIVno," 1lty014 ol.tt,er to 4urlioato to A
o9rtrIn extent t%* orT-,111ati:xas to be 171Ae ir the Com7trol3er or to 'km, orl ftlem

if t%v fewor to
n tdIottimihe envednntior. of rutionzlbwIto.
is in erten if the lottor It ig not.
intondod tho

vrAor




Ob.

300* 10.

voret Nisowit" is

lio( tn ho reknit' lino.

rzz

!.T

paeu zr gee* 20.

trtits of

Thc

tho

posOmt 1Pasteal
Mt tor tiatimid book notes, would stv tweak.
WON sio øUgs ta lopitit 1f4t40Fini Mk the Ihrsanixia. of its i3nitod Staten
Le overt to rtz(tir tAmsly eIrsels ion.

if cze auk. indor Mao ;,xt,'esod

thottimaw *At is

sarroo revenelbtliV for cry nEttozeta bank antes,
bebe

.4d

12:41. Fialtmal btras vAttoh 'how oold their bon& to Vs

iwvotriollah radLo natter

dog& *Ay paid to the De* and not to tho
tabould

oo olozalo on-tod Wit thoro a'An

ether In lts1 or iitt te:VSt. tin Cietiallie
Jour/Grand*

Statec bt

le "mutton of Ito operration
ellatlazte of 00 UNA Met be ote

011617

'2ho nada vioniet rYyrito TIMIS Ms Its assets for the United
2

itir w,uirofraroant a omtoonliis triSenotiteu

V/Ima

oullod /Ironti rotiro 7ationta 'mat note!) thereror VOW INN* 1111011 Irmo) notUnci

that it 000ld IO tha'4

Mid not mcww

ItakItnal rrAlotIon of its Mists wawa

tas lawful now 1tttno Vatinnal Larks vforo oblimd
to roloono thar bonds that "oz_-4 boon dopoattod

ws,v, to




w not with the 2,081111r, nortilhorne

trotn order

-oar olronkitl on

PAZ*

(To follow oni of first pmiL of lees 117)

and thareipon also mph nallieftl Willt shall in relieve* team

all farther liability in rospeot of wash noteo of auoh natiosel
bank, the responsibility for tho rodemption and retirement of
which has been so elleellei bg teal Dank, easept to MY the ewe
on demand and rooster, in =Many theratOr tram the sank lawful

oma to ths taco amount of mob notes. ao sash edtMmida...

MOW the Revised Astute, of the United Itstno (Act of
Aso W. 1074, Chap. 646, Moo. 4, 10 et. M66, 124) end of the
Act of July 12, 1864 Chap. 290, .4:10., fig 22 U. MI, St. 1644

Act of march 4, 1907 and Aot of My 30, 1900, as provides for

the within.* WOW natiOlai bank of its circulating notes
by the deposit of loot* money with Was Tronouror of the United

antes, and the taking up of the bonds whioh such national

bank hes on deposit with the Troasurer for the seearity of

nuoh ciroulating notes, end as proridos that the immat of
bonds on deposit for (simulation shall not be radueed belcw

$60,000 for sny sash national bank, and as providoa that not

mere than $9,000,000 oft/00a annoy shall be IV deposited

with the Trowel, of the Units& °tab o during any oalendar

math ter the purpooe *twit/a/raring oiroulating notes of
mor such national bank, are bereby repealed.




0

63D CONGRESS,
1ST SESSION.

H. R. 7837.

IN THE HOUSE OF REPRESENTATIVES.
NOVEMBER

,

1913.

AN ACT
To incorporate THE FEDERAL RESERVE BANK OF THE UNITED STATES,

establish banking districts, mobilize bank reserves, refund and retire a portion of the national debt, provide for an elastic currency,

afford means for rediscounting commercial paper, establish more
effective supervision of banking, 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 Federal Reserve Act."
DEFINITIONS.

SEC. 2. The words and phrases used in this Act, except
where the context clearly indicates a contrary intention, shall be
defined as follows :

The word " Committee " shall mean the Organization Committee of the Federal Reserve Bank of the United States.

The word " Bank " shall mean the Federal Reserve Bank of
the United States and shall include all the branches, sub-branches
and agencies thereof.



2

The word "Board " shall mean the Board of seven directors

of the Federal Reserve Bank of the United States, known as the
Federal Reserve Board.

The word " Branch " shall mean a branch of the Federal
Reserve Bank of the United States established in the United
States.

The words "Executive Committee" shall mean the Executive Committee of a branch of the Federal Reserve Bank of the
United States.

The words "national bank" shall mean a national banking
association now or hereafter organized or existing.

The word "depositor" shall mean such a bank or trust company, organized under the laws of a state or the laws of the United

States relating to the District of Columbia, or such a national
bank, as shall have a deposit in the Federal Reserve Bank of the
United States.

The word " district " shall mean a banking district from time

to time created and designated by the Federal Reserve Board.

The words "net depolits " shall mean net deposits as from
time to time defined by the Comptroller of the Currency.
The words " sub-branches " shall mean subordinate offices of

branches of the Federal Reserve Bank of the United States.

The word " agencies " shall mean agencies of the Federal
Reserve Bank of the United States located in foreign countries.
ORGANIZATION COMMITTEE.

SEC. 3. That as soon as practicable after the passage of this
Act the President shall appoint a committee of five, to be designated




3

The Federal Reserve Bank Organization Committee. The Committee:

Shall select a Chairman and Secretary and such other
officers as it may deem necessary from its own members and appoint assistant officers, clerks and other necessary employes ;

Shall organize the Federal Reserve Bank of the United
States and branches thereof ;

Shall adopt a

seal for the Bank, which shall, during

the process of organization thereof, be the seal of the Committee, and adopt seals for the several branches, which shall cor-

respond to the seal of the Bank with the name of the branch
added;

Shall invite and receive popular subscriptions at par to
the capital stock of the Bank, in accordance with the provisions

of Sec. 5 of this Act and under regulations to be prescribed_by
the Committee ;

Shall make the certificate provided in See. 6 hereof ;
Shall do all other things necessatY to effect the corporate

organization of the Bank.'

SEC. 4. That there is hereby appropriated out of any money

in the Treasury not otherwise appropriated, a sum sufficient to

establish and provide accommodations for the Bank and its
branches, not to exceed five hundred thousand dollars for the

Bank and

an

equal amount for each branch thereof, and

for the purpose of carrying out the provisions of this Act,
in

accordance

with

the following limitations, viz : Each

member of the Committee shall receive in full compensation



4

for his services the sum of $10,000, besides his actual and
necessary traveling expenses,

and in carrying out the pro-

visions of this Act the Committee is authorized to incur such

expenses as it shall deem necessary, not exceeding the sum of
$250,000, all of which compensation and expenses shall be pay-

able by the Treasurer of the United States upon vouchers approved by the Committee. The balance of the appropriation herein

made shall be disbursed by the Board for the purposes herein set
forth, payments to be made by the Treasurer of the United States
upon vouchers approved by the Board.

The total amount of the

appropriation herein made shall, from time to time, be reimbursed

to the United States by the Bank from its net earnings after the
payment of dividends to the stockholders and before the establishment of a surplus fund.
STOCK ISSUE.

SEC. 5. That the capital stock of the Bank

be

shall

$100,000,000, divided into one million shares of a par value
of $100 each ; such stock shall have no voting power, and

shall be free of all Federal, State, Municipal or other taxes,
except that the holders thereof shall be subject to the provisions

of federal income tax laws with respect to the income derived
therefrom.

The holders of such stock shall be entitled to

dividends thereon at the rate of five per centum per annum and

no more, which dividends shall be cumulative,
dissolution of the Bank such holder shall receive the par amount
of such stock and all the balance of the assets shall be paid to the
United States.




and upon

5

Such stock shall be offered for popular subscription at par by
the Committee under regulations to be prescribed by it and within

six months after the passage of this Act.

In case the amount of

capital stock is over-subscribed, the Committee shall first allot the

shares of stock to the subscribers for the smallest number of
shares.

Every subscriber shall accompany his subscription

cash or a certified check for five per centum of the total-amount
thereof.

The proceeds of the five per cent ._pent of the stock

subscription, shall be deposited in national banks to the credit of

the Committee, and by the Committee assigned and transferred
to the credit of the Bank upon its organization.
ORGANIZATION CERTIFICATE.

SEC. 6. After the popular subscriptions to the capital stock

of the Bank shall have been closed, the Committee shall make
an organization certificate specifying

The names of the several subscribers to the stock, with
the number of shares allotted to them respectively;

The form of stock certificate adopted by the Committee

and the methods for the transfer thereof and such other details

in connection with the organization as the Committee may
determine.

Such certificate shall be executed under the name of the
Committee by the Chairman and Secretary thereof a,nd attested

with its seal and shall be forthwith transmitted to the Comptroller of the Currency, who shall file, record and carefully preserve the same in his office.




6

CHARTER.

SEC. 7. Upon receipt of such certificate, the Comptroller of
the Currency shall issue a charter of incorporation to the persons

who shall have been appointed by the President and confirmed

by the Senate as the directors of the Bank, which charter shall

contain a recital of the compliance with the provisions

of

this Act by the Committee and a statement of

the sub-

scriptions that have been

stock of

made to

the

capital

$100,000,000 of the Federal Reserve Bank of the United States;

and the issuance of such charter by the Comptroller of the Currency, countersigned by the Secretary of the Treasury, shall com-

plete the corporate organization of The Federal Reserve Bank of
the United States. Upon such organization, the Board and their

successors and the stockholders of the Bank as they may
from time to time exist, shall be a body corporate, to be known

as "The Federal Reserve Bank of the United States," to have a

term of existence of fifty years from the date of the issuing of
the organization certificate by the Comptroller of the Currency,

countersigned by the Secretary of the Treasury, to have
the power to contract, to sue and be sued, to acquire, own, lease,
and hold such real and personal property as may be necessary for

its business, to buy, sell and deal in gold coin and gold bullion,
promissory notes and other evidences of indebtedness, and to dis-

count notes, bills and acceptances and to have such further
powers, privileges and functions as are hereinafter specified in this




The Bank shall be Ydated in the City of Washington, D. C.,

Act.

and shall have twelv

wanches located in cities selected by the

Board and sub-b<anches wherever designated by the board,---'GOVERNMENT OF THE BANK.

SEC. 8. That the government and control of the Bank shall
be and hereby is vested in a board of seven directors to be known

as the Federal Reserve Board, whose powers shall be the same

as those conferred upon boards of directors of national banks

under existing law not inconsistent with the provisions of
this Act.

Such directors

shall be appointed, and one of

them shall be designated as Governor, and another of them shall

be designated as Deputy Governor by the President of the
United States, all by and with the advice and consent of the
Senate.

Such selections shall be made from persons qualified by

experience and training for the proper discharge of the duties
imposed upon them by this Act, and in making such selections
due weight shall be given to the various commercial interests of

the different sections of the country, and at least three of the
members shall be persons of recognized wide banking and financial
experience.

The term of office of each member of the Board shall be
fourteen years, except that the terms of office of six of the persons

first appointed shall expire at the end of two, four, six, eight, ten,
and twelve years, respectively.

The President shall have power

to remove any member of the Board for cause after due hearing,
such removal and his reasons therefor to be communicated by him to



8

the Senate.

The Governor and the Deputy Governor shall, subject

to the supervision of the Board, be the active executive officers

of the Bank. No member of the Board shall be an officer
or director of any bank or banking institution, or hold stock in

any bank or banking institution, and before entering on his
duties as a member of the Board, he shall certify under oath
that Ile has complied with this requirement.

Vacancies caused

by death, resignation, retirement or removal of the Governor,
Deputy Governor or other members of the Board, shall be filled by

the President, by and with the advice and consent of the Senate,
and any person appointed to fill such vacancy shall hold office for

the unexpired term of the member to whose place he is appointed.
Members of the Board shall take an oath of office, which shall be

filed with the Comptroller of the Currency, shall devote all their

time to their official duties, and shall retire at the age of seventy
years.

The Governor, or in his absence the Deputy Governor,

shall act as Chairman of the Board. The salary Of the Governor

and Deputy Governor shall be $17,500 and $16,000 per annum,
respectively, and of the other members of the Board $15,000 per
annum.

The Board shall make report annually of the operations

of the Bank to the Speaker of the House of Representatives,
to which shall be attached the certificate of the Comptroller of
the Currency certifying that he has made an audit and examination of the books, accounts and affairs of the Bank.

The Board

shall fix a date which shall be within six months after its appoint-

ment and qualification, upon which subscriptions to the stock of
the Bank shall be paid in full.



Such date may be extended by

9

the Board with the approval of the President of the United
States.

Any subscriber failing to pay for the shares allotted to him

by the Committee shall forfeit his right thereto and to his five

per cent. deposit, which deposit shall be so forfeited to the
Bank, and such shares may thereupon be allotted by the Board
to other subscribers.

In case the full amount of the capital stock shall not have
been subscribed for and paid for in full, the Board shall forthwith

allot the portion so unsubscribed and not paid for to the several
national banks then in existence in proportion, as nearly as may

be convenient, to their respective amounts of capital, and each
such allotment shall fix a liability upon each of the said national
banks to subscribe for and take the number of shares so allotted,
such liability to accrue as of the date of such allotments.

Upon the payment of the ninety-five per cent. residue of the
stock subscriptions, the proceeds shall be deposited with national

banks by and to the credit of the Bank, and shall be so kept
on deposit pending the opening of the Bank foi. business.
BRANCH RESERVE BANKS.

SEC. 9. That the Board shall create and designate in the
continental United States, exclusive of Alaska, twelve banking
districts for the purpose of establishing within each of such districts

a branch of the Bank. Such districts shall be established with
due regard to the convenience and customary course of business of
the community and shall not necessarily coincide with the boundaries



10

of such state or states as may be wholly or in part included within

any given district.

The Board shall also establish within

each district a branch of the Bank which shall be designated by
prefixing the name of the city in which such branch is established

to the words "Branch, Federal Reserve Bank ". The number
of such branches and of such districts may be reduced by the
Board when in its judgment the interests of trade and commerce
so require ; and in like manner the number of such branches
and districts may be increased by the Board after two years from
the time of the organization of the Bank.

The management of such branches shall be vested in an
Executive Committee consisting of five persons to be appointed

by the Board, who shall be residents of the districts in which
they serve, shall devote all their time to their official duties, and

shall retire at the age of seventy years. Each member of an
Executive Committee before entering upon the discharge of his

duties shall take an oath of office which shall be filed with the
Board.

The term of office of each member of such Executive

Committee shall be ten years, except that terms of office of four
of the persons first appointed by the Board upon each such Execu-

tive Committee shall expire at the end of two, four, six and eight
years, respectively.

The Board shall fix the compensation to be

received by the members of the Executive Committee and shall

designate a chairman and vice-chairman for each Executive
Committee.

The chairman, or in his absence the vice-chairman,

shall preside over the meetings of the Executive Committee and,

subject to the supervision of the Executive Committee, shall be



11

the active executive officers of the branches.

The Executive

Committee shall have authority to establish and discontinue

sub-branches, within their respective districts.

No member of

an Executive Committee shall be an officer or a director of

any bank or banking institution, or hold stock in any bank
or banking institution and, before entering upon his duties
member

of

under oath that

he

as

a

Committee,
has

complied

he

shall certify
such

with this requirement.

Vacancies caused by death, resignation, retirement or removal shall
be

filled by

the

Board and any person appointed to fill

such vacancy shall hold office for the unexpired term of tile
member to whose place he is appointed.

Members of ExecutiVe

Committees may be summarily suspended and subseque

moved for cause by the Board after-trii
so removed at the reqiie,st--Of

re-

aring, and shall be

depositors of adra-rict ex-

yytcr(16
'

pressed by *vote o the board-of-girectors of such depostors.---Each such Executive Committee shall annually make a report

of the operations of its-branch to the Board to be by it trans-

mitted with its annual report to the Speaker of the House
of Representatives.

Such report of the Executive Committee

shall contain reports from each sub-branch established in the
district.

All actions of the Executive Committees shall be subject to
the approval of the Board.




15-

.

12

POWERS OF THE FEDERAL RESERVE BOARD.

That the Board shall be authorized and em10.

SEC.

powered:

To govern and control the operations of the Bank;

To supervise and control the actions of the Executive
Committees ;

To supervise and regulate the issue and retirement of
notes of the Bank, and to prescribe the form, tenor and denominations of such notes ;

To suspend in whole or in part in an emergency all
reserve requirements of the Bank for thirty days, and to continue such suspension for periods not to exceed Mteen days ;

To suspend in whole or in part in an emergency all
reserve requirements relative to national banks for thirty days,
and to continue such suspension for periods not to exceed fifteen
days;

To examine, at its discretion, the accounts, books and
affairs of depositors ;

To call for statements of condition of all depositors,
in such form as it may prescribe;
To open and maintain banking accounts in foreign coun-

tries, to establish agencies in foreign countries and to make regu-

lations for the conduct of the foreign business of the branches
through such agencies.

The enumeration of the powers hereinabove set forth shall

not be deemed to be a limitation upon the general authority of




13

the Board to perform and exercise all the duties, functions ,elp.
tervives specified or implied in this Act.
APPLICATION OF EARTNGS.

SEC. Ill. That the net earnings of the Bank, after deducting

taxes, expenses and proper reserves against the acquisition of
permanent property, shall be devoted, first, to the payment of a

five per cent, cumulative dividend upon the stock, and second,

after the reimbursement to the United States of the advances
appropriated under Sec. 4 of this Act, to the accumulation of a
surplus of Twenty million dollars, and after the accumulation of
such surplus, one-half of such earnings above said dividend require-

ments shall be paid to the United States and the other one-half
devoted to the accumulation of a further surplus until the total
surplus reaches fifty million dollars, and thereafter all earnings

beyond such dividend requirements shall be paid to the United

States so long as such surplus is maintained. The earnings so

distributed to the United States shall be applied by the Secretary of the Treasury, not more than three months after the receipt

thereof, to the redemption of outstanding bonds of the United
States, after advertisement published in each district at least once
a week for four successive weeks immediately preceding the date

fixed for such redemption, which advertisement shall call for the

tender of bonds, and the Secretary of the Treasury shall thereupon in his discretion purchase of the bonds so tendered those
offered at the lowest prices up to the amount of such earnings in
his hands at such redemption date.



aftnAn-eth (tit

14

BUSINESS OF THE FEDERAL RESERVE BANK.

SEC. 12. That the Bank shall conduct business solely with
the United States Government, with the national banks, and with

such other banks and trust companies as may from time to time

be permitted to deposit their reserves with the Bank, except as
otherwise provided in this Act. The accounts and transactions of
all depositors shall be confined to the branch and sub-brancheg-of

the banking district in which they are located-------FISCAL AGENCY.

SEC. 13. That the Bank shall be the fiscal agent and sole

depositary of the United States, except that for purposes of
collection and transfer only the Secretary of the Treasury may
designate national banks as Government depositories.

The Secretary of the Treasury shall gradually effect a trans-

fer of the General Fund of the Treasury to the Bank, which
transfer shall be completed within twelve months after the organ-

ization of the Bank. Such transfer, however, shall not include

the five per centum fund for the redemption of outstanding
national bank notes, nor that portion of the General Fund of the
Treasury held by government depositories in the insular possessions or territories of the United States or balances of disbursing
officers there held so long as no branch or sub-branch of the Bank
exists in such possessions or territories.

On and after a date to be determined by the Secretary of the

Treasury and the Board, but not later than six months from the
organization of the Bank, all the revenues of the United States



e

ty &woe

6-10 el`'`Au

CA".

Oistp-' 601'1°'

15

shall be regularly deposited in the Bank and disbursements shall
be made by checks drawn against such deposits, except revenues

and disbursements in the insular possessions and territoOf the
United States.
FIVE PER CENT

EDEMPTION FUND.

SEC. 14. That the Bank shall be required in behalf of, the
national banks which have notes in circulation to make good the

five per centum redemption fund held in the general fund of the

United States Treasury and any deficiencies in the said fund

shall be forthwith paid by the Bank to the Treasury of the
United States upon demand, and the Bank shall be forthwith
reimbursed by the national bank in whose behalf such payment
is made.
GENERAL FUNCTIONS OF THE FEDERAL RESERVE BANK.

SEC. 15. That the Bank shall have power:

To purchase and sell the obligations or other securities
of the United States, as defined by Section 5413 of the Revised

Statutes, and also such of the obligations of the Territories and
Insular possessions of the United States as are guaranteed principal and interest by the United States ;
To purchase, sell and deal in gold coin and gold bullion, to

make loans thereon, and to contract for loans of gold coin and gold

bullion, with or without giving security therefor, which security
may include the bonds and other obligations of the United States
owned by the Bank ;

To receive from any depositor for deposit or collection



16

current funds in lawful money, national bank notes, notes of the
Bank, or checks, drafts, notes or bills of exchange payable upon
presentation

With the acceptance or endorsement of any depositor,

to discount notes, drafts, and bills of exchange arising out
of

commercial

transactions,

such

notes,

to be of a character to be determined and
Board.

drafts

and

defined

bills

by the

Such definition shall only include notes, drafts and bills of

exchange issued or drawn for agricultural, industrial or commercial

purposes, or which shall represent a bona fide sale of agricultural
products or other goods, wares or merchandise, or which shall have

been issued for the purchase or sale of the bonds or other obliga-

tions of the United States. Such definition shall not, however,
include notes, drafts or bills of exchange issued or drawn for the

purpose of holding for future sale and delivery agricultural pro-

ducts or other goods, wares or merchandise, or for carrying or
trading in stocks, bonds or investment securities, other than the

bonds and obligations of the United States.

Notes, drafts and

bills of exchange admitted to rediscount, as so defined under this

paragraph, must mature within not exceeding ninety days from
the date of rediscount.

With the acceptance or endorrent of any depositor
to discount notes, drafts or bills of exchange which are based
upon the exportation or importation of goods, wares, merchandise or agricultural products, as determined and defined by the
Board, and which mature within not exceeding six months from
the date of rediscount ;






17

To purchase from depositors and to sell, with or without its endorsement, bills of exchange arising out of commercial

transactions as determined and defined by the Board and payable in foreign countries, but such bills of exchange must mature

in not exceeding ninety days from the date of the purchase and

must bear the signature, endorsement or acceptance of two or
more responsible parties, of which at least one shall be that of a
depositor ;

Under rules and regulations prescribed by the Board, to
purchase and sell in the open market, either from or to depositors

or through its agencies or from or to banks, firms, corporations
or individuals in foreign countries, notes, drafts and bills of exchange of the kinds and maturities by this Act made eligible for
re-discount, and cable transfers ;

To open and maintain banking accounts in foreign countries, and establish agencies in such countries, for the purpose of pur-

chasing, selling, collecting, and dealing in foreign bills of exchange,

gold coin and gold bullion, and cable transfers, and to buy and
sell, with or without its endorsement, through such correspondents

or agencies, prime foreign bills of exchange, arising out of commercial transactions, as may be defined by the Board, which have

not exceeding ninety days to run, and which bear the signature,
acceptance or endorsement of two or more responsible parties.
DOMESTIC EXCHANGES.

SEC. 16. That the Bank shall receive at par all checks,
drafts or other obligations of the Bank

branches or sub-branches.

and each

of

its

The Executive Committee of each

18

branch shall from time to time, subject to the approval of the
Board, determine and publish exchange and collection charges to
be made with respect to all checks, drafts and other exchange and
collection items, other than those of the bank, received in accord-

ance with paragraph (c), Section 15 of this Act. Such charges
shall not be in excess of the approximate actual cost of collection
of such checks, drafts and other items.
PRIORITY OF LIEN.

SEC. 17. That the Bank shall have a first and paramount

lien upon all of the assets of every national bank for all debts
and liabilities due from it to the Bank, except as to the claims of

the United States, and the Bank shall likewise have a first and
paramount lien upon all the assets of every other depositor
for all debts and liabilities due from it to the Bank, except debts

due by such a depositor to the United States and to the State
of its incorporation, and except with respect to trust funds
held by trust companies.
Liin TATIONS OF DISCOUNTS.

SEC. 18. That no depositor shall be entitled to discount
notes, drafts, bills of exchange or acceptances, with the Bank, in

excess of the amount of the unimpaired capital and surplus of
such depositor, nor shall the aggregate of such notes, drafts, bills
of exchange, and

acceptances, upon which any one person,

company, firm or corporation shall be primarily liable rediscounted for any one depositor, at any time exceed ten per centum

of the unimpaired capital stock and surplus of such depositor ;



19

but this restriction shall not apply to the discount of bills of
exchange payable outside of the continental United States, drawn
in good faith against existing values.
RESTRICTION OF INDEBTEDNESS OF NATIONAL AND STATE BANKS.

SEC. 19. That no national hank shall at any time be indebted

or in any way liable to an amount exceeding the amount of its
capital stock at such time actually paid in and remaining undiminished by losses or otherwise, except on account of demands of
the nature following :
Notes of circulation ;

Moneys deposited with or collected by the national bank ;

Bills of exchange or drafts drawn against credits due the

national bank, or money actually on deposit to the credit of the
national bank or due thereto ;

Liabilities to the stockholders of the national bank for
dividends and reserve profits ;

Liabilities incurred under the provisions of paragraph (d),
Section 15, of this Act ;

Liability as endorser on notes, drafts and bills of exchange, arising out of commercial transactions, as defined in para-

graph (f), Section 15, of this Act ;
Liability as acceptor of drafts or bills of exchange, subject to the limitations of Section 20, of this Act ;

Section 5202 of the Revised Statutes of the United States is
hereby repealed.

Depositors other than national banks, shall be subject to the
limitations defined in Section 18 of this Act.



20

top,

otA°

ACCEPTANCES.

SEC. 20. That any national bank may at its discretion accept

drafts or bills of exchange drawn upon it, having not more than

six months' sight to run, and growlirg out of commercial trans-

actions as described inhiAct and as defined by the Board, but
no national bank shall accept such drafts or bills of exchange to
an amount at any time exceeding in the aggregate one-half

its

paid-up and unimpaired capital stock and surplus
CIRCULATING NOTES.

SEC. 21. That the Bank may issue its circulating notes, which

shall be receivable at par in all parts of the United States in
payment of all taxes and excises and all other dues to the United

States and also for all salaries and other debts and demands

owing by the United States to individuals, corporations and
associations within the United States and its possessions except
interest on the public debt. Such notes shall be a first lien on all

of the assets of the Bank and shall be redeemable on demand at

any office of the Bank in lawful money of the United States.
As long as any such notes are outstanding the Bank shall segre-

gate in its own vaults and carry in a special reserve account on
its books gold coin or gold bullion or United States gold certifi-

cates to the amount of the face value of the notes from time to
time so outstanding or, at its option, shall so segregate gold coin
or gold bullion or United States gold certificates to the amount of

not less than fifty per centum of such face value, and collaterals,

consisting of promissory notes and bills accepted for rediscount




Iv's)

21

under the provisions of Sec. 15 of this Act, or refunding notes
of the United States, hereinafter provided for, or bot imidi

alue to one

laterals and refunding notes, equal at
and

hundred per centum of the face value of the notes from time to
time so outstanding.

Such collaterals may be exchanged from

--

time to time for other collaterals or refunding not

within the

limitations aforesaid and of equal faceir-g;.-PRINTING, DENOMINATIONS AND FORM OF THE CIRCULATING NOTES

OF THE BANK.

SEC. 22. That in order to furnish suitable notes for the Bank,

the Comptroller of the Currency shall, under the direction of the
Secretary of the Treasury, cause plates and dies to be engraved, in

the best manner to guard against counterfeiting and fraudulent
alterations, and shall have printed therefrom, upon the distinctive or
special paper which has heretofore been or may hereafter be lawfully

adopted by him for printing United States notes, and numbered,
such quantity of notes; in blank, of the denominations of five

dollars, ten dollars, twenty dollars, fifty dollars, one hundred dol-

lars, five hundred dollars, one thousand dollars, and ten thousand

dollars, as may be required by the Bank.

Such notes shall

express upon their face the promise of the Bank to pay on
demand, attested by the written or engraved signature of the
Governor or Deputy Governor and Cashier, and bear the engraved

imprint of the seal of the Bank.




22

RESERVES OF NATIONAL BANKS.

SEC. 23. That from and after a date to be fixed by the
Board, in no event longer than five years nor less than thirty
months from the date of the organization of the Bank, all national

banks shall be required to keep and maintain a reserve of not

less than twelve per centum of their net deposit liabilities, as
defined by the Comptroller of the Currency.

Any part of such

reserve, but in no event less than one-half thereof, may consist o

a deposit with the Bank, and the remainder shall be in go

and

lawful money in the vaults of the national ban

From and after the organization of the Bank the Board
shall effect as rapidly as it may deem wise under commercial
conditions from time to time existing, and complete within

the periods herein provided, the change to the minimum
reserve requirements above set forth. Such change shall be

effected by the publication of notices to all national banks

which shall state the percentage of the total reserve which

must thirty days thereafter, and until further
deposited with the Bank
be held in gold

notice, be

riire amount which thereafter may

awful money in its vaults. Such requirements,

however, shall fairly consider the commercial and industrial con-

ditions of the country and its various sections and be so apportioned and determined as to cause the least restrictions upon the
business of national banks, and compliance with such directions

of the Board shall be mandatory upon national banks, and in
such direction the Board shall give due weight to the distinctions



a,s

23

recognized under existing laws between country banks, reserve
city banks and central reserve city banks, but such directions shall
be uniform with respect to banks of each of such classes.
ABOLITION OF NATIONAL BANK CLASSIFICATION.

SEC. 24. That from and after the organization

of the

Bank no action shall be taken under the provisions of Section

1

of the Act of March 3, 1903, or Section 2 of the Act of

March 3, 1887, providing for the designation of cities as additional
reserve cities and additional central reserve cities, respectively, and

from and after the establishment of the new minimum reserve
provided in this Act the classification of national banks, as now

provided by Section 5191 of the Revised Statutes of the United
States, as amended, shall be abolished.
RESERVES.

SEC. 25. That the Bank shall establish and maintain at all
times a reserve equal to not less than fifty per centum of the net
deposit liabilities of the Rank.

Such reserve shall consist of

coin, gold bullion, United States gold and silver certificate,s.raild
other lawful money of the United States.
RATES OF DISOMP
SEC. 26.

The Board shall.---eStablish from time to time a

normal rate of discount which shall be uniform at branches
and sub branches of the Bank, except as herein provided, and the

Board shall renew or change such normal rate at stated meetings
to be held at least once in each week and shall immediately publish the normal rate so renewed or changed. The normal rate of



24

discount so established shall be charged by the branches and sub

branches of the Bank to depositors with respect to all rediscounts of such depositors up to an amount not exceeding the
amount of twenty per centum of the unimpaired capital and surplus
of each such depositor ; and the rate of discount charged by the

branches and sub branches of the Bank upon all rediscounts in ex-

cess of such twenty per cent, shall be increased by the Board for

each ten per centum of increase in such rediscounts above such
twenty per centum.

The additional rates of discount established

by the Board upon such rediscounts in excess of said twenty per

centum shall in like manner be uniform throughout the United
States, but such additional rates B4.3r5e,established by the Board

in progressively increasing amounts for each ten per centum of
excess rediscounts above the said twenty per centum, and such

additional rates of discount above the normal rate shall, in like
manner, be published from time to time by the Board.
REFUNDING NOTES.

SEC. 27. That the Secretary of the Treasury is hereby author-

ized and directed to refund one-half of the two per centum United
States bonds having the circulation privilege and on deposit with the

Treasurer of the United States to secure national bank note circulation

at the date of the organization of the Bank.

He

shall accomplish such refunding by the issue of refunding
notes.

Such refunding notes shall be a direct obligation

of the United States, shall bear interest at the rate of three
per centum per annum, shall be payable in gold of the present

standard of weight and fineness and only at the Bank or




25

any of its branches, and shall mature at various periods as
determined by the Secretary

of

the Treasury not

exceed-

ing one year from their respective dates of issue, and shall
be issued under regulations to be prescribed by the Secretary of

the Treasury as to the form, tenor and denominations thereof ;
provided, that such notes may, at the option of the Secretary of

the Treasury, be extended for periods of one year during a
period of twenty years from the date of the organization of the
Bank.

The Secretary of the Treasury is further hereby authorized

and dit ected to refund such of the two per centum United
States bonds having the circulation privilege, the refunding of

which is not hereinbefore provided for.

He shall accomplish

such refunding by the issue of bonds.

Such bonds shall be

a direct obligation of the United States, shall bear interest
at the rate of three per centum per annum, shall be payable in
gold coin of the present,staridard of weight and fineness, shall mature twenty years from the '-date of issue thereof, shall not have the

circulation privilege, and shall be issued under regulations to be
prescribed by the Secretary of the Treasury as to the form, tenor,

denominations and nature thereof. Both the refunding notes
and the three per centum bonds hereinabove authorized shall be
exempt from Federal, State, municipal and other taxation both as

to income and principal.

The Secretary of the Treasury shall

upon the first day of July, nineteen hundred and fifteen, and annually thereafter, under regulations to be prescribed by him, allot
among the several national banks, in proportion to the respective



26

amounts of their circulating notes outstanding upon such dates,
an aggregate amount of two per centum United States bonds with
the circulation privilege, which such banks shall be entitled to exchange for the three per centum United States-bonds hereinbefore
authorized, provided, that in no one-year shall he allot a greater ag-

gregate amount than,t5enty million dollars thereof, and upon the
receipt of such two per centum bonds from such national banks, the

Secretary of the Treasury shall effect the exchange. Should any

national bank fail in any year so to exchange its full allotment of

two per centum bonds for the three per centum bonds as herein

provided, the Secretary of the Treasury may permit any other
national bank or banks to exchange bonds in an amount equal to
the deficiency caused by the failure of any one or more banks to
make exchange in such year.

At the expiration of twenty years

from the passage of this Act every holder of United States two
per centum bonds then outstanding shall receive payment therefor

at par and accrued interest, and thereafter such bonds shall carry
no interest.

Nothing contained in this Act shall be cOnstrued to

alter, impair or restrict the circulation privileges now given by
law to any bonds of the United States.
PURCHASE AND REFUNDING OF Two PER CENTITM BONDS.

SEC. 28. That the Bank shall from time to time purchase from

the several national banks at prices not exceeding par and accrued

interest two per centum bonds of the United States up to an
amount not exceeding one-half of the total of such bonds on

deposit at the date of the organization of the Bank with the
Treasurer of the United States to secure circulation.



Such pur-

27

chases shall be made from the several national banks up to
amounts not exceeding the par value of one-half of the amounts

-

of bonds owned by the. respective national banks and securing,

their circulation/outstanding at the date of the organiza

n of

the Bank, and thereupon the Bank shall be respo

le

redemption and retirement of the notes of each such national bank

to the amount of the purchase price of the bonds, less interest, so

purchased from it, which responsibility shall constitute payment
to such national banks, respectively, for such bonds.

Immediately after purchasing such bonds the Bank, under
regulations to be prescribed by the Secretary of the Treasury and
the Board, shall, from time to time, as and when the national bank

notes secured by such bonds are redeemed, exchange such bonds
with the Treasurer of the United States, to au amount not exceed-

ing at par the aggregate amount of the face value of such reSuch exchange shall be for an equal amount at
par of refunding notes bereinbefore authorized, and upon the
deemed notes.

maturity of any such Refunding Notes the Bank shall pay such

Notes, for the account of the United States, to the holders

thereof, but it shall, at the option of the Secretary of the
Treasury, for a period

the organization
for

of twenty years from the date

of the Bank,

payments,

such
accept in

in

lieu

exchange

of

of

reimbursement
such

Notes

new Refunding Notes of an equal aggregate amount and of
analogous form and tenor.

The Bank shall pay semi-annually to

the United States out of its earnings and before reimbursement
of advances made by the United States under the provisions of



for

28
9ift

Sec. 4 of th. Act, a tax upon its circulating notes @lama Iv an
amount at one and one-half per centum per annum, calculated upon

the amount of refunding notes from time to time so outstanding.
STATE BANKS AS DEPOSITORS.

SEC. 29. That from and after the organization of the Bank
any bank or banking association or trust company organized under

any law of any state or under any law of the United States relating to the District of Columbia may make application to the
Board and shall by the Board be authorized to become a depositor

in the branch organized or to be organized within the district
.where the principal office of the applicant is located, but before

granting such application, and from time to time thereafter, the
Board shall satisfy itself that no provision of the charter of such

applicant or of any law applying to such applicant prevents a
lawful compliance by the applicant with the requirements of this

Act and the regulations of the Board, and unless so satisfied the

oard shall refuse such application or require the retirement of
such depositor.

Before being admitted as a depositor, and during the period
when it shall continue as a depositor, each applicant shall comply
with the regulations promulgated from time to time by the Board,
and with the following requirements

To establish and maintain a reserve of the character
defined in this Act equal to twelve per cent, of its net deposits
as defined by the Board ;

To establish and maintain a paid-up and unimpaired

capital to an amount not less than that required of national



29

banks under the provisions of Section 5138 of the Revised Statutes, as amended ;

To be subject to such examinations of its books and
affairs as the Board may from time to time direct ;

To prepare and submit reports of its condition and
transactions at such times and in such forms as the Board shall
direct.

Upon the issuance of a certificate of authority by the Board

each applicant shall be entitled to have all the rights and privileges enjoyed by national banks as depositors in the Bank.

If at any time it shall appear to the Board that any such
applicant which has become a depositor has failed or ceased or
become unable to comply with the provisions of this section or
the regulations of the Board, it shall be within the power of the

Board to require such depositor to surrender its rights as a
depositor and to pay and discharge in full any and all of its
obligations to the Bank and to the United States.
No such applicant admitted as a depositor may surrender its
rights or withdraw from its obligations as such until after the ex-

piration of six months from the giving by it to the Bank of a
written notice of its intention so to do, nor unless and until it
shall have paid or discharged

in full all

indebtedness and

obligation of every kind owing by it to the Bank and to the
United States.
BANK EXAMINATIONS.

SEC. 30. That the Board shall, at least once in each calendar

year, cause an examination to be made of the assets and affairs



30

of every depositor, and more frequently if the Board shall consider

special examinations necessary, in order to furnish a full and

complete knowledge of the condition of any such depositor.
The reports of such examinations shall be made in triplicate, one
copy thereof filed in the office of the Comptroller of the Currency,

one copy in the principal office of the Bank and one copy in the

office of the branch of the Bank of the district in which such
depositor has its principal office.

The person assigned to the

making of such examinations shall have power to call together
a quorum of the directors of the depositor being examined, who

may he required to state under oath the character and circumstances of any asset or liability of such depositor.

All examiners,

their assistants and clerks, other than those appointed by the
board, shall be appointed and employed by the Executive Committees of the respective branches, subject to the approval

of the Board and for service within the districts where such
branches are located.

They shall receive fixed salaries, the

amounts whereof shall be ..determined by the Board.

The expense

of the examinations herein provided for shall be assessed by the

Executive Committee upon the depositors of the respective districts, in proportion to the assets or resources held by such depositors upon the dates of the examinations.

Upon request of any depositor the Executive Committee of

any branch may arrange for special or periodical examination
of its affairs, the cost and expenses of such examination to be
borne by such depositor.

All examinations, whether thus regu-

larly provided or specially authorized, shall be so conducted as to



31

inform the Bank of the actual condition of the depositor examined,

and the lines of credit being extended by such depositor, and any

other information essential to a knowledge of the condition of
such depositor, as may be required.

The Board shall, at least once each year, order an examina-

tion of each branch and sub branch, and a report of such
examination shall be made in triplicate and one copy thereof filed

in the office of the Comptroller of the Currency, one copy in the

principal office of the Bank, and one copy in the offices of the
respective branches.

Such examinations and reports shall be so

conducted and made as to exhibit the actual condition of the
assets and liabilities of the respective branches, and the amount
and character of their reserves, and of the amount, character and
maturity of all of their investments and rediscounted paper.

The Comptroller of the Currency shall, at least once in each

calendar year, make an audit and examination of the books,

accounts and affairs of the Bank, a report of which he shall
include in his annual report to the Congress.

The cost of such

examination shall be borne by the Bank.

No depositor, nor any officer, director or employe thereof,
shall make any loan or grant any gratuity to any examiner. Any
bank officer, director or employe violating this provision shall be
deemed guilty of a misdemeanor, and shall be fined not more than

five thousand dollars, and a further sum equal to the money so

loaned or gratuity given. Any examiner accepting a loan or

gratuity from any depositor shall be deemed guilty of a misdemeanor, and shall be fined not more than five thousand dollars,



32

and a further sum equal to the money so loaned or gratuity given,
and shall forever thereafter be disqualified from holding office as
an examiner for the Bank.

No examiner shall perform any other

service for compensation while holding such office, nor shall he be

an officer or director of any financial institution.

The Comptroller of the Currency shall file one copy of every

report made in accordance with the provisions of Sections 5211

and 5240 of the Revised Statutes with the Board, and one copy

in the office of the branch within the district in which the
respective depositors under examination have their offices.

Section 5241 of the Revised Statutes is hereby amended to
read as follows : "No association shall be subject to any visitorial

powers other than such as are authorized by this title, or are
vested in the directors, officers or employees of the Federal Reserve

Bank of the United States, or are vested in the courts of justice."
PROHIBITED COMPENSATION.

SEO. 31. That no officer, director or employe of a national
bank shall be beneficiary of or receive, either directly or indirectly,

any fee (other than the usual salary or (lirector's fee paid to such
officer, director or employe by the national bank and other than a
legitimate fee paid to an attorney at law for legal services) or any
commission, gift or other consideration other than as aforesaid for
or on account of his services, vote or influence as such officer, director

or employe, in connection with or in respect of any loan, purchase,

sale, payment, exchange or transaction with respect to stocks,
bonds, or other investment securities or notes, bills of exchange,



33

acceptances, bankers' bills, cable transfers or mortgages made by
or on behalf of a national bank of which he is such officer, director
or employe.

Any person violating any provision of this section

shall be punished by a fine of not exceeding $5,000 or by imprisonment not exceeding five years, or by both such fine and im-

prisonment, in the discretion of the court having jurisdiction;

Provided, that this restriction shall not be construed to cover
transactions in good faith and in the ordinary course of business
between a national bank and another national bank or a banking
firm or a state bank or a trust company.
POWERS OF NATIONAL BANKS.

SEC. 32. That from and after the passage of this Act any
national bank having a paid up and unimpaired capital stock of
not less than one million dollars shall be authorized to establish

agencies or branches in foreign countries, and such agencies or
branches shall be established and maintained under regulations
to be prescribed by the Comptroller of the Currency ; and any
national bank whose place of business shall be in a city of not less

than fifty thousand population shall be entitled to establish
branches within the corporate limits of the municipality within
which its principal office is located and

all national banks

shall be authorized to exercise such trust company powers and

functions as may be permitted by the laws of the state within
which its principal office is located.




34

REPEAL OF BOND REQUIREMENT.

SEC. 33. That so much of the provisions of Section fifty-one

hundred and fifty-nine of the Revised Statutes of the United
States, and Section four of the Act of June twentieth, eighteen
hundred and seventy-four, and Section eight of the Act of July
twelfth, eighteen hundred and eighty-two, and of any other pro-

visions of existing statutes, as require that before any national

bank shall be authorized to commence banking business it

shall transfer and deliver to the Treasurer

of

the United

States a stated amount of United States registered bonds
.be, and the same is hereby, repealed, and hereafter a national
bank, having retired all of its national bank note circulation, may

withdraw all United States bonds deposited with the Treasurer
of the United States.

From and after the organization of the Bank,

no national bank not having Government funds on deposit with it

shall be required to maintain on deposit with the Treasurer of

the United States any bonds of the United States in excess of
the amount required to secure the outstanding circulating notes of

the national bank.
EXEMPTION FROM TAX.

SEC. 34. That Sections 19 and 20 of the Act of February 8,
1875, shall be amended to read as follows :

" SEc. 19. That every person, firm, association other than
national bank associations, and every corporation, State bank,

or State banking association other than the Federal Reserve

Bank of the United States shall pay a tax of ten per centum



35

on the amount of their own notes used for circulation and paid
out by them."
"SEC. 20. That every such person, firm, association, corpora-

tion, State bank, or State banking association, and also every
national banking association, shall pay a like tax of ten per centum

on the rmount of notes of any person, firm, association other than

a national banking association, or of any corporation, State bank,

other than the Federal Reserve Bank of the United States, or of
any town, city or municipal corporation, used for circulation and
paid out by them."
SEC. 35. That all existing statutes relating to the control and

examination of the plates and dies for the printing of the notes

of national banks, and relating to destroying and replacing of
worn out, lost, stolen and mutilated notes of national banks, and

to the maceration of notes of national banks, and prescribing

penalties for imitating or mutilating all notes of the national
banks, and for counterfeiting notes of the national banks, and for

using or having conttol, custody or possession of any such

plates without authority, and for passing counterfeit circulation,

and

used

in

for

the

taking unauthorized
preparation

of

impressions

notes of

national

of

tools
or

having the same in possession, or for dealing in counterfeit
circulation, shall apply in all respects to the notes of the Bank
and to the plates, dies and tools of all descriptions connected with
the issuance thereof as fully and with the same force and effect as

such statutes now apply to the notes of the national banks and to
the plates, dies and tools connected with the issuance thereof ; and



banks,




36

all penal provisions of existing laws in connection with any acts
done with respect to any of the matters or things above described

shall be applicable to such acts done with respect to the matters
and things relating to the issuance of notes of the Bank.
REPEAL.

SEC. 36. That all provisions of law inconsistent with or
superseded by any of the provisions of this Act be, and the same
are hereby, repealed.
AMENDMENT.

SEC. 37. That the right to amend, alter, or repeal this Act is
hereby expressly reserved.

[10674]

i SESSION.

H.

R. 7837.

IN THE HOUSE OF REPRESENTATIVES., NOVEMBER

, 1913.

AN ACT
Toincerporate THE FEDERAL RESERVE BANK OF TIIE UNITED STATES,




establish banking districts, mobilize bank reserves, refund and re-

tire a portion of the national debt,:provide for an elastic currency,
afford means for rediscounting commercial paper, establish more
effective supervision of banking, 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 Federal Reserve Act)'
DEFINITIONS.

SEc. 2. The words and phrases used in this Act, except
where the context clearly indicates a contrary intention, shall be
defined as follows :

The word " Committee " shall mean the Organization Committee of the Federal Reserve Bank of the United States.

The word " Bank " shall mean the Federal Reserve Bank of
the United States and shall include all the branches, sub-branches
and agencies thereof.

The word " Board " shall mean the Board of seven directors

of the Federal Reserve Bank of the United States, known as the
Federal Reserve Board.




1a

The word " Branch " shall mean a branch of the Feder4
Reserve Bank of the United States.

The words "Executive Committee" shall mean the Execu,
tive Committee of a branch of the Federal Reserve Bank of the
United States.

The words "national bank" shall mean a national ba
.

.

a.33a3Lattoa now or hereafter organized or existing.

The word "depositor" shall mean

a bank or trust com-

pany, organized under the laws of state or the laws of the United

States relating to the District of Columbia, or such a national
bank, as shall have a deposit in the Federal Reserve Bank of the
United States.

The word " district " shall mean a banking district from time

to time created and designated by the Federal Reserve Marl
The words "net deposits shall mean net deposits as from
'time to time defined by the Comptroller of the Currency.
The words " sub-branches " shall mean subordinate office

branches of the Federal Reserve Bank of the United States.

The word " agencies " shall mean agencies of the Federal
Reserve Bank of the United States located in foreign countries.
ORGANIZATION COMMITTEE.

SEC. 3. That as soon a )racticable after the passage of this
Act the President shall appoint :a committee of five, to be designated

The Federal Reserve Bank Organization Committee

liallard-tIoniail=nzitizer The Committee

:

Shall select a Chairman and Secretary and such other
officers as it may deem necessary from its own members and appoint assistant officers, clerks and other necessary employes

Shall organize the Federal Reserve Bank of the United
States and branches thereof ;

2

Shall adopt a seal for the Bank, which shall, during

the process of organization thereof, be the seal of the Committee, and adopt seals for the several branches, wilich shall cor-

respond to the seal of the Bank With the name of the branch
added ;

Shall invite and receive popular" subscriptions at par to

the capital stock of the Bank,- in accordance with the provisions

of Sec. 5 of this Act and under regulations to be prescribed by
the Committee;
Shall make the certificate provided in Sec. 6 hereof

;

Shall do all other things necessary tO effect the corporate
organization of the Bank.

SEC. 4. That there is hereby appropriated out of any money

,

in the Treasury not otherwise appropriated, a sum sufficient to

establish and provide accommodations for the Bank and its
branches, not to eiceed five hundred thousand dollars for the
-

Bank ank_each branch thereof, and for the purpose of carrying out the provisions of this Act, in accordance with the following

limitations, viz : Each member of the Committee shall receive in
full compensation for his servides the sum of $10,000, besides his

actual and necessary traveling expenses, and in carrying out the

provisions of this Act the Committee is authorized to incur such

expenses as it shall deem., necessary, not exceeding the slim of
$250,000, all of which compensation and expenses shall be pay-

'able by the Treasurer of the United States upon vouchers apiroved by the Committee. The balance of the appropriation hdrein
'Made Shall be disbursed by the Board for the purposes herein set

forth, payments to be made by the Treasurer of the United States
'upon vouchers approved by the Board.




The total amount of

-

3

appropriation herein made shall, from time to time, be reimbursed

to the United States by the Bank from its net earnings after the
payment of dividends to the stockholders and before the establishment of a surplus fund.
STOCK ISSUE.

SEC. 5. That the capital stock of the Bank shall be
$100,000,000, divided into -444tiwer5ne million shares of a par

C

value of $100 each; such stock shall have no voting power, and

shall be free of all Federal, State, EMunicipal or other taxes,
except that the holders thereof shall ba" subject to the provision

of fedd: 'income tax laws with respect to the income derived
therefrom.

The holders of such stock shall be entitled to

dividends thereon"at the rate of five per centum per annum and

no more, which [dividends shall [be :cumulative
dissolution of the Bank such hol

upon

BIT receive the par amount

of such stock and all alance of the assets shall be paid. to the
United States.
Such stock shall be offered for popular subscription at par by
the Committee under regulations to be prescribed -13y it and within

six months after the passage of thisjAct.

In case the amount of

capital stock is over-subscribed, the Committee shall first allot the

shares of stock to the subscribers for the smallest number of

tr"

(Yr1 a4M617;;;ittea

shares.

SEC. 6. After the popular subscriptions to the capital stock

of the Bank shall have been Cosed, the Committee shall makean organization certificate specifying

(a) The names of the several subscribers to the stock, with

http://fraser.stlouisfed.org/
the number of
Federal Reserve Bank of St. Louis

shares 00.1iiiiilaM&4040-iiiy them respectively;
A

aittnt

4

(b) The form of stock certificate adopted by the Committee
and the methods for the transfer thereof and such other foot*. in

connection with the organization as the

Committee

may

determine.

Such certificate sh01

e executed under the mune of the

Committee by the ,chairAn4n and ,Secretary thereof and attested

with its seal and shall be forthwith transmitted to the Comp-

ducticteio

,troller of the Currency, who shall file, record and careful]
serve the same in his office.

SEC. 7. Upon receipt of such certificate, the Comptroller of
the Currency shall issue a charter of incorporation to the persons

who shall have been appointed by the President and confirmed

by the Senate as the directors of the Bank, which charter shall
contain a recital of the compliance with the pro.risionSOrtfurAct

by the Committee nndAthe Subscription to the capital stock of
$100,000,000 of the Federal Reserve Bank o

tad- Sta1es1----

and. the issuance of such charter by the Comptroller of the Currency, countersigned by the Secretary ofthe Treasury, shall complete the corporate organization of The FeZleral Reserve Bank of

the United States,

Upon such organization,. the Board and their

successors and the stockholders of the Bank as they may
from time to time exist, shall be n, body corporate, to be known

"The Federal Reserve Bank of the .United States," to have a

term of existence of fifty years from the date of the issuing of
the organization certificate by the Comptroller of the Currency,

countersigned by the SeCretary of the Treasury, to have
the power to contract, to sue and, be sued, to acquire, Own, lease,
and hold such real and personal property as may be nece_wary for



its business, to buy, sell and deal in gold and

9 rei

bullion,

$ if4 moorgek

5

promissory notes and other evidences of indebtedness, and to dis,

count notes, bills and acceptances, and to have such further
powers, privileges and functions as are hereinafter specified in this
Act.

The bank shall be located in the City of -Washington, D. C.,

and shall have twelve branches located in cities selected by the
Board and sub branches wherever designated by the board.
-

SEC. 8. The government and control of the Bank shall be
and hereby is vested in a board of seven directors to be known
as the Federal Reserve Board, whose powers shall be the same
as those conferred upon boards of directors of national 44,414;44.g,

-fts.s44is under existing law not inconsistent with the provisions of this Act. Such directors shall be appointed and one of
them shall be designated as Governor and another of them shall

be designated as Dvn_ty Governor by the President of the
United States all by and with the advice and consent of the
Senate.

Such selection shall be made from persons qualified by

experience and training for the proper :discharge of the duties
imposed upon them by this Act, and in making such selections
due weight shall be given to the vArious_commercial interests of

the different sections of the country, and at least three of the
members shall be persons of recognized wide banking and financial
experience.

The term of office of each member of the Board shall be
fourteen years, except that the terms of office of six of the persons

first appointed shall expire at the end of two, four, six, eight, ten,
and twelve years, respectively.

The President shall have power

to remove any member of the Board for cause after due hearing,
such removal and his reasons therefor to be communicated by him to

the Senate.


The Governor and the Deputy Governor shall, subject

C

kt,,7

to the supervision of the Board, be the active executive officers

of the Bank. No member of the 13oard shall be an officer
or director of any bank or banking institution, or hold stock in

any bank or banking institution, and before entering on his

kzi

duties as a member of the Board, he shall certify under oath
that he has complied with this requirement.

Vacancies caused

by death, resignation, retirement or removal of the Governor
Deputy Governor or other members of the Board, shall be filled
by the Presidentiby*nd. with the advice and copsent of the Senate, and persons appointed to fill such vacancies shall hold office foP---- ae6Afr/

the unexpired term of the member to whose place he is appointed.
Members of the Board shall take an oath of office . 171iicli shall be

filed with the Ckiptroller of the Currency,

4

devote all their....,0

time to their official ditties,--and shall retire at the a e of seventy
years.

The Governor, or in his absence the Deputy Governor,

shall act as Chairman of the 43oard.

The salary of the Governor

and Deputy Governor shall be $17,500 and $16,000 per annum,
re
............2pectively, and of the other members of the Board
annum.

15,000 per

The Board shall make report annually of the operations

of the Bank to the Speaker of the House of Representatives,
.Gryn

The Board shall 44k-a -date --AQ:t within si:s. months

after its appointment and qualification, upon which subscriplion,
to the stock of the Bank shall be paid in full.

Such date may be

extended by the Board with the approval of the President of the
United States.

Any subscriber failing to pay for the shares allotted to him
by the Committee shall forfeit his right thereto and to his five

per cent, deposit which deposit shall be so forfeited to- the




7

Bank, and such shares may th Tupon be alotted by the Board

to other subscribers.

Eve

subscriber shall accompany his.

subscription with cash or a certified check for five per cent, of
the total amount thereof
to 12t forfeited ii.-,n,Lfailia.r.e.a.----ti+eRITbscriber-trrparhis -sub's-mt.=

tioadu_aillar-the-aulgit444.-144444444-4thn.

The proceeds of the

five per cent. payment of the stock subscription, shall be depos-

ited in national banks to the credit of the Committee, and by the

Committee assigned and transferred to the credit of the Bank
Upon its organization.

In case the full amount of the capital stock shall not hare
been subscribed for and paid for in fall, the Board shall forthwith

allot the portion so unsubscribed and paid for to the several
national banks then in existence in proportion, as nearly as may

be convenient, to their respective amounts of capital, and each
such allotment shall fix a liability upon each of the said national
banks to subscribe for and take the number of shares so allotted,
such liability to accrue as of the date of such allotments.

Upon the payment of the ninety-five per cent. residue of th e
stock subscription, the proceeds shall- be depysited with national

banks by and to the credit of the Bank, and shall be so kept
on deposit pending the opening of the Bank for business.
BRANCII RESERVE BANKS.

SEC. 9. That the Board shall create and designate in the
continental United States, exclusive of Alaska, twelve banking
districts for the purpose of establishing within each of such districts

a branch of the Bank. Such districts shall be established with
due regard to the convenience and customary course of business of



8

The community and shall not necessarily coincide with the boundaries.

,,f such state or states as may be wholly or in part included within:
:).ny given district.

The Board shall also establish within

each district a branch off the Bank which shall be designated by
prefixing the name of the city in which such branch is established

to The words " Branch, Federal Reserve Bank ". The number

of strch branches and of such districts maybe reduced by the
-Board when in its judgment the interests of trade and commerce

so require; and in like manner the number of such branches
and districts may be increased by the Board after two years from
the time of the organization of the Bank.

The management of such branches shall be vested in an
Executive Committee consisting of five persons to be appointed

by the Board, who shall be residents of the districts in which
they' serve, shall devote all their time to their official duties, and

shall retire at the age of seventy years.

Each member of

Executive Comrnittet before entering upon the discharge of

duties shanake an oath of office which shall be filed with the
Board.

The term of office of each member of such Executive

Committee shall be ten years, except that terms of office of four
of the persons first appointed by the Board upon each such Execu-

tive Committee shall expire at the end of two, four, six and eight
years, respectively.

The Board shall fix the compensation to be

received by the members of the Executive Committee and shall
Mesignatecl1/4....2!,i22:2211d vice-chairman for each Executive
Committee.

The chairman, or in his absence the vice-chairman;

shall preside over the meetings of such Executive Committee and

subject to the supervision of the Executive 'ComMittee, shall be

the active executive officers of the branches. The Executive



9

Committee shall have authority

establish

to
discon-.

districts ,t4ryer--

tinue sub-branches, within their respective
ta--f,14.e-e+rrt,errfrl--a--4+e--Bes#4.

and

No member of an Executive

Committee shall be an officer or a director of any bank
institution,

or banking

banking
as

member

hold

stock

any bank

in

or

and, before entering upon his duties

institution

a

or

of

such

Committee,

he

shall

certify

under oath that he has complied with this requirement.
Vacancies caused by death, resignation, retirement or removal shall

be filled by

the Board and any person appointed to

fill

such vacancy shall hold office for the unexpired term of the

to whose place he is appointed.

member

ecutive Committees_, pay be

Members of Ex-

summarily suspended and sub-

sequently removed for cause by the Board after due bearing
Each such Executive Committee shall annually make a report
of the operations of its branch to the Bard to lie by t.144)44
mitted with#44.e:
of Representatives.

anig"---)---A-ial report to the Speaker of the House

Such report of the Executive Committee

shall contain reports from each sublvanch established in. the
district.

All actions of the Executive Committees shall be subject to
the approval of the Board.
POWERS OF THE FEDERAL RESERVE BOARD.

10.

SEC.

That the Board shall be authorized and em-

powered :

To govern and control the operations of the Bank ;

To supervise and control the actions of the Executive
Committees




.10

,(c) To supervise and regulate the issue a4 retirement qf
notes of the1.31,Jak, and to pveseribe the form, tenor and denomi.----'"
nationtof such notes;

To suspend,tin an emergency all reserve requirements of

ail air&

Gr

the J3ank for thirty days, and to continue such suspension for
periods not to exceed flfteen dap;

To suspend in an emergency all reserve requiremen,ts
relative to National Banks for thirty days, and to continue such
suspension for periods not to exceed fifteen days;

To examine, at its discretion, the accounts, books and
affairs of depositors;

it

To call for statements of condition of all depositors,
in such form as pi.er-may prescribe;
(11) To open and maintain banking accounts in foreign coun,

teies, to establish agencies in foreign countries and to make regu-

lations for the conduct of the foreign business of the branches

VAC

a/71.

through such agencies.

The enumeration of the powers bereiiiabove set forth shall

not be deemed to be a jon upon the general authority of
the Board to perform W." the duties, functions or services specified
all
or implied in this Act.

art~.

SEC. 11. That The net earnings of. the Bank, after deducting

takes, expenses and proper reserves against the acquisition of
permanent property, shall be devoted, first, to the payment of a
five per cent, cumulative dividend upon the .stock, and second,

after the reimbursement to the United States of the advances
appropriated under Sec. $ of this Act, to the accumulation_of a

A

surplus of Twenty million dollars, and after the accumulation of
such surplus, one-half of such earnings above said dividend require-




4

ments shall be paid to the United States and the other one-half
devoted to the accumulation of a further surplus until the total
surplus reaches Fifty million dollars, and thereafter all earnings

beyond such dividend requirements shall be paid tothe United
States so long as such surplus is maintained. The earnings so

distributed to the United States shall be applied by the Secretary of the Treasury, not more than three months after the receipt

thereof, to the redemption of outstanding bonds of the United
States, after advertisement published in each district at least once
a week for four successive weeks immediately preceding the date

fixed for such redemption, which advertisement shall call for the

tender of bonds, and the Secretary of the Treasury shall thereupon in his discretion purchase of the bonds so tendered those
offered at the lowest prices up to the amount of such earnings in

c-

his hands at suCh redemption date.

afeet

BUSINESS OF THE FEDERAL RESERVE BAN-E.

SEC. 12. The Bank shall sconduct business solely with the

United States Government, with the National banks, and with
such other banks and trust companies as may from time to

be permitted to deposit their reserves with the bank, except as
otherwise provided in this Act. The accounts and transactions of
c epositors shall be confined to the branch and subbranches of

itO Cal C46) tot/

the banking district inwhichAoiz.

Ste. 13. That the Bank- shall be the fiscal agent and sole
Wow
deposit ry of the
except that for purposes of
collection and transfer only the Secretary of the Treasury may
designate national

it ories.


bngaIoamtioac

as Government depos-

ant7i)
44-tdeo

ase--

The Secretary of the Treasury shall gradually effect a trans-

fer of the general fund of the Treasury to the Bank, which
transfer shall be completed within twelve months after the organ-

ization of the Ilank. Such transfer, however, shall not include

the five per centum fund for the redenifition of outstanding
national bank notes, nor that portion of the general fund of the
Treasury held by government depositories or balances of disbursing

officers in the insular possessions or territories of the United
States so long as no branch of the Bank exists in such possessions
or territories.

On and after a date to be determined by the Secretary of the

Treasury and the Board, but not later than six months from the
organization of the Bank, all the revenues of the United States
8bitil be regUldity deposited in the Bank and disbursements shall
be made by ehe-el.'s drawn Nsgainst such deposits, except revenues

and disbursements in the insular possessions and territories of the

icetient 1029096
2uirtte

United Stat.
SEC. 14. That the Bank shall be required to maintain in
behalf of the national banks Which have notes in circulation the
five per centum redemption fund held in the general hind of the

United States Treasury and any defieiencies in the said fund

shall be forthwith paid by the Bank to the Treasury of the
United States upon demand and the Bank Shalt be forthwith
reimbursed by the national
such payment is made.




in whose behalf

)4(.1aNdeit)

13

GENERAL FUNCTIONS OF THE FEDERAL RESERVE BANK.

SEC. A. That the Bank shall have power :

To purchase and sell the obligations or other securities
of the United States, as defined by Section 5413 of the Revised

Statutes, and also such of the obligations of the Territories and
Insular possessions of the United States as are guaranteed prin.

?&Cd.

cipal and interest by the United States ;

To purchase, sell and deal in gold coin an

u lion, to

?ea.

make loans thereon, and to contract for loans of gold coin and
bullion, with or without giving security therefor, which security
may include the bonds and other obligations of the United States
owned by the Bank ;

To receive from any depositor for deposit or collection
current funds in lawful money, national bank notes, notes of the

?it& Crt

Bank, or checks71.6. drafts tapommaxwignisonts payable upon
presentation

ef--9.4eaiLto-Pt

With the _acceptance or endorsement of any depositor,

to discount notes, drafts, and bills of exchange arising out
of

transactions,

commercial

such

notes,

drafts

and bills

to be of a character to be determined and defined by the
Board.

Such definition shall only include notes, drafts and bills of

exchange issued or drawn for agricultural, industrial or commercial

purposes, or which shall represent a bona fide sale of agricultural
products or other goods, wares or merchandise, or which shall have

been issued for the purchase or sale of the bonds or other obliga-

tions of the United States.

Such definition shall not, however,

include notes, drafts or bills of exchange issued or drawn for the
purpose of



.

-*

agricultural products or other goods, wares or

eijiitg

attt:4*

14

-merchandise, or for carrying or trading in stocks, bonds 9r inyest,
ment securities, other than the bonds and obligations of the Unite(il

States. Notes, drafts and bills of exchange admitted to rediscount,

as so defined under this paragraph, must mature within not ex,ceeding ninety days from the date of ediscount.

With the acceptance or endorsment of any depositor
to discount notes, drafts or bills of exchange which are based
upon the exportation or importation of goods, ...v,aixes,,--nirrcban7

dise or agricu ural products, as determined and defined by the
Board, end which matureWithin not exceeding six months from
the date o

is,count;

To purchase from depositors and to sell with or with,
out its endorsement, bills of ex,change arising out of commercial

transactions as **mined and defined by the Board and payable in foreign countries, but such bills of exchange must mature

in not exceeding ninety days from the date of the purchase and

must bear the signature, endorsement or acceptance of two or
more responsible parties, of which at least one shall be that of a
depositor ;

Under rules and regulations prescribed by the Board, to
purchase and sell in the open market, either from or to depositors

or through its Agencies or from or to horoiri banks, firms, corporations or individnals,notes, drafts and bills of exchange of the
kinds and maturities by this Act made eligible for re-discount, and
'cable transfers;

To open and maintain banking accounts in foreign countries, and establish agencies in such countries, for the purpose- -of
purchasing, selling, collecting, and dealing in foreign bills of ex-

change, gold coin and bullion, and cable transfers, and to buy and




iN"

15

sell, with or without its endorsement, through such correspondents

or agencies, prime foreign bills of exchange, arising out of commercial transactions, as may be defined by the Board, which have

not exceeding ninety days to run, and which bear the signature,
acceptance or endorsement of two or more responsible parties.
DOMESTIC EXCHANGES.

SEC. 16. That the Bank shall receive at par all checks,
drafts or other obligations of the Bank and each

branches or sub-branches.

its

The Executive Committee of each

branch shall flom time to time, subject to the approval of the
Board, determine and publish exchange and collection charges to
be made with respect to all checks, drafts and other exchange and
collection items of bank-a and +runt co..n ..riv,s---erthertban those

Itotialitia4444.iiieerll received in accordance with paragraph
(0, Section 15 of this Act. Such charges shall not be in excess
of the approximate actual cost of collection of such cheeks, drafts

and other items.

SEC. 17. That the Bank shall' have a first and paramount

lien upon all of the assets of every national bank for all debts
and liabilities due from it to the Bank, except as to the claims of

the United States, and the Bank shall likewise have a first and
paramount lien upon all the assets of every other depositor

for all debts and liabilities due from it to the Bank, except debts

due by such a depositor to the United States and to the State
of its incorporation, and except with respect to trust funds
held by trust companies.



of

16

LIMITATIONS OF DISCOUNTS.

SEC. 18; That no depositor shall be

ntitled to discount

itotes, drafts, bills of exchange of ace p ances, with the Bank, in

excess of the amount of the

nimpaired capital and surplus of

such depositor, nor shall the aggregate of such notes, drafts, bills
of exchange, and

acceptances, upon which any one person,

company, firm or corp'Oration shall be primarily liable tediscounted for any one depositor, at any time exceed ten per centum

of the unimpaired capital stock and surplus of such depositor;

but this restriction shall not apply to the discount of bills of
exchange payable outside of the continental United States, drawn
in good faith against existing values.
RESTRICTION OF 'INDEBTEDNESS OF NATIONAL AND STATE BANK

rtiterlarsb-oriTrittrs.

SEC. 19. That no national bank shall at any time be indebted

or in any way liable to an amount exceeding the amount of its
;.

capital stock at such time actually paid in and remaining

undi--

minished by losses or otherwise, except on account of demands of

the nature following :
Notes of circulation ;

Moneys deposited with or collected by the national bank;
(0 Bills of exchange or drafts drawn against credits due the
national bank, or money actually on deposit to the credit of the

national bank or due thereto;

(d) Liabilities to the stockholders of the national bank fOi.


http://fraser.stlouisfed.org/
dividends and
Federal Reserve Bank of St. Louis

reserve'profits ;

17

Liabilities incurred under the provisions of paragraph (d),

Section 15, of this Act;

Liability as endorser on notes, drafts and bills of exchange, arising out of commercial transactions, as defined in para-

graph (f), Section 15, of this Act ;
Liability as acceptor of drafts or bills of exchange, subject to the limitations of Section 20, of this Act;

Section 5202 of thelRevised Statutes of the United States is
hereby repealed.

Depositors other than national banks, shall be subject to the
limitations defined in Section 18 of this Act.
ACCEPTANCES.

SEC. 20. That any national bank may at its discretion accept

drafts or bills of exchange drawn upon it, having not more than

six months' sight to run, and growing out of commercial transactions as described in this Act and as defined by the Board, but

no national bank shall accept such drafts or bills of exchange to
an amount at any time exceeding in the aggregate one-half of its
paid-up and unimpaired capital stock and surplus.
CIRCULATING NOTES.

SEC. 21. That the Bank may issue its circulating notes, which

shall be receivable at par in all parts of the United States in
payment of all taxes and excises and all other dues to the United

States and also for all salaries and other debts and demands

owing by the United States to individuals, corporations and
associations within the United States and its possessions except
interest on the public debt.




Such notes shall be a first lien on all

18

of the assets of the ILIA and shall be redeemable on demand at

any office of the Bank in lawful money of the United States.
As long as any such notes are outstanding the Bank shall segre-

gate in its own vaults and carry in a special reserve account on
its books gold coin or gold bullion or United States gold certifi-

elites to the amount of tte face value of the notes from time to
time so outstanding or, at its option, shall so segregate gold coin
or gold bullion or United States gold certificates to the amount of
not less than

jier centum of such face value and collaterals

consisting of promissory notes and bills accepted for rediscount

104t

Under the provisions of Sec. 15 of this Act, or refunding notes
Of the United States, hereinafter provided for, or both such collaterals and refunding notes, equal at the face value to 4:05: per

- CAI 60441.0064.4

Aiit of the face value of the notes from time to time so outstanding.

Such collaterals may be exchanged from time to time for

other collaterala or refunding notes within the limitations afore.
said and of equal face valae.
1311INTING7 DENOMINATIONS AND FORM OF THE CIRCtLATING NOTES

OF THE BANK.

SEC. 22. That in order to furnish suitable notes for the Bank,

the Comptroller of the Currency shall, under the direction of the
Secretary of the Treasury, cause plates and dies to be engraved, in

the best Manner to guard against counterfeiting an fraudulent
'alterations, and shall 'have printed therefrom, itiihon the distinctive

or special pal5er which has heretofore ormay hereaftel e lawfully
adopted. bY him for printing United States notes, and numbered,
such quantity of notes, in blank, of the denominations of five



'dollars, ten dollars, twenty dollars, fifty dollars, one hundred dol-

4ery,1

19

lars, five hundred dollars, one thousand dollars, and ten thousand

dollars, as may be required by the Bank. .goolifterTirail
o oamo.

Such notes

u er
alla.14.111.e..4411:41

shall cla:=

A-

'

express upon their face the promise of the b

o pay on

demand, attested by the written or engraved signature of the
Governor or D3paty Governor and Cashier and bear the engraved
imprint of the seal of the Bank.
RESERVES OF NATIONAL BANK4ftitr,Jeerirrirrrr.

SEC. 23. That from and after a date to be fixed by the
Board, in no event longer than five years nor less than thirty
'months from the date of the organization of the Bank, all national

banks shall be required to keep and maintain a reserve of not

less than twelve per centum of their net deposit liabilities, as
defined by the Comptroller of the Currency.

Any part of such

reserve, but in no event less than one-half thereof, may consist of

a deposit with the Bank, and the remainder shall be in gold and
lawful money in the vaults of theThational bank.

From and after the organization of the Bank the Board
'shall effect as rapidly as it may deem wise under commercial

conditions from time to time existing, and complete within

the periods herein provided, the change to the minimum
reserve requirements above set forth.

Such change shall be

effected by the publication of notices to all national banks

which shall state the percentage of the total reserve which
must thirty

444riiii.44.

thereafter, and until further notice, be

deposited with the Bank,



4-411eamount which thereafter may

-20

be held in gold or lawful money in its vaults. Such requirements,

however, shall fairly consider the commercial and industrial :confri\

ditions of the country and its 'various sections and be: so apportioned and determined as to cause the least restrictions upon the

fte

business of national banks, and compliance with such directions

of, the :Board shall be mandatory upon national banks, and itn
such direetion the Board shall give due weight to the distinctionS

recognized under existing laws between country banks, reserve
city banks and central reserve ,city banks, but sucli directions shall

be uniform with respect to banks

ach of such classes.

SEC. 24. That from and after the organiiatio ----------the

BeP. 1=VO Bank no action shall be taken under the provisions of

Section 1 of the Apt of March 3, 1903; or Section 2 of the Act of
March 3, 1887, providing for the designation of cities as additional
reserve cities and additional cexitral reserve cities, respectively, and
from

and after the establishment of the new minimum reserve

provided in this Act the classification of national banks., as now
provided. by Section 5191 of the Revised Statutes of theVT-n1 ed
States,

.amended shall be abolished.

SEC. 25. That the Bank shah establish and maintain at all

times a reserve equal to not less than fifty per centum of the net
deposit liabilities of the Bank.

Such reserve shall consist of gold

coin, gold bullion, United States gold certificates, and lawful
money of the United States.
RATES OF DISCOUNT,

SEC. 26.

The Board shall establish from time to time a

normal rate of discount which shall be uniform at branches




and sub branches of the Bank, except as herein provided, and the

lbre
cee,i-A.e:ortz

2

Board shall renew or change such normal rate at stated meetings..

to be heal atileast once in each week and shall immediately pub,
lisli the norm d rate _so renewed or changed.

The normal rate of

discount so-established shall be charged by the branches and sub

branches of the Bank to depositors with respect to. all rediscounts of such depositors up to an amount not exceeding the
amount of

per centum of the unimpaired capital grid surplus of

each such depositor ;-

and the rate of discount charged by the
__,---

bnaily33 all subbranches of the baii-pon all rediscounts in excess of such twenty per centAshall be increased by the Board for
each ten per canof increase in such rediscounts aloove such twenty

per cen, The additional rates of discount established by the
Board upon such rediscounts in excess of said twenty per cent/L-

arm/

ki-tv

shall in like manner be uniform throughout-ther but such
additional rates may be established by the Board in progressive y

e0144--d

increasing amounts for each ten per cent of excess rediscounts

above the said twenty per cenAt and such additionf"-'

discOunt above the normal rate shall, in like manner, be publisTed

arh,

from time to time by the Board. s
REFUNDING NOTES

SEC. 27. -vie Secretary of the Treasury is hereby authorized
and directed to refund one-half of the 2 per cent. United States bonds

...

having the circulation privilege and on deposit with the Treasurer of

the United-States to -secure National bank note circulation at the

date of the organization of the Bank. He shall accomplish such
refunding by the issue of refunding notes.

Such refunding notes

shall be a direct obligation of the United States, shall bear
interest at the rate of three per cent6per annum, shall be payable




14,k)%001-

1,7v`
Tne Secretary of the Treasury is further hereby authorized
11,i

and directed to refund such of the two per centum United
States bonds having the circulation privilege, the refunding of

which is not hereinbefore provided for. He shall accomplish

such refunding by the issue of bonds.

Such bonds shall be

a direct obligation of the United States, shall bear interest
at the rate of three per centum per annum, shall be payable
in gold coin of the present standard of weight and fineness,
shall mature twenty years from the date of issue thereof, shall

not have the circulation privilege, and shall be issued under
regulations to be prescribed by the Secretary of the Treasury as

to the form, tenore nature thereof. Both the refunding notes

Oft, 07,1,wyN 0, ilArvov

and the three per centum bonds hereinabove authorized shall be
exempt from Federal, State, municipal and other taxation both as

to income and principal.

The Secretary of the Treasury shall

upon the first day of July, nineteen hundred and fifteen, and annually thereafter, under regulations to be prescribed by him, allot
among the several National banks,_in proportion-to tile---respeCtive

amounts of their circulating notes outstanding upon such dates,.

st

an aggregate amount of two per centum United States bonds with
the circulati

privilege, which such banks shall be entitled to ex-

change for the three per celitaii United States bonds hereinbefore
authorized, provided, that in no one-year shall he- allot a greater ag-

gtegitte amount than twenty million 'dollars thereof, and upon the
receipt of such two per centum bonds from such National banks, the
01.r.

Secretary of the Treasury shall effect the exchange.

Should any

National bank fail in any year so to exchange its full allotment of

two per centum bonds for the three per centum bonds as herein



provided,,the Secretary of the Treasury may permit any other

/Le--

I

National bank or banks to exchange bonds in an amount equal-to,

the deficiency caused by the failure of any one or more banks to
make exchange in such year.

At the expiration of twenty years

from the passage of this Act every holder of United States two
per centum bonds then outstanding shall receive payment therefor

at par and accrued interest, and thereafter such bonds shall carry
no interest.

Nothing contained in this Act shall be construed to

alter, impair or restrict the circulation privileges now given by
law to any bonds of the United States.




Immediately after purchasing such bonds the Bank, under
regulations to be prescribed by the Secretary of the Treasury and
the Board, shall, from time to time, a3 and when the national bank

notes secured by such bonds are redeemed, exchange such bonds
with the Treasurer of the United States, to an amount not exceed-.

ing at par the aggregate amount of the face value of such redeemed notes.

Such exchange shall be for an equal amount at

par of refunding notes hereinbefore authorized, and simpillir




,22

in gold of the _present standard of weight and fineness .and only

at the Bank or any of its branches, and ,shall mature at variious

periods as determined by the Secretary of the Treasur not
exceeding one year from their re,spective dates of iss e, and shall
be issued under regulations to be

7.
prescribedlithe Secretary of

,a(

ihe Treasury as to the form, tenor n denomination thereof ;
provided, that such notes may, at the option of the Sectetary of

the Treasury, be extended for periods of one year during a
period of twenty years from the date of the organization of

le

Bank.

SEC. 28. That the Bank shall from time to time purchase from

the several national banks at prices not exceeding par and accrued

interest two per cen

bonds of the United States up to an

amount not exceeding one-half of the total of such bonds on

deposit at the date of the organization of the Bank with the
Treasurer of the United States to secure circulation of
witionnl hanlis.

st.,1t

Such purchases sshall be made from the several

national banks up to amounts not erceedinglthe par value of one

half of the amounts of bonds owned by the respective national
banks and seeming their circulations outstanding at the date of

the organization of the Bank, and thereupon the Bank shall be
responsible for the redemption and retirement of the notes of each

such national bank to the amountof the purchase price of the
bonds, less interest, so purchased from it, which responsibility
shall constitute payment to such national banks,-:respectively, for
such bonds.

the Bank shall,

Immedi tely after purchasing such b



under reoulati ls to be prescribed by the
1

1

ecretary of the
4-111

MsA

(04:4A1 'garvtufir'

23

of tito UnitecL.ator- an equal anuulat.patorptivr.4-Refifortimirg
,upon the maturity of any such

Refunding Notes the Bank shall pay such Notes, for the account

of the United States, to the holders thereof, but it shall, at the
option of the Secretary of the Treasury, for a period of twenty

years from the date of the organization of the Bank, in lieu of
reimbursement for such payments., accept in exchange for such
Notes new Refunding Notes of an equal aggregate amount and of
analogous form and tenor.

The Bank shall pay semi-annually to

the United States out of its earnings and before reimbursement
of advances made by the United States under the provisions of
Sec.

of this Act, a tax upon its circulating notes equal to ftri

amount of one and one-half per cen per annum, calculated upon

the amount of refunding notes from time to time so outstanding.
STATE BANKS AS DEPOSITORS.

SEO. 29. That from and after the --organization of the Bank
any bank or banking association or trust company organized under

any law of any state or under any law of the United States relating to the District of Columbia may make application to the
13oard and shall by the Board be authorized to become a depositor

in the branch organized or to be organized within the district
where the principal office of the applicant is located, but before

granting such application, and from time to time thereafter, the
Board shall satisfy itself that no provision of the charter of such

applicant or of any law applying to such applicant prevents a
lawful compliance by the applicant with the requirements of this




unless so satisfied the

21

Before being admitted,as a depositor, and during the period'
when it shall continue as a depositor, each applicant shall comply
with the regulations promulgated from time to time by the Board,
and with the following requirements

To establish and maintain _a_ reserve of the character

defined in this Act equal to twelve per cent, of its net deposits
as defined by the Board ;

--

To establish and maintain a paid-up and unimpaired
capital to an amount not less than that required under the pro-

visions of Section 5138 of the Revised Statutes 44-463-44/irtrtr
-St-Ae4, as amended ;

To be subject to such examinations of its books and
affairs ag,the Board may from time to time direct ;

To prepare and submit reports of its condition and
transactions at such times and in such forms as the Board shall
direct.

Upon the issuance of a certificate of authority by the Board

each applicant shall

Qe1titlecLto have all the rights and

privileges enjoyed by national banks as depositors in the Bank.

If at any time it shall .appear to the Board that any such
Applicant wh has become a depositor has failed or ceased or
unable
become unable to comply with the provisions of this section or
the regulations of the Board, it shall be within the power of the

Board to require such depositor to surrender its rights as a
depositor and to pay and discharge in full any and all of its
obligations to the Bank and to the United States.
No such applicant admitted as a depositor may surrender its

rightAor withdraw from its obligatione=ch until after th




liration of six months from the aivin b it to the Bank of a

eaftkx

25

written notice of its intention so to do, nor unless and until it

shall have paid or discharged in fall all indebtedness and

obligation of every kind owing by it to the Bank and to the
United States.
BANK EXAMINATIONS.

SEC. 30. That the Board shall, at least once in each calendar

year, cause an examination' to be made of -the assets and affairs
of every depositor, and more-frequently if the Board shall consider

special examinations necessary, in order to furnish a full and
complete knowledge -of the condition of any such depositor.
The reports of such examination shall be made in triplicate, one
copy thereof filed in the office of the

roller- of- the Currency,

one copy in the principal. office of the Bank and one copy in the

office of the branch of the Bank wthe district in which such
depositor has its principal office.

The person ass!gned to the

making of such examinations shall have power to call together
a quorum of the directors of the depositor being examined, who

may be required to state under oath the character and circumstances of any asset or liability of such depositor.

All examiners,

their assistants and clerks, other than those appointed by the
board, shall be appointed and employed by the Executive Committees of the respective branches, subject to

the approval

of the Board and for service within the districts where such
branches are located.

They shall receive fixed salaries, the

amounts whereof shall be determined by the Board.

The expense

of the examinations herein provided for shall be assessed by the



Executive Committee upon the depositors of the respective dis-

The Comptroller of the Currency shall, at least once

in each calendar year, make an audit and examination of the

books, accounts and affairs of the Bank, a report of which he
shall include in his annual report to Congress. The cost of such
examination shall he
by the Bank.




26

Upon request of any 4epositor ,the Executive Committee of

any branch may arrange for special or periodical examination
of its affairs, the cost and expenses of such examination to be
borne by such depositor.

All examinations, whether thus regu-

larly provided or specially authorized, shall be so cowlucted as to
inform the ;lank of the actual condition of the depositor examined,

and the lines of credit being extended by such d positor, and an

pther information essential to a knowledge of the condition of
such depositor, as may be rewired.

The Board shall, at least once each year, order an examina-

tion of each Branch

branch, and a report of such
branch,
....._...

examination shall bk made in triplicate and one copy thereof led

1--_o __---

in the office of the Comptroller of the Currency, one copy in tl

principal office of the Bank, and one copy in the office o

___._

(11"-fThiS

respective Brands. Such examinations and reports shall be so
conducted and made as to 4,14,gelaseA the actual condition of the

assets and liabilities of the respective B ranches, and the amount

and character of their reserves, and a the amount, character and

maturityall of their investments and rediscounted paper.
epositor, nor any officer, director or employe thereof,Notgf

shall make any loan or grant any gratuity to any examiner. Any
bank officer, director or employe violating this provision shall be
deemed guilty of a misdemeanor, and shall be fined not more than

five thousand dollars, and a fmther sum equal to the money so

loaned or gratuity given. Any examiner accepting a loan or
gratuity from any depositor shall be deemed guilty of a misdemeanor, and shall be fined not more than five thousand dollars,
and a further sum equal to the money so loaned or gratuity given,




and shall forever thereafter be disqualified from holding office as

oLlo

27

an examiner for the Bank. No examiner shall perform any other
service for compensation while holding such office, nor shall he be

an officer or director of any financial institution.

The Comptroller of the Currency shall file one copy of every

report made in accordance with the provisions of Sections 5211

and 5240 of the Revised Statutes with the Board, and one copy

in the office of the Branch within the district in which the
OW,
respective depositors under examination have their offices.

Section 5241 of the Revised Statutes is hereby amended to
read as follows : "No association shall be subject to any visitorial

powers other than such as are authorized by this title, or are
vested in the directors, officers or employees of the Federal Reserve

Bank of the United States, or are vested in the courts of justice."
13/ROHII3ITED COMPENSATION.

SEC. 31. That no officer, director or employe of a national
bank shall be beneficiary of or receive, either directly or indirectly,

any fee (other than the usual salary 'or director's fee paid to such
officer, director or employe by the national bank and other than a

legitimate fee paid to an attorney at law for legal services) or any
commission, gift or other consideration other: than as aforesaid for

--

ør account of his service-srVOte or influence as such officer, director

orenomin connection with or in respect of any loan, purchase,
sale, payment, exchange or transaction with respect to stocks,
bonds, or other investment securities orfnotes, bills of exchange,
acceptances, bankers' bills, cable transfers or mortgages made by
or on behalf of a national bank of which he
or employe.

sfiCh officer, director

Any person violating any provision of this section




shall be punished by a fine of not exceeding $5,000 or by

28

ki such fine and im.
both
...-----'--

prisonment not exceeding five years, o
prisonment,

,......, _

the discretion of the co t having jurisdiction

Provided, that this restriction shall not be construed to cover
transactions in good faith-and in the ordinary course of business

between a national bank and another national bank or a
firm or a-state bank or a trust con )any.

SEC. 32. That from and after the passage of this Act any
national bank having a paid up and unimpaired capital stock of
not less than one million dollars shall be authorized to establish
agencies

or branches in :foreign countries,

uch :agencies

branches shall be established and maintained under regula ions to
be prescribed by the Comptroller of the Currency-

and

au y

national bank 'whose place ofbusiness shall be in a city of not less

than fifty thousand population shall be entitled to establish
branches within the corporate limits of the municipality, within
which its principal office is located and 43.1.kt...q11 national banks

shall be authmized to exercise such trust company powers and

functions as may be permitted by t4e laws of the state within
which its principal office is located<L
SEC. 31 That so much of the provisions of Section fifty-one_L

hundred and fifty-nine of the Revised Statutes of the United

iewal

States, and Section four of the Act of June twentieth, eighteen
hundred and seventy-four, and Section eight of the Act of July
twelfth, eighteen hundred and .:eighty-two, and of any other provisions of existing statutes, as

ire that before any

bankiaggaitmaimiu shall be authorized to commence banking

-to

business it shall transfer and deliver to the Treasurer of the

United States a stated amount of -United States registered bonds
be, and the same is hereby, repealed, and hereafter



CL/

66-r-tc.

/0

joiner-.

roo and after the organization of the Bank, no

national bank not hrviug Government funds on deposit with it
shall be required to maintain on deposit with *e Treasurer of

the United States ilnY bonds of the United States in excess of
the amount required to secure the outstanding circulating notes of

the national bAl'k.




,

29

bank, having retired a11 of its National bank note circulation, may

withdraw all United States CtiftWernMaft bonds deposited wall
e Trea urer of the United:State
SEC. 34. That Sexlywald_ Se_ 20 of the Act of Februtkry 8 __,,,...---:1179444)
4875, shall be amended to read as

That every person, firm, association other than national-bank associations, and every corporation, State bank, or State
banking association other than the Federal Reserve Bank of the

United States shall pay a tax of ten per :centum on the amount
of their own notes used for circulation and paid out by them."
SEC. 210, That every such person, firm, association, corpora,

tion, State bank, or State banking association, and also every
national banking association, shall pay a like tax of ten per centum

on theAmount of notes of any person, firm, association other than

tate bank

a national banking association, o any corporation

a."
4;(1

other than the Federal Reserve Bank of the United States, or of
any town, city or municipal corporation, used for circulation and
paid out by them. 9
SEC.

.

That all existing statutes relating to the control and

examination of the plates an dies for-fhb-Wiltingof the notm-

of national banks, and relating to destroying and replacing of
worn out, lost, stolen and mutilated notes of national banks, and

to the maceration of notes of national banks, and prescribing

penalties for imitating or mutilating all notes of the national
banks, and for counterfeiting notes of the national banks, and for

using or having control, custody or possession

of any

such

plates without authority, and.iver_z_issing counterfeit circulation,

and

used in

for taking unauthorized

impressions

of

tools

the preparation of notes of national banks, or




80

having the same in possession, or for dealing in counterfeit
circulation, shall apply in allrespects to the notes of the Bank
and to the plates, dies:and tools of all descriptions connected with

the issuance thereof as fully and with the saw force and effect as
such statutes now apply to the notes of the national banks and to
the plates, dies and tools connected with the issuance thereof ; and

all penal provisions of existing laws in connection with any acts
,tione with respect to any of the matters or things above described

shall be applicable to such acts done with respect to the matters
and things relating to the issuance of notes of the Bank.
REPEAL OLAVSA-

SEC. Or That all provisions of law inconsistent with or
superseded by any of the provisions of this Act be, and the same
are hereby, repealed.

AMENDMENT -OLAFIgE.-,`-'.4°SE0.0. That the right to amend, alter, or repeal this Act is
hereby expressly reserved,







Insert In Soo. 28;
12.01 boucle th. Bealk4unocr zw.-;ulations
to bo prom.,arlia#4 by ti-:a3 30arobary of ti y2 Trasury anti the Board, shall, il*ota time
I:m*4118;1;ely ai'ter platallaaluL:

to ti,

nd vht7n the .143.tiono,1 Janlz note° scoured try ol.i.oh bonds art-t redeonLed,

excal+iniA ouch bOnd0 With the Tre4, atgror of ti a
(mac:oiling

atatas, to az mount not

t 74)ar the argre9Mte =Cunt of %Ivo faoe wane of auoli redeene4 uttes.

tp.oh o:=Trace Ohall bo for on equal amount 8.t par of roftindine notea bereinbeore
author:1 zsd .oaid,




eta

ato.

Oec.

The Conptroller

in each calendar yea

tr.(' Currency shall. at least once

make an audit and exaninttion of the books, accounts

and. sZfairs of tho Pen17:. 'Alich he ahgl/ inoltIde in hia annual -report to
Congreee. The coat o




ouch examinatIon shall be paid by the

AtOrsatiall' CLIUVA.

See. 3:i.

tfshlt

the riptit to

Ileroby expreosly roaerved.




c_vrtencl, alter,

or repeal thlt 4ct

ntr2AL mom.
17sc. 32.

That n11 provisions of /e, inconsistent rith or suporsocied

by -try of tho provisions f this Act bo, end the sere are herob:T, ropel?deds

provided, thnt nothinc in this Act cant red ø'1l be construed to reptni
the parity provi ion or provisions contained ir en Aot nppreved :nrell fourtoonth, ninstoon hundred, entitled "An Act to define and fi7 the stondnrd

Of vnlue, to maintin the pnr1t7 of all ferns of rene7 issued or coined b:7
the Ih!tee Etatos, to refund the public debt, mi for other purposes."




rriatt;

NATIONAL BI1IE16

+ lorn°

Sec. 31. That from ad after the passage of this Act any national

banking association having a Paid up and unimtaired capital stock of not

less than one million dollars shall be autaorined to establish agencies or
branches in foreign countries and that any nntional banking association

Whose place of business shall be in a city of not less than fifty thousand

population shal/ be entitled to establish branches wIttin the corporate

limits of the municipality within which its principal office is located
and that all national bathing associations shall be authori7ed to exercise
such trust company' powers and functions as nay be pernatted by the laws

of the state within Which its principal office is located.




mat

Soc. 50. Thal no officer, direetor or ettplve or a national bilk

shall to beneficiary of or receive, eithor Irootly or Indiroctly, uny foo
(other thnn tho unool salary or director's The paid to ouch officer, director or employe by the national bank nnd other than m Itmitimate foe pi id

to an attorney at law for lona/ sorvicoo, or ony commission, gift 'w other
consideration other than, so aforennid for or on account of his orvioes,

vote or influence

in connection

or In rospect of any loan, purohoes, sale, payment, czchange or trInsAntion
with roziiot to stocks, bonds, or other investment toonritios or notna,

bills or ezobonge, acceptancoo, bnnkers' bill, cable tronsforo or mortgagee mode by or on behalf of a national bank of rtich ha Is boort officer,
director or employe.

4ny person violnting any. provision of thin section

shail ho punished by a fine of not

onedIng. 45,000 or by imprisonment not

emoseing five ?ears, or both &Inch fins and imprisonnant, in thp discretion

or the court having jurisdiction.

7rovide, that this restriction shall

not be construed to oovor transactions in good faith and in the ordinary
ocurne of business betncon a nations/ bmnk nnd another nations/ bank or
banking firm Or a stoto bank Or a trust




company..

First Revise.
27.411INATIONS.

Sec. 29.

That the Board shall, at least once in each calendar year,

COMBO an eeemination to be made of the assets and affairs' of eatery depositor,

and more frequently if the Board shall consider liseecial examinatioWneceseary

in order to tarnish a full arid complete knoeledee of the condition of any such
depositor. The reports of such examination shall be made in triplicate and

one copy thereof filed in the office or the Comptroller of the Currency,
One COpy in the principal office of the Bank and one copy in the office of

the branch of the Bank within the district in whioh such depositor has its

principal office.

The person assigned to the makine of such examinations

shall have power to call together a quorum of the directors of the depositor
being examined, who may be required to state under oath the character and
eireumstanees of any asset or liability of such depositor.

All examiners,

their assistants and clerks, other then those anpointed by the Board, shall be
appeinted and employed by the :executive Committee of the res,ective branches,

subject to the approval of the Board and fer service within the districts
where such branches are located.

They shall receive fixed salaries, the

amounts whereof shall be determined by the

Board.

The expense of the

examinations herein provided for shall be assessed by the :executive Committee

upon the depositors of the reseective districts, in proportion to the assets
or resources held by such depositors upon the dates of the examinations.
Upon request of

env

depositor the -,zecutive Committee of app.

branch =7 arranee for special or periodical examinations of its affairs, the
cost and expenses

of such examinetion to be borne hr

sudh

depositor.

All

examinations, whether thus regularly provided or epecially authorized, shall
be so /conducted as to inform the Bate of the actual condition of the depositor

exelned, and the lines of credit being extended by such depositor, and any



inations)

(Bank

2

other information easential to a knowledge of the condition of such depositor,
as may be required.

The Board shall, at least once each year, order an examination of each
Branch and of each sub branch, and a report of such examination shall be made

in triplicate and one copy thereof filed in the office of the Comptroller of the
Currency, one Copy in the principal office of the Bank, and one copy in the
Office of the reepective Branches.

Ouch examinatione end reports shell be so

oonducted and maxio oe to disclose the actual condition of the assets and

liabilities of the respootite Branches, and the anount and character of their
reserves, and of the amount, character and maturity of all of their investments
XJ14,

and discounted paper.

No depositor, nor any officer, director Or employe theroof, shell make

any loan or grant any gratuity to any exerainersgeoisedtirer. Any bank
officer, director or employe violating this proVision shall be deemed gutity of
a misderoanor, and shall be fined not more than five thourand dollars, and a f
further aam equal to the money so loaned or gratuity given. Any examiner
accepting a loan or gratuity from any depositor 4xmmtze*,Atrotirc shell be deemed

guilty of a misdemeanor, and shall be fined not more than five thousand dollars,
and a further mne equal to the money so loaned or gratuity given, and shell

forolear thereafter be dieouslifled from bolding office es an examiner for the
Dank.

To exardnor shall perform any other service for compensation while

holding such office, nor shall he be an officer or director of any financial

institution.
The Comptroller of the Currency shell file one cony of every report
made in accordance with the provisions of Sections 5211 and 5240 of the Revised

Statutes with the Board, and one copy in the office of the Branch within the

district it which the respective depositors under examination have their offices.



(Bank 7Aaminat1ons)

3

aectien 5241 of the Revised Statutes is hereby amended to rend a0
follows:

n110 association shall be subject to any visitorial powers other than

such as aro authorized by this ti40. or are vestedip,1142stors officers
or e lo os of the vederal lssorTo Bank of the

the courts of jurtlee.




ta

STATL BAN= g3 DEPOOLTORS.

Soo.

R.

Tnat from and after the organization of the Bank arty

bark or bat%inE, aseocial;lon or trust oompany orgarioed unceo sry law of
any eta/a or otrol,ir

llr of lobe United Statae rrleting to the r.istriot

of Oolumbia, viRe wako ap211oalAan to the Boqad are she'll by th. , Board be
mo.thorimed to b.eoom0

doperitor in the branch or6anised or to be organized

vi,,hin the dintrlet whore the offleeor -Wall applicant is 'coated, but be-

fore eantipc eudi arplicntion, end from ti; theresfter, the :!oar d sball
sativfy itnelf ftt Ti') orovoitien of the charter of much .t,pr.licant or of
any ler opplyinzo to each aloplioant prclionts a :metal oomplianoo by the

applicant with the requirements of this Aco and the re lalations of the

Board, and =less so satisfied tho :ward ahall refuse such application
or require the retirement of svoll depositor.
Before 'osing admitted as a depositor, and darinc the period when

It shall oontinue as a depositor, each appllohnt shall oomply with tho reg-

ulations promulgated fro time to tic by the Board, and with the following requirements:

To ostablish and maintain a reserve of the einractor defined

it this Act equal to twelve per cent. of its net deposits,
To establish and maintain a paid-up and unimpaired capital

to an amount not less than tnat required under the provisions of (:ection
5138 of the Revised Statutes of the united etates, as amended;
To be subject to such examinations of its books and affairs
as the Board may from ti on to time direot;

To prepare and submit reports of Ite condition and transactions at ouch times and in ruoh for

as the Board shall direct.

Mum the issue of a certificate of authority by the Federal Reserve
X4Ziot 4?

Boar).

,,,e4.0,4

-iopplyis64issAt shall become entitled to have all the rights

and privileges enjoyed by national banks as depositors in the Pederal Reserve



2.

Bank.

No such applicant admdtted as a depositor may surrender its

right or withdraw from its obLgation as such until after Vas expire,

tion of one year frois the giving by it at to the 3ank of a written no.-

tloo of its intention so to do, nor uhless aad until it shall have
val4 or discharged in fall all indebtedness and obligation of every
kind. owing by it to the !Auk and to the United States.

If at any ti ms it shall appear to the Board that any such
applicant who has becalm a depositor has failed or ceased to comply with

the provisions of this sootion or tile regulations of the Board, it shall
be 1,4thin the power of tee said Board to require mach depositor to sur-

render its rights as a denositor and to pr and discharge in full any and
all of its oblU;stions to the :lank and to the United States.




n'rt.v.r

Soo. 27. That the Mnk shall from tiro to tiro purohnse from the
:oocral national t0000 at priCou not 414t444 par nd oceured Internet too

per cent. bonds of the United :Antes up to an irozt not enceeOing one-

half of the total of voch Lando on dopositot the date of tho organigation

of the 3an with the 'reasuror of the :Jnitod Otaoes to secure_oirollotion
of such national bank°.

aucb purohosos ahol/ be made from the oovora

national banks up to amounts not coing the par value of one-half of
the =aunts or bonds 'cored by the roopective national banks and Nmuring

thoir eiroolations outstanding at the date of the organization of the Bonk
theroupon tho ZamO ahall be rosponsible for the redomption ald retiro-

nt of the notoo of ach such national bank to the amount or the purchoso

price of tbo bonds, less toteroot, ao porohased from it, +Joh responsibility shall constitute payront to such national bonos, rozpootivoly, for
such bonds.

Immediate:1y aftor ourohnsine such Lando, oho BanO shall, under rogu-

latiorc to bo proscribed by the Oneratary of the Treosury ve the Board,

Tr000urer
soohongo uoch bonds with the PalcOUNIXax of thoUnited Dtateo for on equal

amoont at pnr of kofunding rotes heretnOeforo authorised and upon the

moturity of any such lefunding !;)too the BatIr shall poo such WAGS, 'or

the Recount of the United btotos, to the holdors therrof, but tt ahill, at
the option of the :a.meretary of the Troaoury, for a period of twonty

poor&

from the date of the organization or the !Oink, in lieu of reinbursonont
for such payments, accept in oxchange f'or G;ich Votes now Pvfunding rotet

of an equal uggregato amoont and of analaoous form and tenor. The Balk
shall pn7 semi-annually to the Otitod states, out or its earnirgo ard
before reimborsenont of advancos mado by the Untted 5tates undor the
provisions of Oeo.
of this Act, tax upon its circuloting:

notes equal to
on =runt of one and ono-holf per cent. per onnum, calculated upon the
amount of roeunding notes from tiro to time so outstonding.



Soo.

That

from tbo ortAnisation of the Bon144 no

batik not bovine Govnramant fixndo on depoolt with it &loll b

rotd to

maintain on dopoolt with the TrotwOrme of *be thited Mateo ari7 bon& of the

United Statco in =soy of the amount rorllirod to seourt the aatstandinc
Oroulatinc notoo of tho National bank.




Add to the 2nd half of Seetion 27c

The Secretary of the Treasury is further hereby authorized and directed
to refund the balance of such of the two per contum United States bonds having

the circulation privilege:, the refunding of which is not hereinbefore provided

for.

He shall acoomplish such refunding by the issue of bonds.

Such bonds

shall be a direct obligation of the United States, shall bear interest at the
rate of three or centam per annnm, shall be payable in gold coin of the
present standard of weight and fineness, shall mature twenty years from the date of

issue thereof, shall not have the oiraglation privilege, and shall be issued. under
regulations to be prescribed by the Secretary of the Treasury as to the form,
tenor and nature thereof.

Both the refunding notes and the three per centum

bonds hereinabove authorized shall be exempt from Federal, State Iced municipal eeeci-e*

taxation both as to bloom and nrineleal.
6neeetet.

The seoretary of the Treaeury
NOE,A.

shall upon the first day of jUly, nineteen gam4aan, and. annually thereafter,
under regulations to be presbribed by Mn, allot amone: the several Fational
banks, in proportion to the respective amounts of their circulatinc notes
outstanding upon such dates, an aggregate amount of two per oentum bands

United states bonds with the circulating privilege, which such tanks shall be
entitled to 0:enhance for the three per centum United States bonds hereinbe fore
authorized, provided, that in no one year shall he allot a greater aggregate
amount than twenty million dollars thereof, and upon the receipt of tueh
per cent= bonds from such National banks, the Secretary of the Treasury ohall
effect the exchange.

Should any National 1)a:tit fail in any year so to exehange

its full allotment of two per oentum ands for the three per eentam bonds as
herein provided, the Seoretary of the Treasury seny permit any other National
bank or banks to exchange bonds in an amount eeual to the deficiency caused

by the failure of any one or more banks to make exchange in =oh year.

expiration of twenty years from the passage of this Act every holder of



At the

1,1)

-go. 27)

Mited 71;atos tro per gout= bonde thnn OrU1 eiU1 rgootre roratt thorefer
at par mxI. accrued int:err trt, and the rAladt;:
otrAtoriott

v4is mot total

titv tratagdtari. tIrt4411000




'31:

atr,11 7con:44;

be Mrgra74344 V44- 6,1***,.

rt. al=

eaanv

Lattlr'etvt

irmar or rcoltattat

fki,3aotv 1)036 re itho *AU* tioiyao,

Piret Revise.

4

AO

Sec. 26.

i'The
,

111121ZIDI1G

NOTES.

6 -Pir

secretary of the Treasury is hereby authorized and directed

to refund one-half of the 27, United States bonds having the circulation privilege a/0
din deposit with the Treasurer of the United States* to secure National bank note
cift!OS

circulation at the 44re/e of the organization of the Bank. He shall accomplish
such refunding by the issue of refunding notes. Such refunding notes shall be

a direct obligation of the United States, shall bear interest at the rate of
three per cent, per annum, shall be payable in gold of the present standard of
weight and fineness and only at the Bank or any of its branches, and shell
mature at various periods as determined by the Secretary of the Treasury not

exceeding one year from their respeotive dates of issue, and shall be iseued

under regulations to be prescribed by the Secretary of the Treasury as to the
form, tenor and denomination thereof

provided, that such notes may, at the

option of the Decretary of the Treasury, be extended for periods of one year
during a period of twenty years from the date of the organization of the Bank.




First Revise.

/tat
. "the Board shall establish from tile to time a normal rate
RATE OF DIMWIT.

Sea. A

of discount which shell be uniform at all branches andweill! sub branches of the
Batik, except as herein provided, and the Board Shall renew or Change such normal

rate at stated meetings to be held at least once in each meek and shall
immediately publish the normal rate so renewed or changed.

The normal rate

of discount so established shall be charged by the branches and sub branches

of the Bank to depositing banks and trust companies. with respect to all
rediscounts of eueh banks and trust companies up to but not exceeding the
amount of 20 per oentum of the unimpaired eapital and surplus of each such
bank or trust company;

and the rate of discount charged by the branches

and sub branches of the bank upon all rediscounts in excess of such twenty

per cent shall be increased by the Board for each ten per cent. of increase
in such rediscounts above such twenty per cent.

The additional rates of

discount established by the Board upon such rediscounts in excess of said

twenty per cent. shell in like manner be uniform throughout the country, but
eV444:74140

such rates may be established by the Board in progressively increasing amounts
A,

for each ten per cent, of excess rediseounts above the said twenty per cent.,

and such additional rates of'diseount above the normal rate shall, in like
manner, be published from time to time by the Board.




.

GEKIRAL MERVMS.

See. 24.

That the General Reserve

i4 of the 7oderal Reserve

Bank shall be established rad maintained at all time at not loss than fifty
per omit= of the total amoaat of the deposit llities and tho outstanding
notes of the bank.

3uoh reserve sh412 consist of gold coin OT bullion, mid

gold oortifloatos, Treasury notes, United States notes and silver oertitleates.




RESZITES OF 11A TIC

L 1.410:11iG

That from and after a enta to be fixed by the
No40,44-40ww.140Board, in no event longer than five years nor less than

thirty months from the date of te orGanization of tae 440ssrift'lMlIrlhr'

Bank, all national bor

,s,elseepotiksershall be required to 4eep and

maintain a reserve of rot less *i,par

eft.

liabilities, as defined 4.,-144,...Act.

lire per

ntr of its net deposit

QIM444At,
Such reserve shall consist, ftS to
44,

,,

one-half thereof, of a, deposit dth the ,Pe4erwerrtYlos_Aank, and. as

1146624

0A144

one-half of gold and lawful money in the vaults of the Bank, but the

entire amount of such reserve my ponsist of a deposit with the Peaseva
lireirerros Bank.

From end after the organization of the PedemT-TtrmwTro Bank
the 444eirs4-4.ieweloir4, ?:soare
.

ehallliffect as rapidly as it may deem wire

under commercial conditions from time to time existing, and within the
periods herein provided, the chanke to the minimum reserve reouirements

abovo set forth. Suoh change shell be effected by the publication of
notices to all national.m.N.otiolepa04,44AX0 which shall state the per-

centace of the total reserve which must thirty months thereafter, and until
farther notice, be deposited with the iio*e.re-1.-iteffm***03ank, and the mount

which thereafter mtv be held in Gold or lawfal money in its vaults. Such
requirements, herever, Aaall fairly consider the co:Dmercial and industrial

conditions of the country and its various sections and be so apportioned

and determined as to (mare the least restrictions upon tho business of na1444464)

tional Ii.a44r.Lutaom-mlinttenll and compliance with mach directions of the
Board shall be mandatory upon national blrednifrix iTscretat tons , and in such

directions the Board shall Give due weieht to the distinctions recognized
under existine Im7s between country banks, reserve city banks and central

reserve oity banks, but such directions shall be uniform withix respect to




Reserves of rational Banking Asroc.

banks

ithin each of vuch classes.
Sec. k3. That from and after the organization of the Federal

Reserve Bank no action shall be taken under the provisions of :Action 1

uf the Act of :arch 3, 1903, or Oection

of the Act of Mare' 3, 1887,

prov1din6 for the dosiolation of cities as additional reserve cities and
additional central reserve cities, resoectively; and from and after the
ustablishment of the new mintmam reserve provided In this Act the class/

64-,A)

ificatIon of national loaeleioeiaiilliaz.,§.. as nor provided by Section 5191

of the lievised Ztatutos of the Unit4tate6, aa amended, shall to ubolished.




7/118T TSVIS.E.
CIRCULATITTG rn INS.

Sec. DO. The Bank nay issue its circulating notes, eittich shall be

receivable at par In all parts of the United States in payment of all
taxes and excises and all other dues to the United States and also for all
salaries and other debts and demands owing by the United States to indlviduagtei (15 kewutAtirgA,,a
ale, corporations nd associations within the United States except interest

I\

on the public debt.
of the Bank

Such notes shall be a first lion an all of Lhe assets

,eszt-wm-41.ef-

4mertkeand shall be redeemable on demand at any office of the .Pank

lawful money of the United States

lf

Az long as any such notes aro out-

standing the Bank shall segregate in ts awn vaults and cprry..in aspecial
etron fio-c4Iathern
-Woeme to the ewe
reserve account on its bookeI

kttt

ts
A
filet
4eiet ot the tear value of the notes tra.-1 tine to tine so outstanding er,

(1.01

Cettell*

at its option, shall so segregate sch4

4111 tql,90-

to the em4e.get of 5,0",

lace,
of such Iwo value. and eollaterals, consisting of promissory motes and

bills accepted for rediscount under the provisions of Sec.

of this Act,

or one year ell:chequer notes of the United States, hereinafter nrovided for,

Ot4444,

or both such collaterals and one year Emeheuer notes)equal atA
low to 1001
7ti '0412
of seAell-pai value of the notes from time to time no outstanding.
eidatE4,4,0

Such

rawar,..,atailbfi-uxagazz.a.mTaxawww.4022-44-a.eitaii-lies--.4,4"11141Yr-rrsi-

aented-Zer,peyeterate,set4 nay be exchanged from time to tire for other 4eesFerk
morter,-e,

collateral i or one year exchequer notes within the limitations

aforesaid and of equal par value.




First Revise.
AOCTIMINMS.

3co. 19.

Any National bankine association may at its d1t4cretion

aaaept drafts or bills of =Chance drawn upon it, Lavine not more than sir
ronths' sight to ran, and growing out of commercial transactions as described in
this jection and ao defined by the Federal neoerve 3oardi but no National

barking association sha11 accept swill drafts or bills of exahonge to an

)ant at any tirle exceeding in the aggregate one-half of its paid-up and

unimaired capital and surplus.




PiPet Revise.
an 'MOTION OPINIEBTNIBIESS or NATIONAL AND STATn BANKING
ASSOCIATIONS.

Sec. le.

That no National banking association ahall at any time be

indebted or La any wu.y liable to an omount exceeding the mount Of Its °apnea
stook at mach time actual:y paid in and ramnining undiminished by losses or
otherwise, except on account of demands of the nature following:

(a) Notes of oiroulation4
fb) none:fa deposited with or oolleCted by the association;

(a) Bills of exell

or drafts 4ra41 against credits duo 000

aeaooiatian, or money actually of deposit to the credit of the assioiation
or due thoret0;

411 Liabilities to the stockholders of the association for dividends
and reserve profits;
(e0 Liabilities incurred Indio* the provisions of psragraph
Section 14, of 'ho Federal Reserve Act;

Liability az endorser on notes, draft° and bills of exohange,
arising out of commercial transactions, as definod in peregroA

Section

14, of the Pedoral Reserve Act;

Liability as accepter of drafts or bills of =bongo, subject to
the limitatiofla of paragraph

Seetiaa

, Of the rederal Reserve Act;

$ection 5232 of the Revisod Statutes of the United States is hereby
repealed.
That balks, banking associations and trust comoanies orgEnized under

.ate laws, shall be subject to the limitations defIned in 3et:4ton 17 of this
Act.




First Revise.
LIMITATION OF

lecio 17.

DISCOUNTS.

That no depositing bank, banking association or trust

corkany shall be entitled to discount motes, drafts, bills of exohange or acceptances, with the Federal Reserve Bahlt5 in excess of the ansaht of the unimpaired

capital and surplus of such depositing bank, banking association or trust
company, nor shall the aggregate of such notes, drafts, bills of exchange,
and acceptances, bearing the signature Or endorsement of any ono person,

company, firm or corporation, rediscounted for any one depositing bank or
trust company, at any time exceed ten per centum Of the unimpaired capital
and surplus of such depositing bwik or trust company; but this restriction

shall not apply to the discount of bills of exchange payable outside of the
continental United States, drgrn in good faith Against existing values.




rzrzs,

t5oc. 16.

That the Federal ''eserve Bank shell have a first and pare-

nOunt lien Won all of the assets of ever; nttional banking association

for all debts and liabilities of such banking associations due to the
edoral i'eserve 3arh. anoopt as to the claims of the ' Inited .tatos, rd
that the 'federal l'osorve nant shall liker!se have a first Aad paramount
lien upon all the asoets of ever; state bank and bankinfT =owlet/ on

lrganired under the laws of the various statee for all debts and liabilities due to the ?ederal leserve Bank, emoopt debts due b7 such banks and

banking association° to the Limited etates and to the °tate of their iteorporation, and. esoopt rith respect to truet funds held




trust comranioei

Pirst Revises
ORMATIOn AHD COLIEOTIIN OFIARaga6

Joe. 18.

The ?edema reserve bank ankl eh of its branches and sub-

branches Shall reoelve at par all cheek°, drafts or other 0/1tentions of the said
bank and each of its branches or sub-brandhes. The 7cativv Committee of oadh
branch shall from timp, to time, subject to thAs approval or the Federal 7;,:servs. Board,
determine and publish exohanee end oolleotion oharges to be made with moppet to

all *hooks, drafts and other exeL

and oolloction items of bankv ana trust

odmpanice, other th4in those hereinbofore mentioned$ received in accordance with

paracreeh (01, 5ootion It of this !lot.

3ach oharTes &nal not be In excess of

the approximate netual cost of collection or such °hefts, drafts not other items.




FIrst
(17si1la Pumnarn al, TV

n7=nvn Arr.
cbtal haw. rowers

nGt tho 7sg1er!1 rwxir/a)
porohzzo

(a)

mai /to obliaittiono orotlior sw.o.A.Aritivo of Vie
4sotion 5415 of tl* aorlood 3tatitoo,- and tap°.

"L'1t

alio% or tho oIslit?,tionto of the Torritorims

Inno.lar pooresitiona

ti

nre trAnraitend prinoint4 0.knd intornat 13? VA) tbited 3atoag

itoti -Ctatc,0

TI:kLvviumer, sell and etitSal

irt gold oin tot:3. bst1Tion to

it1,-).

loam

thereon. rod to oortraat for loam of Gold twin tealion, givimc sonority
therefor V= neotit,,r7. viel4;11 1i4eUrq.

of tho :Inited Autos OF

imlnliO the: bonds': stre °then* obiLgtFni

Nderra 2104.43.-Wo

ti443V.4

ora0C,i1W) f9x, delloslit or oolloetien froo z:kny Asrositim beal< or

(0 )

trust oompany 4epottitfr;

r onrrent funae in le..A111 ry.+Iwyr natitqnet. bask notes.

notea Or the 7silor1 reeerve Welk, o(37,*(coor drats tn

ytnt beni,;s

pezabao lk:on pro ;ittton;

(d) rith th
0atTiptir.7

icpbeeneliverx>nt of

tr4 di4iwtryt

4721`

4.1.4

of ozohtimp artoine out or aorrorolai.

tr:anatotions. tnit0h nototo, drafts and bilis to bc of
defir,v5 lvthe Pedra'fa). JAt.nervo 3t4;:rd.

:412. dtspollitire 'Wink or trust

ar4.23,

tivr to bo elotm.nirtati

3ich definition !Pall ma:" inolltdo

notes, eir41}.tiI and bills of omoivinco issuA or ttrrorn Or law pror,t4e(is or -,11..1oli
W341

'be load for hi7louitlral, industrial or ootoloroini pkir:,004,3e0 or

sholl rl)roscot

hIC.1

bOna fido.;t F4o1e of acrionitizrza riroilletz or ot)r.1* zpotla. VIttIVEJ

or raorcfnandive., or vehicki sivai huge° been Irvine/1 tor Ur vo.rac.oe or sale o.f the

bonds or other obliztions of the United Atates.

definition Shz.;k1.1 solt

holvevor, inoluder rioter, drattesor bino of (ma:iv/410,o ittrood or. drawn for taw
parpose

NsriakaiNircd, ,...7.ttodtsotn or ether ;poilts,

or for t.,t,,,rr,-/irk:

thf5 bon&



tradina

WOO Or rerCittZtaiV ,

tteittits, bonds cy±. Invelittnent Seottritiot4, othor than

o:.1itottione of tl'or, United ritotee. Notes.. drz,,rte 4nd bil?.v of

(14311.4=1

Atuationo or the nederal rieverve Bait)

maw adkeittod to redisoonnt, v

ondor this pare010., mot mature

within not 4uo,i0:41;v ntnotr diva frml the) titAtott of dieconnt,,
(,9) With V* eookvAtew or qniclortArni,tnt of eav ao:..00ttlog; bank or

tmlt ofxripav to .di000tait roton, dreteG bill of *Iv:llama(' :hie% .aro Wood
tp)rett, norolvindiPo or

upon. t!tp.: ox:,,.ortation or iravortntion of t;soodz,

eerieu.ltara pro&Loto,
and whioil txttum

(fl

i

dotrIminod

defined kir Vit,s, Podtsvral Iotforvo 3otrd,

in not oxoeodin'l el= northes f'or t thtl date of dtrooltit;

orartatitio ftrAt Yierabwr 1:41,*.s Awl tf) :men

omlortowit bile

r without

ootor7Amoiii trwleactione

71.16e)ra Heborwotratt.4 min:Able in :ora.3.01

determine

of:AvItri it
fro=t

.4.3.1111

orozo:itaTtp ;,:vet J-Ilture in not oroco4inc ninety dzys

dato of tilt

PZU*01127-44

433,1 rtuxt bepr the tili,;naturos onitot*oyAnt

m000ptanoo of to or rnre- roty.ponotAe particfre, of sthioh et leart oT.to **al

tau'.xt of a dopoatini; 1,447,r tit oi:*aiaozr;
(4;

to .r.)ardIvo.e4

oolkvzioot

Iln.der rlleo ooti mfluintione vrenoribed b.y the 7sodorta :;1-,,00rvi71

3,--)E1rd,

fivul sola.th tho opon z3arl:ot., eitbar from or to aol-,,otlitinebtsand trugt
ta f.Ore

tallV)41.

drafts andet00.014Aso 4.): the kin& arid

poratIong or thdisridoalo,
lasturi.tioz

oor-

tqpnOtos rrom or to folvip ba.a4-1,

i14

Aot

Air4isoovoit, one: oable tram:14)70re;

Ch.) To opon one. maintain bunkAn- 0400UAtt,in rOrOier.i 00401'100, and

outaliLIA 00-,naiosineAzoll oountrtoo for tho purpoea of purol-tto
001:,:eatina,

(14:V. laatit;roPe,

doti.linc in Amato billo of xohiip,c7a14 (loin -and. b/C.lion,
1;0 14,ky ctul

.0,411%,10/14241teti or

wit.IA or without itti ontlorvanant, thrtyagli

,-kzww..)..1.3o. prink foreitx billd or ozcollondoo aa-ioing oAt of

oorreroial tranotA,Afione,

rarsq

de.rinod i thvthloh have

TVA oxoeedtrk rsinoty awn to ran, 44nd. whia4 b.-aar tie

cloroonont of tmortram rooronelblo portioa,



volIina,

evo,aeparton

Sec. 13. That the Federal Reserve Bank shall be required to

maintain in behalf of the national banking associations Whin have

notes in circulation the five per centum redemption fund held in the
general fund of the United States Treasury and any deficiencies in the
said fund shall be forthwith paid by the Federal Reserve Bank to the
Treasury of the United States upon demand, and the Federal Reserve Bank

shall be forthwith reimbursed by the national banking associations in
whose behalf such payment is made.




Sec. 12. That the Federal Reserve Bank shall be the fiscal

agent eat sole depository of the Government, except that for eurroses

of collection and transfer only the Secretary of the Treasury may desigmite national banking associations as Government depositories.

The Secretary of the Treasury shall gradually effect a transfer
of the general fund of the Treasury to the Federal Reserve Bank, which

transfer shall be completed within twelve months of the organization of
the Federal Reserve Bank. Such transfer, however, shall not include the

five per °entries fund for the redemption of antstandirg national bark notes,
nor that portion of the general fund of the Treasury held by government
6epositories or -11A-24441-eett-crf disbursing officers in the insular possersions

or territories of the United F:tates so long as no branch of the Federal
Reserve eank exists in such possessions or territories.
On and after a date to be determined by the 3ecretary of the
Treasury and the Federal Reserve Board, but not later than six months from
of

the orPanizationl the Federal Reserve Bank, all tho revenues of the Government shall be regularly deposited in the Federal Reserve Bank and disburseAnts shall be made by cheeks drawn against such deposits, except revenues

and disbursements in the insular possessions and territories of the United

3tates.




Oricinal durinc Revise.
ii13iNt28

OP THE MDURAL =NE wiz.

sou. U. The Pedoral lleserve BazIk ahall conduct buntnens solely
with the Dnited tat en Oovernment, rith the Rational baUke, nna

!mch

State banks and trurt co,;,pantos no nay from tine to t17lo be permitted to

deporit thetr reserves with the Federal reserve bank) except an otherwise pro-

vided in thin 'let.




OM BEV 1131:

Sec. 10. That the net earnings of the 7edere1 'reserve Bank, after

deducting taxes, expenses and proper reserves against the acquisition of

permanent property, shall be devoted, first, to the payment of a :?iee per
cent. cumulative dividend upon the stock, and second, after the reimburse-

ment to the United States of the Seven million dollars appropriated under

Sec. 3 of this Act, ts the aenumulation of a surplus of Twenty minion

dollars, and after the accumulation of such surplus, one half of such earnings above said dividend requirements shall be paid to the United States
one

and the other/half devoted to the accumulation of a further surplus until

the tot/ surplus reaches rifty million dollars, and thereafter all earnings beyond such dividend requirements shall be paid to the United States

so long as such surplus is maintained.

The earnings so distributed to

the United States shall be evened by the Secretary of the Treasury. not

less than three months after the receipt thereof, to the redemption of
outstanding bonds, after advertisement published in each redera/ reserve
district at least once a week for four successive wee17.8 Immediately

Proceeding the date fixed for such redemption, *ich advertisement shall

call for the tender of bonds by the orners thereof at prices to be fixed
by them in such tenders and the Secretary of the Treasury shall thereupon

purchase of the bonds no tepeered those offered at the lowest prices up
to the amount of euch earnings in his hands at such redemption date.




Oricinta 6arinc
Pavta
!;100.

In,urceln

ttr4 ic&orvo

9

bo nuthorlood And

.ornparornalt

orerntiono of the v,04cra1 row,r,11. bnnkr

Tfl sovorn 4,41(.1 move!!

To nupervAse hfla control tho Notions of the '.:meoutive nlonnittoen

of Vte covoral bnh'aiYiko;
(0)

tiCtato the ignue ottl rotirdIttwit or notogOf the

tikorvimo

ANder0 resorstA b.*, told to proforibe Thri forme tenor fvrtol ionordnation of noob

nottm;

!t1t To puevena .in (t11 evaeripnog tal rokorro re4:141ror!,,,ntri of the ?edema

regerro bzznic for thirti 41,7, rmd to oontinne nnob seepstylon for periods not to

orooed fiftqen dar;
(e. To txprond. in nn orierconcy ar

t, relntivo to

0

Nttiotal beztitirz aprooLltiona Ayr thirty' titt7s4 ana to continuo izach vaut7,vawion

for periods not to oxeced fiftenn dr,7m;

ff, To axmAnl, nt itn disorsttyn, the ,,.cconfltei, boat
Nationel bankt and dopovitine Stnto beex
t,

nti

ICfniro

rust elm:anise;

tllernovf.0 or r4n7lber. ..r of "F'xogpat 1.1m f:'(,)!Init tee S t

(h) To no recultItions for tho zowrning of the redern1 reveme bdric
and itn branches- not inelnoisteint ArM1 the ter
To onlo1o7, rilrond

?edema roraric bulk znd
Ci

eovv* b&;




of this Aotl

dirdhar!v

officier or r,Irlo:po or tbc

brgnchco;

limo/WM)

Tr) ix nut , avnee 1

ort1f

itei; of ,etook in the

Origina during rvvise
(k) To *all. fOr liteitlents or candition of oll depoeitisc lar2nk,s,
such form sktl, they nv prescribe;
'tufalealaier, crwr
(1'; To XV

t4:.) writing off, by the .T.,xeoutive Corrittneo or the
A

sevcr1 i3rart3h bare,:o, -FAg dot/St:Ill or vort,Uose itteote tlIO)}1 tho hooks mid bulztnoe
she.,ets o.0 stioh

To determine the prafits of tiv) balk end deolaro dividende nnd

fix

priod of rement;
lho enumeration of the powem horein&bovo sot forth shall not be

onod to bo a ltr2:1tation upon the euthority of the ?odoral "qorcrvo Iloard

to lAaform all the dutios fu.aotions or F.i.rvtoo Ppeolfied or tylplied In

this Mt.
(n)

to este.blieh

ir tar) bar:Icing acoarcts in foreign countries,
smiles in forele,n °Gantries 4;11 to maks regulations for the
To open ond

an,J

conduct of the fareizn buvirxiss of the branches throuch such tc.encies.




"TrZT

nee.7'.

77110 government of the Federal Reserve Bank Shall be

vested in a board of eeven directors to be known as the Poderal Reserve

3ohrd (hereinafter called the Ioerdt, whese payers shall 'be the siese as
those conferred upon boards of clirectors of national balkinE: assoolatious

under eristirv ism not inconsistent with the Irovisions Øf this Act.

3u.oh

t3 iv 0 c tore 1.3hall be arpcirteil by the President of the '..Inited. ')tat es with the

advice aril ooneent of the Senste,

4/1"1if

;.-----Irjlee°6-..--,-

/..

'

`,1nralified71-14-44"4-4C

by ex-

perience end treinine for the Toper di soharge of the .ciuties imposed upon

them by this aot, and at least three or v-ve asaib6rs shall be i,*reorx, of
tested l'Arikinti; experience. Such selection evil be lasAle from residents of

different sections of the ocurt/7, the Yi e WI t beina Elven to te various
mwmasrai al interests of SU Oil secti one .

T1X5 term of ()Moe of each ft%mber of the

el,

d Flu- I be feurteet

years, except that the terio of office of six of tir persons first nopointod
to the or by the President shall expirk4 at the end of two, four, six,
oight, ton, end tv%olve years, respectively. The President St U. have power
to remove am member of the "Aoard for cense after ,'1.1co

hearine. =oh rev:II

or,d his reasons therefor to be commactated by hiA to oho ;:enate. The :Fres
deoiaate from
ident shell lorxxxostumard= more the Mrabers of the iioare.,,. one e mu as
;(yeernor and one

Peruly Governor wh,o sha.1.1, fl4b,j(Jet to the supervision

Of the board, be the active executive offieeve of the Vedeml

eriAnk.

No amber of the 3oar1 rhali be em officer or director of r.ily bara or bank-

ir 1rt1tutton, or hold stook in eny tank or banicint institution, auj. before enteri; on hie (3utiege so a istiod5or of the Isoard,heshclIl curtify under
oath that he bus ootarale

ith this re:;u1r4lent. Vaearcies,,ei

be filled

lay the Pent with the advice end oorment of the 5!4nate, en 7,A/isms appointed to fill ettob visearioies shall hold offioe f.or the unexpired torts of
the member to '4:vest place he is appointed. ':. e.eabers of the 3oard shall devote



4

FIRST REVISE
2

all their time to their official
seventy years.

The Governor, or in his absence the Deputy Governor, shall

act PS Chairman of

the Board.

The salary of

per annum, and of the other members of the
Board

shall make

Bank to the

ase of

duties, and shall retire at the

report annually of

Speaker of

the Governor shall be ,17,500

Board .A5,000 per annum.

the orerations

The

Reserve

of the Federal

who shall cause the

the House of Resresentatives,

same to be printed for the information of Congress.

BRANCH RESERVF MM. The Federal Reserve Board shall create and
designate in the continental
banking districts for the

United States, exclusive of Slaske,

purpose of establishing

tricts a branch

of the Federal Reserve Bank.

lished with due

regard to

rithin each of such dis-

Such districts shall

district.

or states as may be wholly
The Board shall

be estab-

the convenience and customary course of business

of the community and shall not necessarily coincide

such staten

trelve

or in Part

with the arrangement of

included

within any given

also establish within each district a

branch of

the Federal Reserve Bank which shall be designated by prefixing the

name of

the city in which such branch is mestabliehed to the words "Branch, the
Federal Reserve Bank".

The number of such branch banks and of such dis-

tricts may be reduced by the

Board when in its judgment

trade and commerce so require; and in like manner
branch banks and districts may be increased

from the time of the organization

the

interests of

the number of such laxandk

by the :board after two years

of the original number of

branch banks

and districts.

The government of such branch banks shall be vested in an Executive

Committee consisting of five persoxs. to be appointed by
Board.

The term of office of each member of such

be five years, except that terms of office

the Federal Reserve

Executive Committee shall

of four of

the

persons first ap-

pointed by tae Board upon each such Executive Committee shall expire at the



end of ones twee throe tal4oir verso respeCtively. Thc Federal Reserve
Att
ftard shall fix tht (=remotion to he roceiveti by tho :lambert; of the
cutivCaaaittee aLd
daWnata the alLairnm and vice-chairman for

xutjComitt. 7110 cleirman, or it his absenoe the vioc-chairman,
shall preqde over the 1:teat1me of such nacative Committbes ate, subject
to the sm.vervision of tao Exeoulive Coomittoes, anali be the active execu-

tive °Moors. of the brio h miervo haM:11. The 'FWACUti743 ecorlittess stall
elitcGo
have authority to est&blish cud Usctntin iub-1nh bantv, withlr their

respective disicts, sajeet to the approval of Uht Federal

eserve 73ohrd.

No member of such 3xecutive Committees shal be an officer or a director of

any bank or

banking institution, or hold stock in any bank or banking in-

stitution and, before entering upon his duties as a member of such Committee,
he shall certify under oath that he has complied with this requirement.

Vacancies caused by death, resignation ar removal shall be filled
Federal Reseive Board and any person
hold

office for

pointed.

appointed

to fill such

by

vacancy

the

shall

the unexpired term of the member to whose place he is ap-

Meffbers of such Executive Committees glay be summarily suspended

and subsequently removed for cause by the Federal Reserve Board after due
hearing.

Each such Executive Committee shall annually make a report of the

operations of the branch Reserve bank to the

Federal

Reserve Board to be by

them transmitted with their annual report to the Speaker of the House of
Representatives.

Such report of the Executive Committee shall contain re-

ports from each sub-branch bank established in the district.
All actions of the executive committees shall be subject to the
approval of the Federal Reserve Board. Each executive committee shall select
a president and other executive officers to conduct the business of the
branch.
Such officers shall have no official or financial relation with
any other financial




institution.

0=====:-8ec.7.

Upon receipt of sech certlficrite, the Cam/troller of the

tharretcy shall issue a charter of incorporation to the persons rhe hall

hnve 1een4e=se- appointed by the PreaiSent xed confirrea Iv the Senate
as the Airsetors of theZada=41-1.4seasteeBesk, rhich charter shall contein
a recital of the cemplinnce rith the provisions ot this Act by the 410Neeee4,141444w '.:ommittee and the subscription to the-4461,-womsa4.-470 capital

3tock.eI,rtt,e7,fter90erof the'.iile:ksigeklee

Ink and the issuance of 0401
Seg,retary

charter by the Comptrcale of tho Currenow, countersigned

of theTreasu
,

Mor2M''

0110.1 complete 2xx the corporete erganization of- the 4)044V

trfli aci. Slake;
qpon such organization, the41e4eleek-e*ereeeeftsrd and their encoece-

Innlytt

ors and the stockholders of the 4244egririi-44evertle Bank as they may from time

to tire exist, shall be a body orpornte, to be known as

Thco

reserve 'lank of tbs United r.tatea," to hnvn m term of existence of fifty
years from the

organization

to of the issuing of the/certificate by the Comptroller

of the Currency, countersigned by the Oeerotery of the Treacury, to heae
'444and hold such real and personal
the power to sue and be sued, toaoquire,
ernA

property as maw be necessary for its business, to buy, eel/ mut deal in
gold and silver bullion, promiseory notes and other evidences of indebted-

nee, *iall-wee.ivtiverazer-TftIrtrttriltr usgoili to ii o
te h-va or,44

-

tb iitttt,

91.(Ac,

74400,,Z0444t6e0.--fi a-1.,044,,04*07ftrWrIrtM--

ectot* Oda

in t1-.e

it of 7ash1ngton. D. C., and

42,c.** twelve branches located in cities selected by the lelIrTrt-arilPen
and
Board and sub branches wherever desimated by LA6 board
,-,-,
,,,
,----,,----,
LO have ouch further powen5 privileges and functions as nre hereinafter
,

cow if le&




eireaisaigle=":'
STOCY MILE.

eeo.

That the enpitM1 stord,: of the 0e0we4iefilemmlime.lImak deal; be

Ip 0,00
/I Avt, Tem,
Usit ttnA,ThtrTiiqiptyttrEni a7r1
$100,000,000, divided intwhares of ft00 each; such stock shall be free
to

Of ell ?Moral, State, trunieipeleor other taxes. except that the holders
Att
thereof shall be subject to_rederal income tax with reenact to the income
te

derived therefrom.

The holders of such stock sha// be entitled to divi-

nds thereon st the rate of five per contum per annum end no more, which
Alviderda shell be eumulWve.

Such stock shall be offered for popular subscription at par by the
Committee under regulations to bo proscribed by it.

In case the amount

of capital stock is over-subscribed, the Committee shall first allot the
shares of stock to the eubscribere for the smallest number of Shares.

In

case the full amount of the capital stock is not sebscribed for, the Con-

eittee shall allot the portion unsubscribed for to the several netionel
benke in existence at the date of the public offering in proportion, as
nearly as may be convenient, to their respective emounts of capital, and

each 0120/ allotment shell fix a liability upon each of the said national
enn1ls to eubscribo for end teen the number of aheres so allotted, each

liability to acerne as of the e:ate of public offering by the Coredttee.
Any aubscriberfailinz to pay for the shares allotted to htm at the
tine renuired by the Committee shell forfeit kis right thereto and such
shares mey thereupon be allotted to other subscribers by the Committee.
'Avery subscriber shall accompany his subscription by cash or a Certified

check for five pee cent. of the total amount thereof, such five eer cent.
of the subscription to be forfeited upon failure of the subscriber to pay

his subscription for the mount allotted to him in full, as above provided.
The Committee %hall call for such subscriptions and meke such ellotr*Ent

within six months of the dete of the passem of this Act, and the balance
of the subscription shall be paid by each subscriber upon the enount allotted



Tnrvp 1VI31.: of pager.

2.

to him by the :ommittee ppon n date to be 'ized by the Board, nt a period
tted thnt the date upon
allotment p
within six nonths from the to
which wach subscriptions shall become payable my be e7tonded by the teard,

nith the approval of the President of the United btates. The proeseee of
the five per cent. payment of the stock nutscription. 6ha11 be deposited In

national banks to the credit of the

Committee,

nd by the Committee aseigned

and transferred to the orodit of the 'Flank upon its organisation. upon
the pa:front of the ninety-five :er cent. residue of the stetW subscription,
the proceeds shall be depositerl rith notional banks by and to the credit
of the ')anit, and Shall be so 1!;ept on deposit pending the opening of the
Bank for businees.

TO if;
c5a tr.f

Sec.
4011

6.
.

74 ,git
:Ma Arta

d 6,74

After the

- . the Committoo shell wake an orr ImtIor4 certificate sic-

;a) The names of the,aeveral subscribers to the stook, rith the

respective number of stares subscribed for;
The form of stock certificate adoptee by t Committee and tro
nethods of the transfer thereof anc . such othor facto in connection r"ith the
(b)

organisation as the Committee may determine.

Such certificate Shall be osecuted under the warm of the Cemnittee
by the Chairman and Elocrotary thereof and attected rith its seal and shall

be forthvith transmitted to the Comptroller of the Currency, to Shall file,
record and carefully preserve the WACO in his office.




-

AN ACT
To incorporate T:'; TV'lRAL 7

wen SAW or TVA trtm ntr45, eetablish

banetag dietriote, mobiliee belok reserves, refund and retire m portion

of the national debt, provide for an elastic currency' afford means for
relecounting commercial paper, establish more effective enparvieion of
banking, ard for other purpooes.
Be It ennatefl by the Senate nnd Youee of repreeentatives of the United
atoteo of Amerion in Cfmgroos assembiedt

That the short title of this Act shall be "The 7ederal 7'eserve Act."
TaAmnzAnOr

Sec.;
the

'

That rs soon as practicable after the passneo of thie Act

resident obeli appoint n committee of five, to be ces-pmated The

7"edera1teserve Bank Irganisation Committe

mittc.0
(a)

hereinafter called the "Com-

The Committee:

Shell select a Chairman and Secretary and eneh other officers

ae it Ttany deem neceseary from its on mentors and appoint assietant offieors,

clors end other neceseary employes;
z

Sf vft- ktatee,

ih) i,'ha/1 organise The eadanAii-oesesere-en

7

of the United States,

ldwr.a.Lue.;tt4r.-e-elleoi-s////ee-feeoh*eeel-11s, and branchee thereof.
(0)

1l edopt a seal for The 2e4e+A1-aeame znk, ehich shall,

during the process of orgneiration thereof, be the noel of the Committee,

and adopt seals for the several branches. 'Ada °hell cerrespend to the
seal of The Asee.se4.4.,,atimmAa Botmk itt the mele of the branch elided:
(d)

Uboll Invite and receive popular subscriptions at par to the

capital stook of The -?1410411-4044440son Lank, in accordance rith tho previsions

of Sec.

5f Vhis 4ct fled under roguIntions to be proscribed by the Colp-

mittee;
(el

hall make the certificate provided in 50c. 6hereof;

(f) Shall do all other thinge necessary to effect the corporate



t
Nmn.

\?.'
orLanization of the atommgivIRIoweempr-_,.. 2erlita,

Sec.

mttee-461,11,reof

ae-;64*.:ha-arraa&uarr, is hereby appropriated out of any money in the
A
Feribtiok 6,4 Autrajd
obvini 000tC4TvfTreasury not otherwise appropriated, for the purpose of carryinc; out the

ew
vizIcr

provisions of this Act, in acoordance with the followino

7f!ach member of the Committee shall receive in fall compensation for his

services the sum of :-;10,000, besides his actzal nal necessary travel LIE

expenses, and in carryiris. out the trovisions of this ,t.ct thccommittee 14e,
d_.F

e,\.47'

authorized to incur such expenses as it shall deem neces,sary, all of .1,.111-

compensation anl expenses shall be payable by the Treasurer of the United
Staten upon voudhers approved by the Committee.
..aaL4,-1,f,zy,,,,tikowsial.;-:41e41-eire.,-eiverti-tre-emireire-&-.4trm,rtrry+ntr--cetki-4ein-eoevisiene,,v,,
-01...L13.1.2...k.almeseklevtoknfrterarsixtitea.

The balance of the appropriation

herein made shall b di ebursed Ty,v. the -Pearrr '..th--itereerre Board for the par-

101,11 at 101A,

,,,,:444,044,44,42,4,641vovali.ArrzkYtellEfirltre

0 (.4)

payments to be made by the

Treasurer of the United States upon vouchers approved by the 73card.

The

total amount of the appropriation herein :nade shall, from time to titue, be
reimbursed to the

Stetti,4

ntrsPerrmmonoi by the 440441444-1-4er" ere..tev<r'- Bank from its net earn-

is aftey the ppyment of dividends to the stockholders arid before the
a_,41

-seemertstri-cdt of aforturp




("C?

aRGAITIZATION ADVISORY BOARD

That there is hereby created an Organization Advisory Board

to consist of twelve members who shall be selected by the Organization
Committee, one member, as near as possible, from each section of the
country in which there is to be es tablished a branch of the Federal
Reserve Bank.

The members of the Organization Advisory Board shall be

chosen with reference to tneir practical
ence.

banking

and business experi-

They shall serve without compensation, except that

they

reimbursed for their actual and necessary traveling expenses.

shall be
The

Organization Advisory Board shall, upon the completion of the duties of
the Organization Committee, serve in a

like capacity to the

Reserve Board, with lie reimbursement for

their

Federal

actual and necessary

traveling expenses, until the completion ant of its work of organization
and the beginning of actual operation of
which time it




shall cease

to exist.

the

Federal Reserve Bank, at




POINTS STILL TO BE ElIBODIED.

Embody .3' ettrar

Applicatren of earnines torestire debt of U.S.

See page 16;,;(7lass Bill.

3.-÷lot es Inv-be-rest -tatter," en r ncleeifird.
--,Atate -enainrifnc

Amend-Trevi si orr-er-IPederal lay; as to le: terer"
tops now applicable te"'" ti =al bank
InsiiPtnote circulation-as, tc destretot i on of mut ilated
on of notes
notes, counterfei
or emitinE,
and penalties, cars of plates,' perm,
etc. J.flivil and criminal sections ap,p cable to
banlrnotes.

Lttorney General as, ailyteorr*8 wA,44ditiOna1.L40fIni ti ens:
9 .1'.4-741tral

on-ree.e47ving the rizlit to-ritstill--,or, amend.

10. ---ileneraireneal section.

d.f-any-proistItt"SYPTI-14w,e,made,Irrtr'refe-rence-,k0,..45I1V24,44944L1.17P
Extend the provisions of 4
appropriations section to,e rer the expenses
of organization by the
deral Doard as well as byUte Organization Committee. Consider w .her it should also provi4e."6r housing the bank and
branches; and sd be repayable to the Gov
ment before the establishment of any

Deposit the capital of th sank in National Banks
business of the 7edera.,oserve an

g the opening for

4

Consider the creation of an
isory T3oard, consisting o
ankers and perhaps
business men, to serve wi
u. compensation, and to
and advioe to
both the Organization
ittee and, the "ederal "pied on mattpme'ef organi-

5,p'aid

,,/

zation.




Perhaps this board

o1d be selected by the.,AM5Asory Committee.

;;;;z72r,

/e

MX R

q:

',OR

cur= .tar, ADDITIM TO =VT ar

,'tf bran4bas in relation

3hall there be a kipttation on the numb
0, that no branch

to tho deposits,

posits than (b

BILL.

I be orwalised with less 0,o-

aoutit.

nk

olwa .e to ititly t1e

Insert

potcr to a branni or a

sub-branch. rrohlb .1 on that a d ep os tire Lank en have only one stocount

with a branch or nib-brarich hP uggeS. tell to 41 thi s
,e0-

,*4.

'the effect that within five e1the Feaeral
,

Lase rt proV 1 ei

it a plan end r oetionjthe appropriate

3escrve Board shall
Committees of t

rtouse And Senato for the retpoement an cancellation of

areenbacks

f:oe 3action ri$6, 7aCona1 Bank tst, pace 14/f X.C.B. book,

are specified.

poor :i that uaght to -f anbodiea; see bit powers of

3ection 4, dictated,Artift. It is necessaxy to proylde that mentors
of the redoral Res rve 4eard shall not bo conaectodiefill any otner financial
inotil:ut
!q1plication of nuiv

debt.

,.

s earnincs for tbe :-faymoat ar the public

.e.

in connection w a that road Hr. Fivne °

aoran4ute robarainb re-

,.

tiremcnt of Oni*

In the

f"tates bonfle./I

at or Ass° ution, stock holders

pr value and nothinK more, ar.,

Of tho public debt.

the balance shall be fvlied to the pay:sent

Insert i 'OrosniaatI on eot

ederi ::. serve 72.initz shonIe. be mXeirtpt fro.,

tion, except with rem



rek.leive back

t to tax on real estate.

t.ate and local tn2szt1

4 Nix\ of the Bill.
Ine 20

0.4

Nemo. of obanc,-,ee

Put in t.1 provie

3-;

that the It.m1( rhell

contract.
Zralthit..2.-44ior4-rentre,-

efir

rd to by-laws and ret,u3.at

Provitl, on in r

to be made by the

Pederal Recerve 4
Btate biz

nat

4ctulation. Leave

t to tinepeotIoii

out the woro reculatdrou?

.e

law aryl the
If a Lank fails to cop1 vith the provivione 9kihe
t is to happen to it-hat le, what Is to be
regulations of the Bo,

thaeiharao ter of the pOntro 1 of ztate bank
the prov in ions

bore who fa 11 to comply vi ith

the law.

:!einbere of the Bsaffd 6)76.1.1 clevote thei
datie e .

Insert "entj

tiT3e to their

tie.

lievairement that Federal rteeerve Board el-18.3.1 publish weekly
th,o'IW doral Ileaerve '3 ai a to ,oertain items
a tate:I:ant of trio coal it ion of
*Ainte to Tablieh
w:ilch wifl be epeolf fed in USIA clause, and it the Bari,
week4 or otherAorakori bark they mot furnish a firtate=nt

etater4ent of all

wise.

12aw ere pe Board, pace LO of the

,'

of the notes to the 3ank.

Ilaehiner7 for the printing an ti delivers
all
Govermkent. TbieiehOuld be at
tire of the notee ehould be doii bythe
racleraption.
so provide lachinet7
the expense of the Government.
wreay/for bancelk.ition upon preriotee should kl) to tprItipor Govern:amt
sentatioli for refoliiptiort



3.
ar/

It should be f

%%poll

thi

totes upon

vc,rniint to

.ral Reserve :ord.

the application of the

Federal Beserve Odid should have power to pet-the form and

tenor of such notes"Aie Glars-Ower Bill.

///
Power to reissue notes.= when thf4-ereprec,ented for_xe4tATien.

distinction between ,-.

roeard to

section of National Bank

Clause in Act to r9-1).-

try, reserve and centramilierve citz

Ten Per 99.40L Isxprovisiore oas s-tatsbrutte vaned 'mast not ispp17.

Power to re vve ea officer or smployee wept those al:pointed
book.

by the President. AOSetion ZOZ, pRel*83 T

Give Board poser to

erform the duties and espfbiss the fUnctions

necessary or conveniett _te.'the carryinv out of toe'provisions of this

%et".

liubstitute for preegnt paragraph Elvirlg ',44016 led" pavers.

Thore ehould be provision. for depoaitors it ins

r possessions

under the provision where ,OsaFnderal Reaerve Ban4,,,inclu1in6 its branohes
and sub-branches
ernment.

See

sl

sole depository of the ors..

be the fiscal a6ent

i2O of the bill.

Insert "temporarily fo

in the above

rn le si on' '

seraph waere,

e made the depositories of tner Goverment, 'ard
the Secretary of ty0,7reatury my derionate otherAnpasitoriss temporarily, eto"
the ank ard its branches




.

i'4,-

,,,

There ,ahc4,114 be provisicgurlissitircti
4avtrniumt and 4*mi:ter b,

eat fur kiodestin trsoinotlome moopt as

provido4 it the. .. .1a,ralersell roittine- to open

operationo.

oast arc dipic Collovirt thirea: (1) the- right cf

'NW

delve!. tire br.4

reoolpt .44. aopoelt& to

t.()

a aloorottat. mid (4) tage Acht of a daPOS I Utile boric kf

jet notee of the Atak ac,tirist Jittoutte, or it

brtizmoe.

clar4se ?ro-

vioinv, for the latter Wicra3 contain, "Isc far at not vioIttl.w the roacrve

provisIOns of tno At'.
Reed previa= rooraimt collection of It, 44

line 4.

-oonnectiou wit4

0.1, pace 9;41 tht, bila.
7he 7Wersta 74toorvo Umrd s4,11 aa:en roports to lotereso Ufld the

reports shell be nocomreAnied by the orrtlfloate of t4c Cotroller of the
'arrevoy as to audit, and Orr. should, be stnted periods provided for tax*
No nem ban4 no44 btr (ow ilamt bkv.f.de.

ro ckistte bubk need am Coverament bonds.
Woo sit.all be 42L4c, speolfloyil

turh Lu 0 ytrLre.

'inch yts,r,

flavortgent ohall buy or, tarter, ht not oxeoodire par, up to a0.0,)04,0610.




MAI &ballo lorcor Irmo
--itopeta---ttnr-tttiostrttteotuxtureig;

-

4+ of sewrixt lireolation

-arro".

'614

tabkir-fillar
.ilssorvek,404011*c

rwtr4 to ertlargitit
to establish foroLm




of rlatiol1

include power to eetabliA

incliade or wo41(3.*

P*1-4110INA

NIk.

rftonesti

rkr ,

WWI vosalti

brr:ro,'45. pouor

pmer to conextot,tstn1noe5 of trust oorkavr

3.rtue of-Akrlous states.

/

Sootians of the now ,i11:

Obort Litle.

j

,,

4:

...,

,/4,
Orranizatn ommittee.

Comensation and ,Tpropriation for the Committee.
:::.tocly, Inoue.

S.

7.
O.

U.

14.
1E.

Certificate oe 'Irganization Committee:
Issue of charter by Comptroller.
Orcanicatien of per-,enent 7ord.

Mr= of office. etc., of !ord.

Powers of Federal 7eserve ?oard.
Itarninps.
Dusinoss of the rederal :uoserve Beard.
riscn1 ,,qotc7 and depositor:7.
Goneral fund and transfer tneroof.
Oencral functions of the 171,t.
Operation end colloction charges.
Liens of "ej.eral reserve 7. 9.?*..
Limitation on discounts.

Ecstrictions on imiebtoftess.
Acceptances.

a.
r
..o.
,o

to lettme and clmantion.
2rintinr note6.

Feserves of nationnl bnnks.
classification of national banking aseociatiOns abolished.
General reserves.
no.to of dizovant.
7ofur3luc notes.
?urolia.se of 27, bonds.

Btate banks as depositors.
Bank examtnations.
.'":.,

41,N

.7,,,, v.




,

? --Et4411,4
ko

vol
4

44
'

(

.,.,,,,,
,,,,

1

,,,./.,,,tftk.t.ku,f44 74
Ft
v
ii x,,,,

,...--tettcte
40

.

Xit41,40,:444,t41.,

-,

,,.

'7'1 t"i)tkia
a,,,,

0.4414




UNCOMPLETED MAT,..,h

Lanuage specilypg the right of a depositor to obtain a
discount which must be limited by the reserve
provisions of the Act, etc.
The Controller of the Currency shall make an annual examination of the Pederal Reserve Bank and its branches
and the Board shall make an annual report to Congress
or to the Spear of the House, accompanied by a certificate of the Controller of the Currency as to the
examination.
No new national bank reauired to buy Government bonds.

No existing national bank renuired to maintain Government
bonds on deposit with the Treasurer of the United States
except for an amount sufficient to secure outstanding
national bank notes.
All two per cent bonds which have the circulation privilege
and which are not refunded into refunding notes shall be
purchased on tenders at not exceeding par and accrued
interest and to an amount not exceeding 20,00,030.
per annum until the untire amount is retired and cancelled with authority to the proper officers to issue a
new bond to be authorized or to issue bonds which have
already been authorized for the purpose of such refunding.
Provision that pending the retirement of all 2/s no impairment
of the circulation privilege shall occur by reason of the
Act and at the end of twenty years after passage of the Act
no national bank shall,hereafter have the privilege of
issuing circulating notes.

LEN.T. STRONG-,

Jr,

PERSONAL.
112EIMRAIMUL.

ma

CHANGES AND ADDITIONS TO DRAM' OF BILL.

Shall there be a limitation on the number of branches in relation
to the deposits.

That is, that no branch shall be organized with less de-

posits than (blank) amount.

Insert a clause to distinctly tie a depositor to a branch or a
sub-branch.

Prohibition that a depositing bank can have only one account

with a branch or sub-branch is suggested to do this.

Insert provision to the effect that within five years the Federal
Reserve Board shall submit a plan and recommendation to

the

appropriate

Committees of the House and Senate for the retirement and cancellation of
greenbacks.

See Section 5136, National Bank Act, page 14 of N.C.B. book,
powers that ought to be embodied; see that powers of Board are specified.

Section 4, dictated draft.

It is necessary to provide that members

of the Federal Reserve Board Shall not be connected with any other financial
institution.

Application of surplus earnings for the payment of the public
debt.

In connection with that read Mr. Fisher's memorandum regarding re-

tirement of United States bonds.
In the event of dissolution, stock holders shall receive back

par value and nothing more, and the balance shall be applied to the payment
of the public debt.

Insert in "Organization Section".

Federal Reserve Bank should be exempt from state and local taxation, except with respect to tax on real estate.



Page 13, line 20 of the Bill.

(Memo. of changes)

2.

Put in a provision that the Bank shall have the right to
contract.

Provide a short route for state bank to enter National system.

Provision in regard to by-laws and regulations to be made by the
Federal Reserve Board.

State bank must submit to "inspection and regulation".

Leave

out the word regulation?

If a bank fails to comply with the provisions of the law and the
regulations of the Board, what is to happen to it?

That is, what is to be

the Character of the control of state bank members who fail to comply with
the provisions of the law.

Members of the Board shall devote their entire time to their
duties.

Insert "entire time".

Requirement that Federal Reserve Board Shall publish weekly
a statement of the condition of the Federal Reserve Bank as to certain items

which will be specified in that clause, and if the Bank wants to publish a
statement of all members bank they must furnish a statement weekly or otherwise.

'Powers of Board, page 20 of the bill.)

Machinery for the printing and delivery of the notes to the Bank.
Auditing of the notes should be done by the Government. Thisisnould be at
the expense of the Government.

Also provide machinery

Notes should go to the proper Government bureau for cancellation upon presentation for redemption



3.

It should be mandatory upon the Government to issue notes upon
the application of the Federal Reserve Board.

Federal Reserve Board should have power to fix "the form and
tenor of such notes". See Glass-Owen Bill.

Power to reissue notes when they are presented for redemption.

Clause in Act to repeal section of National Bank Act in regard to
distinction between country, reserve and central reserve city banks.

Ten per cent, tax provision on state bank notes must not apply.

Power to remove any officer or aniployee except those appointed
by the President.

Section 202, page 83 N.C.B. book.

Give Board power to "perform the duties and exercise the functions
necessary or convenient to the carrying out of the provisions of this Act".
Substitute for present paragraph giving "implied" powers.

There should be provision for depositors in insular possessions
under the provision where the Federal Reserve Bank, including its branches
and sub-branches, shall be the fiscal agent and sole depository of the government.

See pate 28 of the bill.

Insert "temporarily for transmission" in the above paragraph where
the Bank and its branches are made the depositories of the Government, "and

the

Secretary of the Treatary may designate other depositories temporarily, etc"




4.

There should be provisions limiting the receipt
the Government and member banks,

and for domestic

of

deposits to

transactions except as

provided in the paragraph relating to open market operations.

The Act must anecifSrz the following things:(1) the right of a

depositing bank
of

get notes

viding for

to a discount, and (2) the right

of

a depositing bark to

the Bank against discounts or its balance.

the latter should contain, "so

fax

The clause pro-

as not violating the reserve

rrovisions of the _Act".

Read provision regarding collection of items in connection with
line 23, etc., page 22 of the bill.

The Federal Reserve Board shall make reports to Congress and the
reports shall be accompanied by the certificate

of

the Comptroller of the

Currency as to audit, and there should be stated periods provided for this.

No new bank need buy Government bonds.

No existing bank need on Government bonds.
Tuos shall be made specifically maturing in 20 years.

Each year

the Goverment shall bay on tender, at not exceeding par, up to $20,000,000.




MOOK shall no longer have privilege of securing circulation.

Repeal the classification

of central

reserve cities.

Leave out Sec. 21.

Leave out savings bank clause.

Give power to

call for

reports as vie 11 as make examinations at

5.

their discretion.

Make Comptroller's reports available to the Federal

Reserve Board.

Provision in regard to enlarging powers of national banlos, which viould
include or would not include power to establish domestic branches, power
to establish foreign branches, paver to conduct business of trust
company
where permitted by laws of various states.




a tit PI

aritro

et, -(erelq--ik4_I7CIt

fvetoofil

7IP.6

DrAT'T

Foation

4c,

exari,-*,0 oht
4., .0er.tt, ,-.40,nion 3;31 of Vv.'
It

oE

1,6

noolE!tion

No

ora4 authorised lt7

4)400

.ntiocit

46:2-.4a

raw -11

rc',0inj vifitortul zomerr

thor than etioh

d/)%Ora, 9flo!re,

.:t1;4341, 91.

juntioo.

ftro vot4tet:/,tnti*.e ooerts

21.02,roos ot the rollers,111jeLl,orve

itct of ovr,:a7

Mirdrol.:,..er 0.f the thkrroney man hereort4,,r ,fil
report roflmirod byOections 5211 1.mti

40 of the rai,tityesta :itztk Mot,

omit,

vdttt

OPC,, Ono in Vel orrice of tix, bru=1:1 of the

Iredoora;. Reserve ;Were:

Nodarea roterVr 'balk within thr, clivAxcot

whioh tt

rorteotiwi; bz.'4274Xu unaer

ir off 1 Cif:s.

exatli,',0140.21 htnrtt

f11,41,'6.1c. 400,04,eurt

.6ttal1., at leapt ortoe t

ndix

nn, a:ca.:It:nation of .the er.,eeta anti effely.v o.f every doTocittnr; bark. WI:kirk;

Oetar

oonpani to be rite*,

az.7zootation unet

.arvt

rre.,-,:%tontl.7

tr t4t, Aideml

oortridor topoolaa czt;irlizetion tx,00nntry, in order to rtalitfah

r trazt

fell end oorty,,1c,t9 1,-..npv,,Tedo of tile eons:lit/on of

renortE

filed in

ono ft?..,41-42.

9ffice: 1." Th

C

1)e vAriate in de.,110-f.,:to,, ant ca,)::::v v101-0017

tierof the Clin-0120y.

ot Vro brh of the !Nodora4-770,0erve

he offlete

witLin tb.c diotrict i whiah v;act

deponitinc bcric or treat eortparz. hop ite off iw
In

;Int t)4J py ir

or 4,,ericned

Ube

of t:Ie ext=inetione 3fierein provided ahall horp powor tookaa. tnother

quorerr. of tA di:rootore; of

to *Vito ender oftth
of moll 'wee:

7.ao.o,r1, by thy

the di:Arlots whore



oliarsotcr nd eiromatanceeof ij aso(it or

trut comptimr.

shell be 0pr:tinted

inotitation beir*: ozalined, wtio raw "41,e roviro0.

oi;3ye

AL

thcir ,IA4,5ALEAnt10 NA.

ubjeot to the nvproVel of the 7Werril aot;erve

Comittoo or th rea:..ective branoho
1.,Aoh, lovinO4ms ke-o lootited.

May rival

for earvioe within
fixed acilarlea,

.S1,11131,'

the mount rtae:r-:.of a`.44..1i t

relortea

Oenovitut.

INA b threllera 1011trve
tazierwe

ISotird anti. wanuially

tho ocialinationN bazvitt proitifled for Own be

ativertiodb t1,4 7:zzent Ivo Committeo won the iikroltinc bka3*1S ,

ifC' 00-c tut tow

and trutt aorkontoo of V-3e. resmottre dixtriate, thprtql..)rtifyn to Vto atweto or
rer=oimee heldb7 thinrtitutiom won tle datnv o-ft; tearlitrlione.
Via

IVA tient:loot of 6m 414tplvitintr, bad:, btavim, wont 16t iOn ertrilit
0,0t4Ealis
&t II
c2i1tt( tnirk? Uri:mil of the 'Pedeirt4 reverve
turanc.xt for orocial

p.' rt.04tO11:1 ammineittone of de-,:oettinG barko and tAir,t eentianion within its

dt..trtot., tZlie oast rald ezperves of men extriinetion to be borno

zuah (ta16,10iting

or trust OeviNtny..

..An examination., *tether taw reettlerly provbiod
othUnutloriso+4, oCatal, be 04 G,3riitto4e1 413 to infom the :.,ederal reterw.
Volk guld itc tos7-.eotivo livenohos of ti: notues1 oondition or tv: 'hank or traet

oirtrogantned,

lime of oredlt WAN: artendod b:maoh bazire end trust

emoentep, and ans oUlityr infbrgektoin eatkential

voeh bank or trust oopt,erri,

IntrnotIty of the oonditiorl

riek7 be required by the TAaeutive7. amittee of the

.1vetivv.-0 brzialaltio or by to 7edera1 rIfirertow Board. Irdlor In4114114or.,,q1:347u1

iliAtone of tho Iloand;
Site roderal riosorve Board ehali, at leant onoo er.t0h yoar , order an

ilination of 0441 brar/S1o to

Ilederca r000rve

tfteroof, ale! rrsipvit GM./an tuttititation

,V6f1 of oath otilb-branah

be mato

tAJr,,pliox.iste., one new

thoroof 11144 in tal4 offine of the bran& era ow) txtm tit thc: offtoo of the
T.Pederal '1)iitxrvry Pfaard

--44411Arcton,

eo eorgiUttft4 colit rgAio ea to dia.elatle

and ttneh extrilivztton and revert ahall be
;r,A3 tiata eXi Altiln of tZlii itikirte and

bilittee of .4154-*1 brtmohos, mil, the arzeunt v,nd t.z4arciotorof itIN r000rvo,

of the trroa4,, etr.;raoter etna rtetority of :%.11 of lite tzvo

nt

rnddi.;-,00nnted

pev.;-er.

17+3 aeporitinc bunk, barking f0,0 fra I at ion or trwt oerrmz..7,

mcrly

officer, dirietor or mrloyee tuATiof. eNt1.1 :Itke Yp oan or matt 3flt exAtutty



FIFir.7 DRAMs

to Lint extiatrar

ov mat; berit

boa offloor,

tnrt eort/rwirq.

41.tro43trir

ThiPOIV- :',OfirtOr,
torlorio vtaalltale tax IlsrArtotor Okfill be deenlit tpillbr of
VilnaW, dollars, arta irarther eats oqual.
t mom
aria 0.4741 b
mt,tloll/led or sratalty. etvort. kiti extzdnor nooel-Ainc: a lostt or

110 terio/r4 uo

itity frOti MY heat extParod b7, ;tin, ar.t.11
arie4 chAllb

irpl.d not or thm rivo

t. tho /nonoy tto loworlo

guilty of a. mtvderrralor,
0.01,1.trz

rzikz farther me% exjzal

ittty Oxon. kArl /41.t.11 Ayrovor thareaft/o.

ti nation4, Iva*: extb4rier.i:10 =minor shez:11
orcloe lextr ohal big
Ei-fivr, any otbkr Soniclo for,prrempt ton %Idle boldine

disoalfied fcn

Y.cith, effiee

()-7--ShitiVet,tibt,

be to- offt/x.r




N4c

dir-f,;,-ator of .f,-zr: htaik.

3TA.57 BAriC5 At;

K,, alty,

,n4q4G-0-k.af

sec. 10. That froa and after t

or bankin6 sasociation or t

t,opppeny incorporated by special 1ms of

CR
71i,p6firtar
any 3tate, or organized unde r the ceneral laws of aRy Btate, Ney maize

erP

A

application to the 4/04140,ik-ztAirmsgrore Flosrd

1

11016%0C

au16'

Ato

beeolls a depositor In t4eerilirrnriterervir-ftrft branoh,organised ,or to be
ijr, oad(kok 6-6C,Ce

district whete the applioant is lo-

organised within the-

A

at

-5ZraFeriiiiiriFirtuiriiaireirarffer.rdttorat-fte-it---151r

02

itevAn

--sittrit-mmtt-

4;&rt- 41/t171,14zri'
A

* d. T.,,ach-liesir-sprieng--6040411Wren, deposi tor, to have
1/1114

-460,reeervOt-libd"WIWati-provis,

flrovigt10110

-relotire,te

,

...patAro.wpowital. tsotr

cVz, efAvvo,,,
CIA<

stesiss-as

folltinuAtantkiest_to JAI* enclimstios, istolts
Irths _Vaasa,

&mall .413so ts sad- -0,

.:aattexyla,;;,uxixs.L. as. 4,-(44-Sosz.4-tauritorrirt

dir,nr'"4

':henever the Federal Reserve iloard shall permit ouch as_applyi* bank to
---bcowe a dermitor In the branch of the Federal Reserve 'i3shit of the di-

tit in which the applyInu Unk Is located* such p2viu bank shall becalm)
-"
entitled, osolorlhe rules and reLlulations in thio Aot provided, to enjoy
a44,r-ttw,,tSskttva-Atirfntnoirittf' tatiattrrtrallts.
a depoaitor

.704 &NM evAN

7o

sarrend,pr its rights or withdraw

ada;dtted

Its obli&ations

as such until after thotiSspirattos of one year fr9f1 the gtving by it to the
/gadawal-4.wsrvis,lanWof written notice of Its

tention so to do, nor unless

and until it ohal nave pain, or &i-crgo iz

'1 all indobtednos ane ob-

1/cations of øvr3 kind sw*Ail

It t3 the

4AP006,x14.orers7 ale the United LJtatess



(Otate Banks aa gerabers)
g--

artbettb1ivh
pro's'', s 1 ens of this s ection,ir the gone ra 1 6ev -

It shall 'be %be dutq,arytio Federal Reserve

IS

,-- ,,--

by- 1 gtv, e 0 one° mut Iv I-th ,libi
..-

=de by so.id state banks

ernstent of its Oetaditot in astine uponapplioat ot

oztd bazidpe rowoolstiono and tmst*.'$03a-4los to beeorze

depositors in the

Fedex:n.1 Reserve Bank.

at any time it shallfiallpear to the ii:64eral-tellerv.e. Board that
0.Pkttervq\A-, kito ftet,4 tfeetyr,t,
et,.,rocier
,..-Aia--barlic-rir-b7olcitw.-aasoniatior-ar.1xne4o-sr , ved-enter-tlie

Irts failed or ceased to eon!)

.1ewe-ef.-

with the provisions of this section or the regulations of the 3oart1, it shall
be within the power or .the said

awd to require

,-Laliiian_or,.,txo,,g.Lo4wyaai.,e to surrender

it

such

eeLb

rights as a depositor .1s---44*.-41

againb-11.414a-inteasa,,e-dapclai,tor, and to pay
et,

ate

diseharto any eon all of it oblications to .the 44-4erra--iiemerre, :lank
efr,cr)

,er-loe-arr-ef-14r-tfremairee,-ew to the United 'States.




Sec.

.

:27

That the Federal Reserve Bank shall from time to time

purchase from the national banking associations,at prices not over par
and accrued interest, the two per cent. bonds of the United Statesjhaving

the circulation privilege,up to an mount not exceeding their par value,
one-half of the amount of circulation of the national banking associations
from which purchased, and thereupon shall assume responsibility for the redemption and retirement of the notes of each such national banking association, to the amount of the bonds so purchased from it, which assumption

and responsibility shall constitute pwment to such national banking associations for such bonds.

Immediately after purchasing any such bonds

the Bank shall exchange them with the Treasury of the United States for an
equal amount at par value of three per cent. notes of the United States,
payable within one year of the dates of their issue, at various periods,
at

as determined by the Secretary of the Treasury, xXikadit the Bank of any of
its branches.

All such notes to be issued under regulations to be nre-

scribed by the Secretary of the Treasury as to the form ard tenor thereof,
are hereby authorized.

Upon the maturity of any such notes, the Bank shall,

for a period of twenty years from the organization of the Bank, at the option of the Secretary of the Treasury, accept and nay for to the United
States new notes of like aggregate amounts and similar form and tenor.
The Bank shall pay to the United States out of its earnings and before

re-

imbursement to the United States for the advance of seven million dollars,
herein provided for, a tax of one and arixrka± one-half per cent. ner annum

on the amount of its circulating notes equal at par to the amount of such
Treasury




0

three per cent. notes from time to time outstanding.

The Federal Reserve bank, ineluei
4eremreilmererms1-beole
fT .-ceeen, shall be the fiscal gents andOeposi ()rye of the government, extieelsetttiletete 'ettu
c ept that for temeleelofte.y purposes
eeecretary at' the Treesury may designatl
of viti, eAtitother Government depouitories. es The Federal A eerve Bank shall be require(
to maintain in behalf of the/National Banking sociations which have Notes
es'
es
in circulation the five/ter cent redemption f d now held in the General Fun(
of the United Stat,ee Treasury and any deficijmcy of the said fund shall be
forthwith pater/by the Federal Reserve Bank to the Treasurer of the United
,e
States upen demand being made by him, arf the said bank shall be forthwith
reip6ursed by the rational Banking Asso iation in whose behalf such payment
!ection

is Made.

,

atilt

afil-,-Ehe Federal Reserve Bank 4ft-efttilartzed-tmli-empalrerady-la-the-441-e.
cx.Qt4o41-1!ffi:4ieltreral-Reserve-r4oarg, from time to time to purchase at a

price not to exceed par and interest two per cent Bonds of the United States
deposited to secure circulating rational Banking Association Notes, but not
to exceed pal amount equal to one-half the total amount of such Bonds deposit/
with the Treasurer of the United Statee as security for the circulation of
such rational Bank Notes. It shall pay for the purchase of these Bonds by
assuming the responsibility forthe redemption and retirement of the Eational
Bank Notes secured thereby. IlmnediaLely upon the purchase of such Bonds, th(
Federal Reserve Bank shall exchange the bonds so purchased with the Treasurel
of the United States who shall deliver and exchange therefor an equal amount

at par of One Year Notes of the United States bearing three per cent interess
which Notes may be renewed, at the option of the United States to be exercis(
by the Secretary of the Treasury, each year at maturity for twenty years.
Such Notes shall be made to mature at various periods during a calendar year,
the dates of maturity thereof to be determined by the Secretary of the
Treasury. During the existence of such eotes, or Renewal Notes, before
payment or cancellation, the Federal Reserve Bank shall pay to the United
states out of it earnings and before any dividends are paid upon its stock



a tax of one and one-half (34) per cent per annum on an amount of circulating IOtes equal to the amount of such Treasury three per cent Notes
outstanding.




Pl2

DARK'

(Reserves)

2.

Of cold or lawful money other than nationol tank notes and 'Federal Reserve
lemk notes. The losifhl anounkor the :Animus reserve of coon oueh bank,

from and after five year

from the Milne of said certificate of orcanisation,

or from the date of the Lsounnoe

the last each notice, nnall be twelve
per oettuw of the arePate amount of the deposits of each such bank other
than the savinge deposits hereinafter authorized, or whlea resorve at least
one-half shall be deposited rith `;:he :Federal Reserve 3unk and the remainder

hall be and continue in the vaults of Fueh bank and not elsev:here.
The Pederal Reserve Bank

i1l t all times :maintain a reserve not

loss than fifty per oentun or its demand liabilities, inoludinG any note issue
by it then outetandinc; ouch reserve shall consist of gold. or :Lawful MDUR:1,
other than national bank notes and Veders1 Reserve 3ank rotas, and shall be

kept in the vaults of the Poderal nesorve 3ark at its headquarters or at
any of its brandhes in oue4 proportions as the 7oderal Reseive !Ward may from

time to time establioh, and not elsewhere.
The Federal Reoerve aoard nay If in the judement of a majority

of its nember,pas exTremsed by resolution at h duly assealbled meetin6, an

emorgenoy exists, susper0 all the fon/col:4; reserve requiremonts for a per-

of tArty days and by like resolution for additioned periods not exceedin e fifteen days each.




FWT DRAM.

From and after the date of the Mire hereunder of the certificate
of organisation of the Vederal Penerve Unit, the Pederel Reserve .Boerd shall

have per to, and shnll bring about no rally se it may deem wise under
commercial conditions from time to time existinn, trio channe of the minim=

reserve renuiroannts of national benkinn assooiations (including etate banks
which shall nationalise themselves hereunder) until the reserve of each such
association or bank shell be maintained at not less than the lawful Trani:taxa
hereinafter ordained. Such ehnnne shall be nocomplished in a period not
shorter then thirty months nor longer than five years from the filinn of said

certificate of ornaninntion. Frala time to time, at Interval of not lees
than three months, the Pederal 'deserve lionrd shall issue to all each assoointions an4 brinks notioee settinn forth that f,49.6h of them mey, not later
than one month from the issuance of each notice, cause the reductIon'of its
reserve by an amount, on the oncasion of each such notice, (a) in the cane

of all country banks, as intended by existing law, not treater than/1O of
one per cent., nornless than 3A.X of one per cent. of the amount of the de-

posits of such bank, as hereinafter defined, nt the data of the Orst of each
notices; and, (b) in the case of all reserve city banks and central reserve
city barke,as intended by oxisting lawnnot &roater than 1 7,40 per cent. nor
lees than Gb/100 of one per cent, of the amaant of the depooits of sueh bank,

as hereinafter defined, at the date of tho first of such notiess.
Upon the issuance of such notice, each such bank shall forthwith
make the necessary transfers and withdrnwale thereby indicated and shall also,
to such extent no may be opeoified in such notice, transfer to the Pederal
Enserve nank a .ortion of its lawful reserve, nuch reserve, whether in its

con vaults or In the austody of the rederal Bessrve sank, shall consist only



r77

Section
vamkflpitmf

./:)...,

44-11"P""Wortr""W"I'

be entitled to kliscoutt

rixl reserve b#,inke
totes, drafts, bills of oacharce or woeptancee, rith the
In encase of the amoant of the =lapsing otpitEl et.1 sur:aus of each depozit-

int batik.or true. compaty. tor Shell too azreeete of eodh rote, drafts, bins
of *41414mne, and acceptances, bearina the cieratere or etdorsemtent of ar;y

one yervon, orkaparv, firm or corporation, rediecoutted for :Ay one depositite

bank or trwt oompa4y. 41 any time aisse4 ten per cent= of trio unimpaired

oapital

warplue of riuch dopotatIrc baLk or traot oompany; but thic re-

striction eaall tot apply t;" the alaccent of bille of ez,_:aravo Nyable cuteiao

of the continental ltlitetitate. ram it good raith ausinet existin4
vtlass.




Seotion UO2 of the Revised Btatutes of the United :Antes la horeby
*mended eo aS to read as folles-edolto aseceistion shall at tiny time be

Indebted' Or in anyway

to w x4ount exocedine the =cunt of its
°apnea stock at suoh tie actus14 raid in an6 rerIalain uudimitiened by
losses or otleri,ine, ese_tott on acoount of delando of She nature folimiug:
Firlit. Notes of circulation.
Beocud.

' S.cmyye depoSitod with or oollooted by tile association.

Third. Mils of exciisite or drafts dravn acsiuot credits due the

etation. or =my actually on deijmit to taco credit of the aesoolation,
or due tneroto.
Pcurth. Liabilities to the stockholders

the association for

0N1-donde and reserve profits.

71M. Liabilities incurred under to provisions

of section IZMcp.,

0564KNOW fourteon of the Fedora]. notarve

sixth. Liebalty alo endorser on notes or bills of sx(4puffe ariOng
ltotk_frealk. 0-1/4 :1Fskibtf 0.ae/444,1
out of *ammo:vial transeetions, edefirod in user Ult..

jet to

3eseut4, Liability as enceqtor of_draftsAr bills of 9tette, Alb!Of--/*M. ...
6E'
t "kip 16 /'''''lft-f Wf.etkAr kklikWIF at N.,,,1
t:w limitation*
.
'-:,

n.

c

AN

Any national bwelLaki at its discretion accept drafts or bills of
eloharVI drarn upea it having not nor* than. six Aonthe nit to ran and frog*.
inL out of commercial transactions as described in thls section, and a* defined
by the Yederal Betervo Board, but ao bank ahall accept such drafts or bills
of exchange to nu &wont at at' time exceoA.ft* in tho oGgro6ste ono-half of

its aid-up an0 uniqoalrod oacitel and sar)lus.




..the Thethirahl

tI*

iieserve

eint6C,
(f.1/112.

hay() z flret caul paramount Ilea upor,

to(e. Cvory national bank, and, eatoort r

onfliot
with Cm- existinii; r,state, ltoe, upon the attsetts of every Stuto bank, banking
at:80°1ot Ion

true t oork.zow

11en

for all do tote ond 1 lab 1 1 it lea of such ber*ze ,

banking associations and tmet oomrani6e due to t P Fe4eral




r

rerSITVO /vatic.

4

Section (blanIc). The 1,Wlerg.I feorv
brarichoe and sab-branohes rthall r000ivo
ot%er obligationo of the nal°. 131.snk raau

branches. The l'Attfri ON e

wctut. each of ito

par all elatileks, arafte or

soh of its bramhes or sub.67yrnv-rirs.t. *GYN.&

C;017471ittoe

of (molt brazoth iettir ohallAsubjeot to
pet4(745/.,

cy,art ep

A

-

.'

t'...o oporovp1 of the Federal 7.:ecerve Board
elcacm ra ad Coal. eri 44; aSna
tt 0 > to tic 0 rit it.(42( Cl le

()the /WA

t,v- rl1-f all cheolce, drafts and ot:(v)r *-4,434;t4t.lasai of banks
/k

trust (la:T=1os, other vlan those hereit4beforo., mentioned, reaeived in
I
a)oordance *.c,th 7a.rocreph. (c), V ection
,1---...

ttiPtlft/)%0. flt.

.) of ttie ,,ot., ;lob.
-f

charges 516107-

not to be in Pxoess of the,t-ctucl cost of collection of such cheeks,
4trepw.,

'

drafts ard other 4-1-tre4kerttr.




Econl Marl%

(Functions of the Federal Reserve Bank) 2.

comeany to discount notes, drafts or bills of exchange which are based
upon the exportation or importation of goofs, -;ares, merchandise met or

agricultural eroducts, as determined and defined by the Federal Reserve
Board, and whio1 mature Watt within not exceeding six months from the date

of discount;

(

to purchase from manber banks and to sell with or with-

out its endorsement, bills of exchange arising out of

commercial transac-

tions as determined and defined by the Federal Reserve -30ard and payable

in foreign countries, but such bills of exchaege must mature in not exceeding ninety days from the date of the purchase and must bear the signa-

ture, endorsement or acceptance of two or more responsible parties, of

which at least one shall be that of a depositing bank or trust company
)

1

under rules and regulations prescribed by the Federal eserve 3oard,

to purchase and sell in the open market, either from Or to depositing
banks and trust

companies, or through its foreign agencies from or to

foreign banks, firms, corporations or individuals/, notes,drafts
and bills of exchange of the kinds and maturities by this Act made eligible
for discount and mxpakim cable




transfers.

SECOND DRAFT

SECTICK

?Unctions of the Federal Reserve 3ank.
The Federal Reserve Ilatkiahall have power (a) to invest in the

bonds and other obligations of the United States and-tIrTriThitaltr-poseese20,A1% (b) to deal In gold coin and billion; to ma ks loans thereon, and to

contract for loans of gold coin and bullion, giving security taerefOr when
NItta
necessary, includatothe bonds and other obligations of the United States
vtafitee4k.44e.eimealarAgR441Aime owned by the Bank; (c) to receiv

u?,46.4e

from any

depositing bank or trust cOmpany deposits of current funds in lawful money,
national bank notes, notes of the Federal Reserve Bank, xsact or Cheeks or
drafts upon solvent banks payable upon presentation; (d) with the acceptance or endorsement of any depositing bank or trust company, to discount

notes, drafts, and bills of exohange arising out of commercial transactions,
such notes,drafts and bills to be of a character to be determined and defined by the Federal Reserve Board. Such definition shall include notes,
/N

drafts and bills of exchange issued or drawn or the proceeds of which shall
be used for agricultural, industrial or commercial purposes, or which shall

represent a bona fide sale of agricultural products or other goods, wares
or merchandise, or which phall have been issued for the purchase or sale of

the bonds or other obligations of the United States

ce-Tef6.44meetenettimm.-10T-

'~e1Teees

Such definition shall not, however, include notes, drafts or bills
of exchange issued or drawn for the purpose of carrying agricultural products
or other goods, wares or merchandise, or for carrying or trading in stocks,

bonds or investment securities, other than the bonds and obligations of the
United States-ar&-lef-tt,-iewsdiCigggraljelom. Notes, drafts and bills of
exchange admitted to rediscount, as so defined under this paragraph, must

mature within not exceeding ninety days from the date of discount.

(g)nth the acceptance or endorsement of any depositing bank or trust



c!!)4411

A

Tars': Dr-TT.
PPIVTMG,

Sec.

DErluintTilm

witli

OF TPX CIPCILATING

rIms or

TRN BAIT.

In order to furnidh suitable notes for the Bank, the Comp-

troller of the Currency shall, under the direction of the Secretary of the
Treasury, cause plates and dies to be engraved, in the best manner to guard

against counterfeiting and fraudulent alterations, and shall have printed
therefrom, and numbered, such quantity of notes, in blank, of the denomi
rations of five dollars, ton dollars, twenty dollars, fifty dollars, one

hundred dollars, five hundred dollars, one teusand dollars, ard ton thousand dollars, as may be required to supply the absociations entitled to

receive the owe.

Such notes shall upon their face be certified by the

written or engraved signatures of the Treasurer
imprint of the seal of the Treasury.

;Ind register and by the

They shall also express upon their

face the promise of the Bank to pay on demnd, attested by the signature
of the Governor or Deputy Governor and Cashier.

The Comptroller of the

Currency, acting under the direction of the Secretary of the Treasury,

shall as soon as practicable cause notes to be prepared and

printed,upon

the distinctive or special paper which hns heretofore or nay hereafter
lawfully adopted by him

for printing United states notes, to an amount

equal to the requirements of the Bank.




be

TZD mArT

deo.

The Bank may lovue Its circulating notes, which ehnll be

receivable nt per in all pnrts of the Jnited atatee in pAyrent of All
taxes and =tees and all other duos to the United Staten except duties
an imports and also for all salaries and other dotts and dornrds cring
the United States to individuals, corporations and associations rithin
the flited. Dtates except Interest on the pane det..

Such not

shall

be a first lien on 111 of the nesets of tho Dank and payablo in ran fros)
such nscots before any other obligations of tho nank nnd shnll be rot amable on demand at any office of the Bank in lawful money of the United.

States.

AD long as Any such notes are outstanding the Tunk shall seg-

regmte in its own vaults and carry in a elTolel reserve account on its
books lawful money of the Onited states to the extent of the pr vAlue

of the notes from time to time so outstanding or, at its option, shall
ao segregate such lawful mons:r to the extent of DOI of such pmr value,

und oollatorle, convicting of promissory notes end bills Accepted for
reAsoeunt under the provieions of Sec.

of this Act, or one year
exotequor notes of the United I'matoc hcreitafter provided for, OT both

---

such collet:orals nnd ono ,ear exchequer notes equal at par to 100,7, of ouch

par value of the notes from time to time so outstanding.

Such reservo

shall be wed for the rodonmtion of suoh notes as And. rhen presented for
payment and my be exch ,ged from time to time for other lawful money or

collatorels or ore ;iota' exchoquer notes within tho limitations aforesaid
and of aqua/ per value. ( The Board of the

.'v

suspend ell reserve, requiromets for ZO days Ind. ma7 continuo ouch sus-

4 ft\ pension for periods of 16 dnye.

r-

Ilk may, in au smorgen07,

er*

,O




said Committee at a period within six months from the date of allotment,

provided that the date upon which such subscriptions shall become payable
may be extended by the Board of Directors of the Federal Reserve Bank, with
the approval of the President of the United States.




tv a

STOCK ISSUE
Section

That the Capital Stock of the Federal Reserve Bank shall be
00

$1,000,000. divided into shares of $100. each;
A

such stock shall be free

of all Federal, State, Municipal or other taxes, except that the holders

thereof shall be subject toItieFederal Income Tax with respect to the
income derived therefrom.

The holders of such stock shall be entitled

to dividends thereon at the rate of five per centum per annum and no more,
which dividends shall be cumulative.

4;19144A
Such stock shall be offered fOr subscription -tee--bite--pTttrleke at
A

par by

item

the-eTs.ni-ratran Committee under regulations to be prescribed by
In case the amount of Capital Stock is over-subscribed, the Com-

mittee shall allot the shares of stock to the smallest subscriber

tr.

In

case the full amount of the Capital Stock is not subscribed for, the

Committee shall allot the portion unsubscribed for to the several National
Banks in existence at the date of their allotment in proportion to their
respective amounts of capital,

and such

allotment shall fix a liability

upon each of the said National Banks to subscribe for and take the number
of shares so allotted, such liability to accrue on the date of allotment
by the Committee.

Any subscriber N.Q.4.140.tiss to pay for the shares allotted to

him at the time required by the Committee shall forfeit his right thereto
Ateefti...ficte
allotted to
by the Com,.
and such shares may thereupon be
otherAp...exzewile

mittee.

Every subscriber shall accompany his subscription with a cer-

tified check for five per cent of the total
the

subscription

amount'
g,

such five per cent of

to be forfeited upon failure of the subscriber to pay his

subscription for the amount allotted to him in full, as above provided.
The

trg7Trie,t1

Committee shall callfor such subscriptions and make such

allotment within six months of the date of passage of this Act, and the
balance of the subscription shall be paid by each subscriber upon the

http://fraser.stlouisfed.org/
amount Louis
Federal Reserve Bank of St.allotted to him by the Committee, upon a date to be fixed by the

',old stock in any bank or banking institution and, before entering upon his
du ef,4 as a member of such Committee, he shall certify under oath that he
has compliA vcith this requirement. Vacancies shall be filled by the Federal Aeserve Board and any peroon appointed to fill such vacancy shall hold
office for the unexpired term of the member to whose place he is appointed.
.k,embnrs of such _&xecutive Committees may be removed for cause by the ii'ederal

Reserve Board after .:ue hearing. ,ach such laxecutive Committee shall annually make a report of the operations of the Branch Reserve :Jank to the
Yederal Reserve ,3oard to be by them transmitted with their annual report to
the Speaker of the house of lepresentativeo. Such report of the , xecutive
Committee shall contain reports from each "id Branch Bank established in the

district.




e -)ers of the Board shall devote all their time to their official duties,
and shall automatically retire at the age of seventy (70) years. The
Governor, or in his absence the Deputy Governor, shall act as Chairman of the
The salary of the Governor shall be $17,500. per annum, and of the
Board.
The Board shall make a
other members of the Board, ;45,000. per annum.
report of the operations of the Federal Reserve Bank to the Speaker of the
Houee of'Representatives who shall cuse the same to be printed for the
information of Congress.
The Federal Reserve Board shall cause the Country
BRAHCE RE2ERVE BALKS.

to be divided into teelve (12) districts for the purpose of establishing
eithin each of such districts a Branch Reserve Bank to be known as
, provided that the number of such Branch Banks and of such
distriets may be reduced by the saidBoard when, in its judgment, the interests of trade and commerce so require; and in the like manner the number
of such Branch Banks and districts may be increased by the said Board after
two years from the time of the organization of the original number of Branch
Banks and districts. The government of such Branch Banks shall be vested

1n: Board of five (5) Directors to be appointed for terms of
years
by the Federal Reserve Board which shall also fix the compensation to be paid
to such eovernors.

Such a Board of Governors of the 3ranch Reserve :Banks
shall be celled the xecutive Committee and shall be presided over by the
Chairman, or, in his absence, the Vice-Chairman, both oe whom shall be appointed by the Federal Reserve :Board.
The ..ixecutive Committee of such

1

'

Branch Reserve eanks shall have authority to establish and diecontinue eald Ana
Branch Banks within their respective districts, subject to the approval of
the Federal Reserve lioard. The Chairman and Vice-Chairman, subject to the
supervision oi the executive Committee, shall be the active executive officere of the eranch Reeerve Banks.
ho member of such Executive Committee

shall be an officer or a director of any bank or banking institution, or



The government of the Federal Reserve Bank shall be vested
Section 4.
in a Board of seven (7) Directors to be known as the Federal Reserve Board
(hereinafter called the Board) whoee powers shell be the same as those conferred upon Boards of Directors of National banking associations uneer existing law not inconsistent with the provisions of this Act. Such Directors
shall be appointed by the President of the United States with the advice and
coneent of the Senate, to be selected from men qualified by experience and
training for the proper discharge of the duties imposed upon them by this

Act, and at least three (3) of the members shall be persons of tested bank2uch/4 selection shall be made from residents of difirw, experience.
ferent sections ofthe Country, due weight being given to the various commercial interests of such sections.
The term of office of each member o; th9 Board shall be fourteen

T(14) years, except that the terms of office of/\:the persons first appointed
to the Board by the President shall expire at the end of two (2), four (4),
six (6), eight (8), ten (10), twelve (12) and fourteen-(14) years, respectively,
The President shall have power to remove any member of the Board
or cause after due hearing, such removal and his reasons therefor to be

President shall designate from among
the members of the Board one person as Governor and one as Deputy Governor,
communicated by him to the Senate.

The

who shall, subject to the supervision of the Board, be the active executive
officers of the Federal Reserve Bank. No member of the -ioard shall be an
officer or director of any bank or banking institution, or hold stock in any
hank or banking institution, End before enterilv on his duties as a member

of the Board he shall certify under oath that he has complied with this requirement.
Vacancies shall be filled by the Presiett with the advice and
consent of

the Senate

and persons appointed to fill such vacancies shall

hold office for the unexpired term of the member to whose place he is appointed.




("Division of F,arniare)

2.

by the 3ecretary of the Treasury, not less than three months after the
receipt thereof, to the redemption of such outstanding bonds by advertisement published in each of the Federal reserve districts at least once a
week in the four succesrive weeks immediately preceding, the date fixed

for such redemption, which advertisement shall call for the tender of
bonds by the owners thereof at prices to be fixed tivirlm4- by them in such

tenders, and the cacretary of the Treasury shall thereupon purchase from
the bone so tendered those offered at the lowest prices up tp the amount
of such funds in his hands at sach redemption date.




DIVISION OF tARFINGS.

Sec.

That, after the payment of all necessary expenses and
taxes of the Federal reserve bank, its net earnings shall be applied to
7.

the payment of a dividend of five per centum per annum, which dividend
shall be cumelatIve. thy overplus of such net earnings in excess of divi-

dend reeuiremsnts in any year shall be devoted to the upbuilding of a

sur lus of twenty ear cent= upon the paid-in capital. After such surplus
shall have attained to an amount equal to such twenty per centam, subse-

quent net earnings shall be distributed, subject to the peyment of said
cumulative five per centum dividend under the conditions herein prescribed,

to the United States and the remaining one-half thereof to the accumulation

of a farther surplus until the total surplus of the Federal Reserve Beek
shall'attain to an amount equal to fifty eer cent um upon the paid-in cap-

ital.

en said surplun shall have attained to such fifty per centum, all

net earnings beyond the anaant necessary to pay said five per cent. dividend shall be paid to the United States. The payment of said dividends
upon the stock may at any time or from time to time be deferred for such
period as may be necessary to restore any impairment of surplus below the

amount thereof which the same shall have theretofore attained, to the end

that each surplus shall never be diminished and that after vaoh surplus

shall have eeuelled fifty per cent= upon the naid-in capital the same
shall thereafter be continuously maintained at that auount.
The earnings distributed to tee United States under the foregoing

provisions shall be applied to the retirement of its outstanding bonded
debtedness. All funds so received by the United States shall be applied




0

-b-

besides their necessary traveling
an annual salary of J
and other expenses connected with the performance of their duties
and the governor of the Bank shall receive an additional salary
and the deputy governor shall receive an additional
of
The compensation of the members of the
salary of
executive committees of the several branches shall be fixed and
determined by the Doard of the Bank and need not be the same for
each branch. The compensation of the president, vice-president

and other officers of each branch shall be fixed by the executive
committee thereof.
Sec. 9. The net earnings of the bank after deducting taxes

and expenses, including proper reserves against the acquisition of
permanent property, shall be devoted, first, to paying a 6% cumulative dividend upon the stock, and, secind, to an accumulation
of a surplus equal to 20% of the capital, and one-half of such
earnings above such dividends and surplus shall be paid to the
Government and the other one-half devoted to the accumulation of a

further surplus until the total surplus reaches 50 of the capital,
and thereafter all earnings beyond the dividend requirements shall
be paid to the Government.
See. 10. The Bank shall conduct business solely with the
Government and the qualified member banks, which shall include

all national banks and such state banks and trust companies as
may from time to time be admitted by the Board of the Bank under
such rules and regulations as the Board may prescribe for the
government of all member banks.




(4)

-4The form of stock certificate adopted by the committee

and the methods of the transfer thereof and such other facts in
connection with the organization as the committee may determine.

such certificate shall be executed under the name of the
committee by the President and 3ecretary thereof and attested with
its seal and shall be forthwith transmitted to the Comptroller of
the Currency, who shall fi/e, record and carefully preserve the
same in his office.
Sec. G. The 7;oard of the Bank shall appoint for each branch
an executive committee of seven members, the members of each of
which executive committees shall be selected as to qualifications,

territorial distribution and banking and financial experience
with the some regard as hereinbefore provided in respect of the
selection of the members of the Board of the Bank. The terms
of office of the members of the executive committees shall be
seven years, but in the case of the first members of each executive
committee appointed, they shall be classified no that one member
of each executive committee shall retire each year. The Board
of the Bank shall designate one member of each executive committee
as a ehairwan and one as a vice-chairman and the chairman or, in

his absence, the vice-chairman, shall act as chairman of that
executive committee.

sec. 7. All actions of the executive committees shall be
subject to the approval of the Board of the Bank. Each executive
committee shall select a president and other executive officers
to conduct the business of the branch, the men filling such offices
to have no offcja. or financial relation with any other financial
institution.



3ee. 8.

members of the Board of the Dank shall each receive

-3-

Governor, shall act ae chairman or the board and be the chief
executive officer of the Bank. Directors shall retire at the
age of seventy and a vacancy thereby created.
Sec. 4. such board of directors and their successors and
the stockholders as they may from time to time exist are hereby
created a body corporate to be known as "The Federal reserve Bank
of the United ltateen, to have a term of existence of fifty years

from the date of the filing of the organization certificate, to
have the power to sue and be sued, to acquire, own and hold such
real and personal property aemny be necessary for its business, to
buy, sell and deal in gold and silver bullion, promissory notes
and other evidences of indebtedneus and warehouse certificates

and bills of lading, and to discount bills, to have a capital stock
of One hundred million dollars, divided into one million shares
with a par value of one hundred dollars each,which stock Shall have
no voting power, to have its principal place of business in the
City of 7ashington, D. C., r1,1d to have twelve branches located in
cities selected by the organization committee and sue branches
wherever designated by its board of directors and to have such further power, privileges and functions as are hereinafter specified

in this act.
Sec. 5. After the entire capital of the Bank shall have
been subscribed for, the organization committee shall make an
organization certificate specifying
The names of the several subscribers to the stock;
The territorial extent of the several commercial diei;ricte as determined by the committee and the designated cities

in each district as the seats of the several branches;
A description of the seal of the Bank;



1i.

-2-

process of organization thereof, be the seal of the Committee,
and adopt seals for the several branches, which shall correspond
OFdtua,Rti,*:..tes
to the seal of the Bank with the name of the branch added;

aarti

ars1

04\

.1.1114

.1102e' 'Mat-

,s3,0d.grlat.

of t1T

nvite public subscriptions to the capital stock of
the Bank under such terms as the Committee may determine and re-

ceive from all national banks in the United States their subscriptions for their pro rata proportions to any of such stock not taken
by the public, all of such national banks being hereby required,
under the direction of said Committee, to subscribe for such pro
rata .proportions.
INOORPOTATION AND ORGANIZATION OF TEE FEDERAL RESERVE
BANK OF THE UNITED STATES.

Sec. 3. The president shall appoint, with the advice and
consent of the Senate, seven directors of the Bank, which directors
shall be selected from among men resident in different sections of
the country so as to give due weight to the commercial districts
and from among men who are qualified by experience and training
for the proper discharge of the duties imposed upon them. At least
times
three members of the board shall at allAte men who have had wide
financial and banking experience. The terms of office of such

directors shall be fourteen years, but the board. first appointed
shall be classified so that the term of one director shall expire
every two years. The president also, with the advice and consent
of the Senate, shall designate one director as Governor and another
as Deputy Governor, and shall fill all vacancies on said board for
the unexpired terms. The Governor, or, in his absence, the neputy



tgk
ci..

ACT

.rm,(vnortmisti.4e.., ,.tz44....4Are incorporat42A tif

t

-

Second Draft.

Perrrei-

AN

a to,

,17;tx.,

gEDERAL RESERVF. BANK OF

THE UNITED STATES .a.g4--loawriaalleeet-he.reoci4, .Zir. establish 4;114 ii&114

tc.t* kti
districtb too;f4stemirest an elastic currency,
A

itre

AO

afford AO means

ge

yeti

more effective
supervision of banking 4,(4--4440,--ett--eis and for other purposes.
Be it enacted by the senate and House of Representatives of
the United States of America in Congress assembled:
Xec, short title of this Mt shall be The :Federal
The
rediscounting commercial paper 401- establish

iitimme.

reserve Act."
ORGANI Z AT l0! COM' T TEE .

sec. 2. aids soon as practicable after the passage of this
Act the president shall appoint a committee of five, to_be
t.twAttif t er vit
nated lor 0'7he Yederal Reserve Lank organization CommitteeAV
4\

oi

_21

791

organize3he Federal eserve Lank
ktAcl
of the United. States i.hereinafter calledlheABankl and Wow branches
92'16r
416.E.A1
thereof,and shall receive% ip full compensation for k services,
A
committee shall liwite--1Foemie*-4e

the sum of 0 100 .
'

,z,.., ot.,,n-vrt inn.

4110m, 4000. shall, -4-444444444.4' ,1..y-it.'gev-.4-tre-a)r.---

-paiotment., -ty-triett

A) 7041ect a Chairman and Oecretary and such other officers as it may 414Q444 from its own members and ii.o.. appoint assistant
A
officers, clerks and other necessary employes, (. and 14.4. incur such ex,

penses in carrying out the provisions of this Act as it shall deem
necessary, which expenses shall be payable by the Treasurer of the
United States upon voucherSapproved by the Committee, and the 311M
of ;250.000 or so much thereof as may be necessary is hereby appro-

priated out of any moneys in the Treasury not otherwise appropriated
for the payment of such expenses;
Gal:A

A 44 adopt a seal for thejank, which shall, during the







3
COMPLIMENTS OF

DOW, JONES & CO.

63n1s.OME-SS H. R. 7837.

PU BLISHERS

THE WALL STREET JOURNAL
FINANCIAL NEWS BULLETINS
ELECTRIC PAGE NEWS TICKER

IN THE SENATE OF THE -UNITED STATES.
Read twice and referred to the Committee on Banking and Currency.
SEPTEMBER 18, 1913.

AN ACT
To provide for the establishment of Federal reserve banks, to
furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes,
1

Be it enacted by the Senate and House of Representa-

2

tives of the United States of America in Congress assembled,

3

That the short title of this Act shall be the "Federal Reserve

4

Act."

5

FEDERAL RESERVE DISTRICTS.

6

SEC. 2. That within ninety days after the passage of

7

this Act, or as soon thereafter as practicable, the Sec-

8

retary of the Treasury, the Secretary of Agriculture, and

9

the Comptroller of the Currency, acting as "The Reserve goU .Jl4

10

Bank Organization Committee," shall designate from among

11

the reserve and central reserve cities now authorized by

12

law a number of such cities to be known as Federal

13

reserve cities, and shall divide the continental -United

14

States into districts, each district to contain one of such

15

Federal reserve cities : Provided, That the districts shall

16

be apportioned with due regard to the convenience and

5"2-C-Li

44) 6".

rt
A

tJet441'

2
1

2

si,,,zastrow-ccov,:,

may) from time to time(3e createdy the Federal Reserve

6

'4

districts thus created may be readjuste4and new districts

5

ft' A4v1,4

may be wholly or in part included in any given district.

4

fl,)

necessarily coincide with the area of such State or States as

3

(Too (1uN

customary course of business of the community and shall not

Board hereinafter established(acting upon a joint application

7

made by not less than ten member banks desiring to be organ-

8

ized into a new district) The districts thus `constituted shall

9

10

The

be known as Federal reserve districts and shall be designated

by number according to the pleasure of the organization
committee, and no Federal reserve district shall be abolished,

NA

.m1;1'4611

4,vecopic 12
4 go rc"t'

nor the location of a Federal reserve bank changed, except

Las s 13 upon the application of /1.1.r.e.0-4*444s-of the member banks of

10;,,

ifs)

14

such district.

15
16

regulations to be established by itself, proceed to organize in

17

each of the reserve cities designated as hereinbefore specified

18

a Federal reserve bank. Each such Federal reserve bank

19

shall include in its title the name of the city in which it is

20

situated, as "Federal Reserve Bank of Chicago," and so

21
,

The organization committee shall, in accordance with

forth.

aiwir: 22
po.c.ta to

gaLgir

(iiidkX442.

The total numbet of reserve cities designg by the

flu

4444*

/thee

WA

organization committee shall be not gess)than(twelve) and

23

the organization committee shall be authorized to employ

24

counsel and expert aid, to take testimony, to send for persons

25

and papers, to administer oaths, and to make such investiga-

26

tions as may be deemed necessary by the said committee for the







3

ak.-1 etwireteZ.

purpose of determining the reserve cities to be designated
ad
Gro.iD

2

and organiziAg-t14-r4s4r-v-e-distrietis hereinbefore provided.

Every national bank located within a given district

3

4

shall be 4equirect to subscribe to the capital stock of the ttagerrp

5

Federal reserve bank of that district a sum equal to twenty

6

per

7

bank fully paid in and unimpaired, one-fourth of such

8

subscription

centum of

the capital

to be paid

in

stock

of such

national

cash and one-fourth within

9

ly days after said subscription is made. The remain-

10

der of the subscriptionA(or any part thereof)shall become

11

a liability of the member bank, subject to call and pay- ,Pititgo

12

ment thereof whenever necessary to meet the obligations

13

of the Federal reserve bank under such terms and in ac-

14

cordance with such regulations as the board of directors

15

of said Federal reserve bank may prescribe : Provided,

16

That no Federal reserve bank shall commence business with

17

18

a paid-up and unimpaired capital less in amount than $5,000,- to 6 6 Ott t) S
7tOrerft
000. The organization committee shall have power to appoint 1.
re (./P.

19

such assistants and incur such expenses in carrying out the pro- jriAkIlr

20

visions of this Act as it shall deem necessary, and such ex-

21

penses shall be payable by the Treasurer of the -United States

22

upon voucher approved by the Secretary of the Treasury, and

23

the sum of $100,000,_ or so much thereof as may be necessary, tuesetiltext,A

24

is hereby appropriated, out of any moneys in the Treasury not

25

otherwise appropriated, for the payment of such expenses.

dtaCMC:6fAig

Wig, Few- 'let cite, a fa Mufwv4.1\

pen-Let,
1.14

.5si5

>Is al,

4
STOCK ISSUES.

1

SEC. 3. That the capital stock of each Federal reserve

2

3

4

standing capital stock shall be increased from time to time as

5

member banks increase their capital stock or as additional

6

banks become members, and shall be decreased as member

7

banks reduce their capital stock or cease to be members.

8

Each Federal reserve bank may establish branch offices under

9

regulations of the Federal Reserve Board at points within

10

ftelA4

bank shall be divided into shares of $100 each.

the Federal reserve district in which it is located : Provided,

The out-

That the total number of such branches shall not exceed one
,;(v;)'I
o

gete"%41

11

_Pr:rovt..0-11 if, 12

13

for each $500,000 of the capital stock of said Federal reserve
bank.

owl-. 14

FEDERAL RESERVE BANKS.
1

15

16

5fg

SEC. 4. The national banks in each Federal reserve
district uniting to form the Federal reserve bank therein,

17

hereinbefore provided for, shall under their seals, make an

18

organization certificate, which shall specifically state the name

19

of such Federal reserve bank so organized, the territorial ex-

20

tent of the district over which the operations of said Federal

21

reserve bank are to be carried on, the city and State in which

22

said bank is to be located, the amount of capital stock and the

23

number of shares into which the same is divided, the names

24

and places of doing business of each of the makers of said cer-

25

tificate and the number of share(held)by each of them, and the

9

r5ohoot4441




5

oJ




1

fact that the certificate is made to enable such banks to avail

2

themselves of the advantages of this Act. The said organiza-

3

tion certificate shall be acknowledged before a judge of some

4

court of record or notary public; and shall be, together with

5

the acknowledgment thereof, authenticated by the seal of

6

such court, or notary, transmitted to the Comptroller of the

7

Currency,who shall file, record, and carefully preserve the same

8

in his office.

9

Comptroller of the Currency as aforesaid, the said Federal

10

reserve bank so formed shall become a body corporate, and as

ta A

11

such, and in the name designated in such organization certifi-

4- li/t

12

cate, shall have power to perform all those acts and to enjoy

13

all those privileges and to exercise all those powers described ep.742/,..L0

14

in section fifty-one hundred and thirty-six, Revised Statutes,

Upon the filing of such certificate with the

iats ketk11;-.

58_8 1?,2

of6 (I, PA, it),,
16

save in so far as the same shall be limited by the provisions f4 '1u441
,Ict 2' .:17.1v,
(4 flotee
of this Act. The Federal reserve bank so incorporated shall

17

have succession for a period of twenty years from its organiza-

18

tion, unless sooner dissolved by Act of Congress.

15

wrizok.11,0":1

floydmAl)'

Every Federal reserve bank shall be conducted under "11-

19

#(0 rtx

21

the oversight and control of a board of directors, whose guikef-TI,
powers shall be the same as those conferred upon the out" /6tin
6,Ltplr

22

boards of directors of national banking associations under Of4.0"

23

existing law, not inconsistent with the provisions of this etwoviee-l'

24

Act.

25

as as hereinafter specified and shall consist of nine members 00.7-fr,c,ttat

20

tivelv't

ftniltd-e"

Such board of directors shall be constituted and elected Air,01
iht9. Kea"

IN04,41&

frj.)14.4.4) ecktat. .e

// 4m( etin-p° S:soe,eoa. Ow; .1%4-6 ((16(4.
6reutefi 6eutio:4f
402,,,,
4,,,' Pfau
x,,,t,t, 4:3 lor- 691.64,9




5
1

fact that the certificate is made to enable such banks to avail

2

themselves of the advantages of this Act. The said organiza-

3

tion certificate shall be acknowledged before a judge of some

4

court of record or notary public ; and shall be, together with

5

the acknowledgment thereof, authenticated by the seal of

6

such court, or notary, transmitted to the Comptroller of the

7

Currency,who shall file, record, and carefully preserve the same

8

in his office.

9

Comptroller of the Currency as aforesaid, the said Federal

10

reserve bank so formed shall become a body corporate, and as

11

such, and in the name designated in such organization certifi-

12

cate, shall have power to perform all those acts and to enjoy

13

all those privileges and to exercise all those powers described eifivatt.ca

14

in section fifty-one hundred and thirty-six, Revised Statutes,

15

save in so far as the same shall be limited by the provisions

16

of this Act.

17

have succession for a period of twenty years from its organiza-

18

tion, unless sooner dissolved by Act of Congress.

21

etirtit

-;

Efftil.",)

ptcJ

t:i47.1;49f

_qAmious-,17

The Federal reserve bank so incorporated shall

Ore'Vrc.

0)9""4
ahl

,

Every Federal reserve bank shall be conducted under 'Ma-

19

20

Upon the filing of such certificate with the

ago; ,(0171,1

the oversight and control of a board of directors, whose Ptiftewe,
powers shall be the same as those conferred upon the (au" "run
ttu.024\
trowitg

23

boards of directors of national banking associations under tr it't k14,0
Pitf4"
existing law, not inconsistent with the provisions of this eltrAYWF

24

Act.

25

as hereinafter specifi3d and shall consist of nine members, 00.4'Itatatklt
juagatteit
Int 0411(4. &Lab, iahtet,o eopttiCe

22

Such board of directors shall be constituted and elected km goww)

kvjal",i

kfi,g40,4(

z,

4421444-

Itt

_.00IOIe Am; 1WS Lf a (. CC r
&mike-A6fewtft 6cutitc4f aL1407-44:3
luit--ernixt;9 ti4.4.1-ArrTK 4t,' plata.

6
1

holding office for three years, and divided into three classes,

2

designated as classes A, B, and C.

3

Class A shall consist of three members, who shall be

4

chosen by and be representative of the stock-holding banks.

5

Class B shall consist of three members, who shall be repre-

6

sentative of the general public interests of the reserve district.

7

Class C shall consist of three members, who shall be
designated by the Federal Reserve Board.

Directors of class A shall be chosen in the following

9

10

manner :

11

It shall be the duty of the chairman of the board of

1

12

directors of the Federal reserve bank of the district in which

1

13

each such bank is situated to classify the member banks of the

1

ef0C CILTRANut
ettfifill

erCAVA

ifitte fi3 :1"

Saito

nel 61\
0,1

'vet g"--

14

j1

said district into three general groups or divisions.

A

Each

15

such group shall contain as nearly as may be one-third of

MIS
16
C1(474D,10'
eta(
I
Gt; OtIe

the aggregate number of said member banks of the said dis-

woo 0.06.,,H ! 17

trict and shall consist, as nearly as may be, of banks of simi-

44,

lar capitalization.

cow, 0.1.1 "Aktt:v

.-t'irC° 18

1-4

The said groups shall be designated by

number at the pleasure of the chairman of the board of di-

10

rectors of the Federal reserve bank. "4-1- 1414411". 7"-efrn''

20

21

At a regularly called directors' meeting of each member

21

22

bank in the Federal reserve district aforesaid, the board of

22

23

directors of such member bank shall elect by ballot one of its

23

24

own members as a district reserve elector and shall certify his

24

25

name to the chairman of the board of directors of the Federal

25

4019

too

(C't
VteA'le°'.20

er.46.0,(1

Settc,t







7
1

reserve bank of the district.

2

establish lists of the district reserve electors, class A,

3

thus named by banks in each of the aforesaid three groups and

4

shall transmit one list to each such elector in each

5

group.

6

of the said list, select and certify to the said chairman from

7

among the names on the list pertaining to his group, trans-

8

mitted to him by the chairman, one name, not his own, as rep-

9

resenting his choice for Federal reserve director, class A.

The said chairman shall

Every elector shall, within fifteen days of the receipt

The

10

name receiving the greatest number of votes, not less than a

11

majority, shall be designated by said chairman as Federal re-

12

serve director for the group to which he belongs.

13

candidate shall receive a majority of all votes cast in any

14

group, the chairman aforesaid shall establish an eligible list,

15

consisting of the three names receiving the greatest number

16

of votes on the first ballot, and shall transmit said list to the

17

electors in each of the groups of banks established by him.

18

Each elector shall at once select and certify to the said chair-

19

man from among the three persons submitted to him his choice

20

for Federal reserve director, class A, and the name receiving

21

the greatest number of such votes shall be declared by the

22

chairman as Federal eserve director, class A

'wu6

In case no

n case of a

a5$42.4

23

tie votzthe balloting shall continue in the manner hereinbe-

24

fore prescribed until one candidate receives more votes than

25

either of the others.

2ustet,44.,

t 441f*,

ikx54Y°1

8

Directors of class B shall be chosen by the electors
2

of the respective groups at the same time and in the same

3

manner prescribed for directors of class A, except that they

4

must be selected from a list of names furnished, one by each

5

member bank, and such names shall in no case be those of offi-

6

cers or directors of any bank or banking association.

7

shall not accept office as such during the term of their service

8

as directors of the Federal reserve bank.

9

representative of the commercial, agricultural, or industrial

They

They shall be fairly

The Federal Reserve

10

interests of their respective districts.

11

Board shall have power at its discretion to remove ally di-

12

rector of class B in any Federal reserve bank, if it should ap-

13

pear at any time that such director does not fairly represent

14

the commercial, agricultural, or industrial interests of his

15

district? _tr-4,9E4Pzt-5--ds4a-lt' -tztt-r

16

Three directors belonging to class C shall be chosen

17

directly by the Federal Reserve Board, and shall be residents

18

of the district for which they are selected, one of whom shall be

19

designated by said board as chairman of the board of directors

20

of the Federal reserve bank of the district to which he is

21

appointed and shall be designated as" Federal reserve agent."

22

He shall be a person of tested banking experience and in

23

addition to his duties as chairman of the board of directors of

24

the Federal reserve bank of the district to which he is

25

appointed, he shall be required to maintain under regulations

26

to be established by the Federal Reserve Board a local office







9
1

of said board, which shall be situated on the premises

2

of the Federal reserve bank of the district.

3

regular 'reports to the Federal Reserve Board, and shall

4

He shall make

f,

4 act as its official representative for the performance of the
:functions conferred upon it by this Act.

He shall receive an

6

annual compensation to be fixed by the Federal Reserve

7

Board and paid monthly by the Federal reserve bank to which

8

he is designated.

9

Directors of Federal reserve banks shall receive, in

10

addition to any compensation otherwise provided, a reason-

11

able allowance for necessary expenses in attending meetings

12

of their respective boards, which amount shall be paid by

13

the respective Federal reserve banks. Any compensation

14

that may be provided by boards of directors of Federal

15

reserve banks for members of such boards shall be subject

16

to review by the Federal Reserve Board.

17

The Reserve Bank Organization Committee may, in or-

18

gttnizing Federal reserve banks for the first time, call such meet-

19

ings of bank (Erectors in the several districts as may be neces,5-e4A-10M4,

20 sary to carry out the purposes of this Act and may exercise the
21

functions herein conferred upon the chairman of the board of

22

directors of each Federal reserve bank pending the complete

23

organization of such bank.

24

At the first meeting of the full board of directors of each

25

Federal reserve bank after organization it shall be the duty of

H. R. 7837

10
1

the directors of classes A and B and C, respectively, to desig-

2

nate one of the members of each class whose term of office

3

shall expire in one year from the first of January nearest to

4

date of such meeting, one whose term of office shall expire

5

at the end of two years from said date, and one whose term

6

of office shall expire at the end of three years from said date.

ntrU Ct"cullt44v2

tti""
CO/6")"`

Thereafter every director of a Federal reserve bank chosen
as hereinbefore provided shall hold office for a term of three

r1/18

9

years ;

but the chairman of the board of directors of

10

each Federal reserve bank designated by the Federal Reserve

11

Board, as hereinbefore described, shall be removable at

12

the pleasure of the said board without notice, and his

13

successor shall hold office during the unexpired term of the

14

director in whose place he-was appointed.

15

may occur in the several classes of directors of Federal reserve

16

banks may be filled in the manner provided for the original

17

selection of such directors, such appointees to hold office for

18

the unexpired terms of their predecessors.

Vacancies that

INCREASE AND DECREASE OF CAPITAL.

19

20

SEC. 5. That shares of the capital stock of Federal reserve

21

banks shall not be transferable, nor be hypothecated.

22

In case a member bank increases its capital, it shall there-

23

upon subscribe for an additional amount of capital stock of

24

the Federal reserve bank of its district equal to twenty per

25

centum of the bank's e-1.4wa increase of capital, one-half of

h-unti-ew







11
1

2

said subscription to be paid in cash in__the manner_leresin- 6i-in-,- ',AAA
ifedtf

before provided for original subscription, and one-half to
_

3

become a liability of the member bank according to the

4

terms of the original subscription.

5

in a Federal reserve bank at any time after the formation of

6

the latter must subscribe for an amount of the capital of said

7

Federal reserve bank equal to twenty per centum of the

8

capital stock of said subscribing bank, paying therefor its par

9

10

value in accordance with the terms prescribed by section two
cpt tiu,ropa jeg Fut( k -Pala/4 It& wiz:
of this Act When the capital stock of any Federal reserve

11

bank has been increased either on account of the increase of

12

capital stock of member banks or on account of the increase

13

in:the number of member banks, the board of directors shall

14

make and execute a certificate to the Comptroller of the Cur-

15

rency showing said increase in capital, the amount paid in,

16

and by whom paid.

17

capital stock it shall surrender a proportionate amount of its

18

holdings in the capital of said Federal reserve bank, and in

19

case a member bank goes into voluntary liquidation it shall

20

surrender all of its holdings of the capital stock of said Federal

21

reserve bank.

22

be canceled and such member bank shall recei-v e in payment

23

therefor, under regulations to be prescribed by the Federal

24

Reserve Board, a sum equal to its cash paid subscriptions on

25

the shares surrendered). C1A4i 6444:4

a ow

A bank applying for stock

In case a member bank reduces its

In either case the shares surrendered shall

$*424Ylvytiktzeot'

tv

That if any member ,bank -shall become

SEC. 6.

1

2

insolvent and a receiver be appointed, the stock held

.3

by it in said

4

and, the balance, after deducting from the amount of its

5

cash paid subscriptions all debts due by such insolvent

6

bank to said Federal reserve bank, shall be paid to the

7

receiver of the insolvent bank.

8

of a Federal reserve bank is reduced, either on account of a

9

reduction in capital stock of any member bank or of the liquida-

10

tion or insolvency of any such member bank, the board of

11

directors shall make and execute a certificate to the Comp-

12

troller of the Currency showing such reduction of capital

13

stock and the amount repaid to such bank.

-

FedoTa,1 reserve bank shall be canceled

Whenever-the capital stock

DIVISION OF EARNINGS.

14
15

SEC. 7.

That after the payment of all necessary expenses

16

and taxes of a Federal reserve bank, the member banks

17

shall be entitled to receive an annual dividend of five per

18

centum on the paid-in capital stock, which dividend shall

19

be cumulative.

20

said dividend claims have been fully met, shall be paid into

21

a surplus fund until such fund shall amount to twenty per

22

centum of the paid-in capital stock of such bank,

23

and pf the remainiiik,

24

be paid

25

to the member banks in the ratio of their average bal-




to

One-half of the net earnings, after the afore-

per centum )shall

the United States (and forty per centum




13
1

ances with the Federal reserve bank for the preceding year.)

2

Whenever and so long as the surplus fund of a Federal

3

reserve bank amounts to twenty per centum of the

4

paid-in capital

5

have received the dividends at the rate of

6

eentum

7

per centum of all excess earnings shall be paid to the

8

United States end forty per centum to the member banks in

9

proportion to their annual average balances with such Federal

10

reserve bank all earnings derived by the United States from

11

Federal reserve banks shall constitute a sinking fund to be

12

held for the reduction of the outstanding bonded indebtedness

13

of the -United States, said reduction to be accomplished under

14

regulations to be prescribed by the Secretary of the _Treasury.

15

Should a Federal reserve bank be dissolved or go into liquida-

16

tion, the surplus fund of said bank, after the payment of all

17

debts and dividend requirements as hereinbefore provided

18

for, shah be paid to and become the property of the -United

19

States.

per

stock

annum

and

the

hereinbefore

member banks

shall

five per

provided for,

sixty

-7--

Rot&
e'l4,014e !

t r. ieY

20

Every Federal reserve bank incorporated under the f2t-14420C'

21

terms of this Act and the capital stock therein held by mem-

22

ber banks shall be exempt from Federal, State, and local

23

taxation, except in respect to taxes upon real estate.

24
25

SEC. 8. That any national banking association heretofore organized may

upon

application at any time

14
1

within one year after the passage of this Act, and

2

with the approval of the Comptroller of the Currency,

3

be granted, as herein provided, all the rights, and be sub-

4

ject to all the liabilities, of national banking associations

5

organized subsequent to the passage of this Act : Provided,

6

That such application on the part of such associations shall

7

be authorized by the consent in writing of stockholders
owning not less than a majority of the capital stock of the
association.

Any national banking association now organ-

ized which shall not, within one year after the passage of this

Act, become a national banking association under the pro12

visions hereinbefore stated, or which shall fail to comply

13

with any of the provisions of this Act applicable thereto,

14

shall be dissolved ; but such dissolution shall not take away

15

or impair any remedy against such corporation, its stockholders

16

or officers, for any liability or penalty which shall have pre-

17

viously been incurred.

18

SEC. 9. That any bank or banking association moor-

19

porated by special law of any State or of the -United States,

20

or organized under the general laws of any State or the

21

United States, and having an unimpaired capital sufficient

22

to entitle it to become a national banking association under

23

the provisions of existing laws, may, by the consent in writ-

24

ing of the shareholders owning not less than fifty-one per

25

centum of the capital stock of such bank or banking associa-







15
1

tion, and with the approval of the Comptroller of the Currency,

2

become a national banking association under its former name

3

or)by any name approved by the comptroller.

4

thereof may continue to be the directors of the association so

5

organized until others are elected or appointed in accordance %44nir dilvv.

6

with the provisions of the law.

7

given to such bank or banking association a certificate that

'

The directors

When the comptroller has 44fettlxvrtv

8

the provisions of this Act have been complied -with, such

9

bank or banking association, and all its stockholders, officers,

10

and employees, shall have the same powers and privileges,

11

and shall be subject to the same duties, liabilities, and regu-

12

lations, in all respects, as shall have been prescribed by

13

this Act or by the national banking Act for associations

14

originally organized as national banking associations.

15

STATE BANKS AS MEMBERS.

16

SEC. 10. That from and after the passage of this Act

17

any bank or banking association or trust company incor-

18

porated ' by special law of any State, or organized under

19

the general laws of any State

20

make application to the Federal Reserve Board hereinafter

21

created for the right to subscribe to the stock of the Federal

22

reserve bank organized or to be organized within the Federal

23

reserve district where the applicant is located. The Federal

24

Reserve Board, under such rules and regulations as it may

25

prescribe, subject to the provisions of this section, shall

tz, gt

.<4

he -United States, may

7

,

16

445

1

permit such applying bank to become a stockholder in the

2

Fediaal reserve bank of the district in which such apply61 ,to

ing bankAis located. Whenever the Federal Reserve Board
4 shall permit such applying bankA to become a stockholder

3

5

in the Federal reserve bank of the district in which the ap-

6

plying bank is located, stock shall be issued and paid for under

7

the rules and regulations in this Act provided for national

8

banks which become stockholders in Federal reserve banks.

9

It shall be the duty of the Federal Reserve Board to

10

establish by-laws for the general government of its conduct

11

in acting upon applications made by the State banks

12

and banking associations and trust companies hereinbefore

13

referred to for stock ownership in Federal reserve banks.

14

Such by-laws shall require applying

15

ized under

16

requirements and submit to the inspection (and regula-

1V°' 17

tion) provided for in this and other laws relating to

18

national banks. No such applying bank shall be admitted

19

to membership in a Federal reserve bank unless it pos-

20

sesses a paid-up unimpaired capital sufficient to entitle it to

21

become a national banking association in the place where it is

22

situated, under the provisions of the national banking Act,

23

and conforms to the provisions herein prescribed for national

24

banking associations of similar capitalization and to the regu-

25

lations of the Federal Reserve Board.

r' 4-,

fk,l())4/646'




Federal law to comply

e a v 2. C.I71

not organ-

banks/1
with the reserve




17
1

If at any time it shall appear to the Federal Reserve

2

Board that a banking association or trust company organized

htd h

CO-

3

under the laws of any State or of the United States has failed

4

to comply with the provisions of this section or the regu-

5

lations of the Federal Reserve Board, it shall be within

6

the power of the said board to require such banking associa-

7

tion or trust company to surrender its stock in the Federal

Vliarar-itAndC

8

reserve bank in which it bolds stock upon receiving from

efhAeseyhum,?

9

such Federal reserve bank the cash-paid subscriptions to

10

the said stock interment funds) and said Federal reserve

11

bank shall upon notice from the Federal Reserve Board

12

be required to suspend said banking association or trust

13

company from further privileges of membership, and shall

14

within thirty days of such notice cancel and retire its

15

stock and make payment therefor in the manner herein

16

provided.
FEDERAL RESERVE BOARD.

17

18

okfti-z-A.

SEC. 11.

That there shall be created a Federal Reserve

19

Board, which shall consist of seven members, including the

20

Secretary of the Treasury, the

21

the Comptroller .of the Currency, who shall be tielEtibeFg- ex

22

officioand-feat members appointed by the President of the

23

United States, by and with the advice and consent of the

24

Senate.

25

Federal Reserve Board, ,EtJatBaeFet-harr--ofteei----whom -

A

ricniturand

!141.,

A

In selecting the four appointive members of the

H. R. 7837-3

a),
16e).-

afar

AZi461<,

18
1

-be selectedfron---reserve district,

2

the President shall have due regard to a fair represen-

3

tation of different geographicaldivisions of the country.

4

The four members of the Federal Reserve Board appointed

5

by the President and confirmed as aforesaid shall

6

vote their entire time to the business of the Federal Re-

de-

7 Aserve Board and shall each receive an annual salary of
'sr 1 70-0.4-.0

8

$-10,0007together with an allowance for actual necessary

9

traveling expenses, .and_11443-Getttptruiterortreeurrency;
era

eserve Board,- shall,

10

ex -officio

11

In_addition to the salary now paidhim as coinptrOneT;"'

12

receive the sum of $5,000 annually -forETTOVices as a mem----

13

ber en-7 bOrAr -.- Of the four members thus appointed by the

14

President not more than two shall be of the same political

15

party, and at least one of whom shall be a person experienced

16

in banking.

vix 17

"

I1

One shall be designated by the President to

serve for two, one for

four, one for six, and one for

18

eight years, respectively, and thereafter each member so

19

appointed shall serve for a term of eight years unless sooner

20

removed for cause by the President. Of the four persons thus

21

V 22

appointed, one shall be designated by the President as manager
Vieatertarit
and one as vice manager of the Federal Reserve Board. The

23

manager of the Federal Reserve Board, subject to the super-

24

vision of(he Secretary of the Treasury

25

Board, shall be the active executive officer of the Federal

(11

6 cf

C2Art.-

c; MCI

1,-e-of 7 n...er

26 Reserve Board.




and)Federal
Reserve




19
1

The Federal Reserve Board shall have power to levy

2

semiannually upon the Federal reserve banks, in proportion to

3

their capital stock, an assessment sufficient to pay its esti-

4

mated expenses for the half year succeeding the levying of

5

such assessment, together with any deficit carried forward

6

from the preceding half year.

7

The first meeting of the Federal Reserve Board shall

8

be held in Washington, District of Columbia, as soon as may

9

be after the passage of this Act, at a date to be fixed by the

10

serve-Bank- Organization Committee.

The Secretary of the

11 -Treasury shall be ex officio 4lainnan of the Federal Reserve

12 Board.- No member of the Federal Reserve Board shall
13

be an officer or director of any bank or banking institution

14

or Federal reserve bank nor hold stock in any bank or bank-

15

ing institution; and before entering upon his duties as a

16

member of the Federal Reserve Board he shall certify under

17

oath-te-4e-Sreletaly of thr-4reastgy that he has complied

18

with this requirement. Whenever a vacancy shall occur,

19

other than by expiration of term, among the four members of

20

the Federal Reserve Board appointed by the President, as

21

above provided, a successor shall be appointed by the Presi-

22

dent, with the advice and consent of the Senate, to fill such

23

vacancy, and when appointed shall hold office for the

24

unexpired term of the member whose place he is selected

25

to fill.

L.

20
1

The Federal Reserve Board shall annually make a report

2

of its fiscal operations to the Speaker of the House of Repre-

3

sentatives, who shall cause the same to be printed for the

4

information of the Congress.

5

Section three hundred and twenty-four of the Revised

6

Statutes of the United States shall be amended so as to

7

read as follows : "There shall be in the Department of the

8

Treasury a bureau charged, except as in this Act otherwise

9

provided, with the execution of all laws passed by Congress

10

relating to the issue and regulation of currency issued by

11

or through banking associations, the chief officer of which

12

bureau slid be called the Comptroller of the Currency, and

13

shall pertorm his duties under the general direction of the

14

Secretary of the Treasury,(acting as the chairman of the

15

Moral Reserve Board

16

herein contained shall be construed to affect any power now

17

vested by law in the Comptroller of the Currency or the

18

Secretary of the Treasury.

SEC. 12. That the Federal Reserve Board hereinbefore

19

20

Provided, however, That nothing

established shall be authorized and empowered :
(a) To examine at its discretion the accounts, books, and

21

pet.4

22

affairs of each Federal reserve bank and to require such
A

23

statements and reports as it may deem necessary. The said

24

board shall publish once each week a statement showing the

25

condition of each Federal reserve bank and a consolidated







21

Such statements

1

statement for all Federal reserve banks.

2

shall

3

such Federal reserve banks, single and combined, and

show

in detail

the

assets

and

liabilities of

4 shall furnish full information regarding the character
5

of the(lawful money)held as reserve and the amount, na-

6

ture, and maturities of the paper owned by Federal reserve

7

banks

64,444,ti c0)_-611,
L,we

8

(b) To permitr requirerin time of emergencyAFederal

9

reserve banks to rediscount the discounted prime paper of

10

other Federal reserve banks, a4-14444-fw-e-raemilers of the

11

Federal Reserve Board being present when,Och) action is

12

taken and all iresent consenting to the requirement. The

13

exercise of this compulsory rediscount power by the Federal

14

Reserve Board shall be subject to an interest charge to the

uttleitt

eit,,lterrA y

15

accommodated bank of not less than one nor greater than

16

7141-14-k,.

644_

three per centura above the higher of the rates prevailing

17

12044,0

in the districts immediately affected.

18

(c) To suspend for a period not exceeding thirty days

19

(and to renew such suspension for periods not to exceed

20

fifteen days) any and every reserve requirement specified in

21

this Act : Provided, That it shall establish a graduated tax \

22

upon the amounts by which the reserve requirements of

23

this Act may be permitted to fall below the level hereinafter

24

specified, such tax to_be uniform in its application to all banks

14.4.vh eAfri

22
1

but said board shall not suspend the reserve requirements

2

with reference to Federal reserve notes.

3

(d) To supervise and regulate the issue and retirement

4

of Federal reserve notes and to prescribe the form and tenor

5

of such notes.
.--

67

X). 44,A;k,

arka

(e) To add to the number of cities classified as reserve
and central reserve cities under existing law in which national




banking associations are subject to the reserve requirements

9

ktmifriatAr

8

set forth in section twenty of this Act ; or to reclassify

10

existing reserve and Central reserve cities and to desig-

11

nate the bank' therein situated as country banks at its

12

discretion.

ta

(f) To suspend the officials of Federal reserve banks

14

and, for cause stated in writing with opportunity of hearing,

15

require the removal of said officials for incompetency, derelic-

16

tion of duty, fraud, or deceit, such removal to be subject to

17

approval by the President of the -United States.

18

(g) To require the writing off of doubtful or worthless

19

assets upon the books and balance sheets of Federal reserve

20

banks.

21

(h) To suspend, for cause relating to violation of any of

22

the provisions of this Act, the operations of any Federal

23

reserve bank and appoint a receiver therefor.

24
25

(i) To perform the duties, functions, or services specified

(or impliqin this Act.




23
1

FEDERAL ADVISORY COUNCIL.

2

SEC. 13. There is hereby created a Federal Advisory

3

Council, which shall consist of as many members as there are

4

Federal reserve districts.

5

board of directors shall annually select from its own Fed-

6

eral reserve district one member of said council, who shall

7

receive _no compensation for his services, but may be re-

8

imbursed for actual necessary expenses.

Each Federal reserve bank by its

The meetings
----

-

9

of said advisory council shall be held at Washington,

10

District of Columbia, at least four times each year, and

11

oftener if called by the Federal Reserve Board.

12

may select its own officers and adopt its own methods of pro-

13

cedure, and a majority of its members shall constitute a quo-

14

rum for the transaction of business./ Vacancies in the council

15

shall be filled by the respective reserve banks, and members

16

selected to fill vacancies shall serve for the unexpired term.

17

The Federal Advisory Council shall have power (1) to

18

meet and confer directly with the Federal Reserve Board on

19

general business conditions; (2) to make oral or written rep-

20

resentations concerning matters within the jurisdiction of

21

said board ; (3) to call for complete information and to make

22

recommendations in regard to discount rates, rediscount

23

business, note issues, reserve conditions in the various districts,

24

the purchase and sale of gold or securities by reserve banks,

25

open-market operations by said banks, and the general affairs

26

of the reserve banking system.

,

The council

tt741 )fr-t-




24
REDISCOUNTS.

1

2

SEC. 14. That any Federal reserve bank may receive

3

from any member bank deposits of current funds in lawful

4

money, national bank notes, Federal reserve notes,

5

checks and drafts upon solvent banks, payable upon presenta-

6

tion ; or, solely for exchange purposes, may receive from other

7

Federal reserve banks deposits of current funds in lawful

8

money, national bank notes, or checks and drafts upon

9

solvent banks, payable upon presentation.

or

10

Upon the indorsement of any member bank any Federal

11

reserve bank may discount notes and bills of exchange aris-

12

ing out of commercial transactions ; that is, notes and bills

13

of exchange issued or drawn for agricultural, industrial, or

14

commercial purposes, or the proceeds of which have been used,

15

(1.1. +earl" etmeti, for such purposes, the Federal Reserve Board to
etia

16 (have the right to)determine ytc define the character of the
- 17

paper thus eligible for discount, within the meaning of this

18

Act; nothing herein contained shall be construed to prohibit

19

(such no eg) and bills of exchange, secured by staple agri-

,4 fex;i4e.014.1\1.)

ek ,tict,(4

20

cultural products, or other goods, wares, or merchandise

21

-being eligible for such discount but such definition shall not

(22
3

include notes or bills issued or drawn for the purpose of carry
A
ing or trading in stocks, bonds, or other investment securities.

24

Notes and bills admitted to discount under the terms of

25

this paragraph must have a maturity of not more than

26

ninety days.

A la/

r




25
1

-Upon the indorsement of any member bank any Federal

2

reserve bank may discount the paper of the classes herein-

3

before described having a maturity of more than ninety

4

and not more than one hundred and twenty days, when its

5

own cash reserve exceeds thirty-three and one-third per cent

6

of its total outstanding demand liabilities exclusive of its (r.kod.ka,

7

outstanding Federal reserve notes by an amount to be fixed

8

by the Federal Reserve Board but not more than(fifty)per

9

cent of the total paper so discounted for any member bank

10

shall have a maturity of more than ninety days.

-Upon the indorsement of any member bank any

11

12

Federal

13

such

14

reserve

bank

may discount acceptances of

banks which are based on the exportation

importation

(14se

of

tt
goods

.t4.-17

trt."71:71frrfrrr

' and which

or

-Orritite-9)1/4.'

mature

in

itt

not

15

A
more than six months and bear the signature of at

16

least one member bank in addition to that of the acceptor.

17

The amount so discounted shall at no time exceed one-half the

18

capital stock of the bank for which the rediscounts are made.

19

The aggregate of such notes and bills bearing the signa-

20

ture or indorsement of any one person, company, firm,, or, la.44-Mtrot-

21

corporation rediscounted for any one bank shall at no time e6044:(41:'

22

exceed ten per centum of the unimpaired capital and surpliA

23

of said bank but this restriction shall not apply to the

24

discount of bills of exchange drawn in good faith against

25

actually existing values.

H. R. 7837

4

26

Any national bank may, at its discretion, accept

1

or

bills

of

exchange drawn upon it having

2

drafts

3

not more than six months sight to run and growing out

4

of transactions involving th( importation or exportation)

5

of goods ;

6

to an amount equal at any time in the aggregate to more

7

thanrone-half) the face value of its paid-up and unim-

8

paired capital. 014..4

att

but

no

bank

shall

accept

such

bills

9

Section fifty-two hundred and two of the Revised Statutes

10

of the 'United States is hereby amended so as to read as follows :

11

No association shall at any time be indebted, or in any way

12

liable, to an amount exceeding the amount of its capital stock

13

at such time actually paid in and remaining undiminished by

14

losses or otherwise, except on account of demands of the

15

nature following :

16

First. Notes of circulation.

17

Second.%Moneys deposited with or collected by the

18

association.

enael,(XAA.t. PL., el._ 0-40

19

Third. Bills of exchange of:drafts drawn againsmoney

20

actually on deposit to the credit of the association, or due

21

thereto.

A 7710

Fourth. Liabilities to the stockholders of the associa-

22

23

tion for dividends and reserve profits.

24
25

tit

Fifth. Liabilities incurred under the provisions of sections two, five, and fourteen of the Federal reserve Act.




t attkia,-,:fA
lE

1,LAI4enrVbtC-3 61%, PetiolAA- efrid

27
OPEN-MARKET OPERATIONS.

1

2

SEC. 15. That any Federal reserve bank may, under

3

rules and regulations prescribed by the Federal Reserve Board,

4

purchase and. sell in the open market, either from or to

tinvt.,444,q0.1

5 (domestic) orvforeign banks, firms, corporations, or individ6

tyle.
/ limiturik 44, irre<414,6ftwA-,
uals, prime bankers' bills, and bills of exchange of the kinds

7

and maturities by this Act made eligible for rediscount, and 56

8

cable transfers.

euttk c AA. Att t.o1)6",e4A-k 44"A'

Ate4ARA I7v

Every Federal reserve bank shall have power (a) to deal °Ay' II:re4M

9

dkuto.

10

in gold coin and bullion both at home and abroad, to make

11

loans thereon, and to contract for loans of gold coin or bullion,

12

giving therefor, when necessary., acceptable security, includ-

13

ing the hypothecation of -United States bonds i (b) to invest
aLa hu.d. i d/k a.4,4;,

Arnt44 4.- d..4464.4%444.4404.4,0
14

in United States bonds'A andbetttisiesueki by ttyfitate,
AI kit
:#I I

*

a.

;

(C)

to purchase from mem-te15
A

16

ber bankkand to sell)

17

of exchange arising out of commercial transactions, as herein-

18

before defined, payable in foreign countries; but such bills

19

of exchange must have not exceeding ninety days to run

20

and must bear the signature of two or more responsible parties,

21

of which the last shall be that of a member bank; (d) to

22

establish each week, or as mub oftener as required, subject

23

to review and determination

24

a rate of discount to be charged by such bank for each

25

class of paper, which shall be fixed with a view of accom/
-

6

41'

2-/3,

with or without its indorsement, bills

the Federal Reserve Board,

modating the commerce of the country; and (e) with the




28
1

consent of the Federal Reserve Board, to open and maintain

2

banking accounts in foreign countries and establish agencies

3

in such countries wheresoever it may deem best for the pur-

4

pose of purchasing, selling, and collecting foreign bills of

5

exchange, and to buy and sell with or without its indorsement,

6

through such correspondents or agencies, prime foreign bills

7

of exchange arising out of commercial transactions which

8

have not exceeding ninety days to run and which bear the

9

signature of two or more responsible parties.

10

GOVERNMENT DEPOSITS.

11

SEC. 16. That all moneys now held in the general fund

12

of the Treasury except the five per centum fund for the

13

redemption of outstanding national - bank notesVshall,
b., hid ,/,), )10; a.-s
5te
$
;

14

upon the direction of the Secretary of the Treasury,

15

within twelve months after the passage

16

be deposited in Federal reserve banks, which banks shall

17

act as fiscal agents of the United States

18

revenues of the Government shall be regularly deposited in

19

such banks, and disbursements shall be made by checks

20

drawn against such deposits.

of this Act,

21

The Secretary of the Treasury shall, subject to the

22

approval of the Federal Reserve Board, from time to time,

23

apportion the funds of the Government among the said

24

Federal reserve banks, distributing them, as far as practi-

25 cable, equitably between different sections, and may, at
26

their joint discretion, charge interest thereon and fix, from




and thereafter the

I




29
1

month to month, a rate which shall be regularly paid by the

2

banks holding such deposits : Provided, That no Federal

3

reserve bank shall pay interest upon any deposits except

"irlij

those of the -United States7
°te
No Federal reserve bank shall receive or credit deposits
5
4

6

except from the Government of the -United States, its own

7

member banks, and, to the extent permitted by this Act,

8

from other Federal reserve banks.

9

of the Federal reserve banks involving loans made by such

10

banks, rediscount operations or the creation of deposit ac-

11

counts shall be confined to the Government and the deposit-

12

ing and Federal reserve banks, with the exception of the

13

purchase or sale of Government okState)securities tx of gold

14

coin or bullion.

All domestic transactions

IkaltdetA

15

NOTE ISSUES.

16

SEC. 17. That Federal reserve notes, to be issued at

17

the discretion of the Federal Reserve Board for the purpose

18

of making advances to Federal reserve banks as hereinafter

19

set forth and for no other purpose, are hereby authorized.

20

The said notes shall be obligations of the Tuited States)

21

and shall be receivable for all taxes, customs, and other

22

public dues.

23

money)on demand at(the Treasury Department of the -United

24

States, in the city of Washington, District of Columbia, or

25

at)any Federal reserve bank.

Pt...70AL kw/144_ 6411,4444,0

They shall be redeemed in gold (or lawful

30
1

Any Federal reserve bank may, upon vote of its direc-

2

tors, make application to the local Federal reserve agent

3

for such amount of the Federal reserve notes hereinbefore

4

provided for as it may deem best.

5

accompanied with a tender to the local Federal reserve agent

6

of collateral in amount equal to the sum of the Federal reserve

7

notes thus applied for and issued pursuant to such applica-

8

tion.

9

bills accepted for rediscount under the provisions of sec-

10

tion 14 of this Act, and the Federal reserve agent shall

11

each day notify the Federal Reserve Board of issues and

12

withdrawals of notes to and by the Federal reserve bank to

13

which he is accredited. The said Federal Reserve Board

14

shall be authorized at any time to call upon a Federal reserve

15

bank for additional security to protect the Federal reserve

16

notes issued to it.

Such application shall be

The collateral security thus offered shall be notes and

17

Whenever any Federal reserve bank shall pay out or

18

disburse Federal reserve notes issued to it as hereinbefgre pro-

19

vided, it shall segregate in its own vaults and shall carry to

20

a special reserve account on its books gold& lawful money)

jp/4/44/ 21

equal in amount to t_hirty-three and one-third) per centum

22

of the reserve notes so paid out by it, such reserve to be

23

used for the redemption of said reserve notes as presented ;

24

but any Federal reserve bank so using any part of such re-

25

serve to redeem notes shall immediately carry to said




31
1

wow,




reserve account an amount of gol or lawful mone3)sufficient

2

to make said reserve equal t<thirty-three and one-third) per

3

centum of its outstanding Federal reserve notes.

4

paid out shall bear upon their faces a distinctive letter and

5

serial number, which shall be assigned by the Federal Reserve

6

Board to each Federal reserve bank. Whenever Federal

7

reserve notes issued through one Federal reserve bank shall

8

be received by another Federal reserve bank they shall be

9

returne(for redemption)to the Federal reserve bank through

10

which they were originally issued4or shall be charged off

11

against Government deposit9andAreturned to the (Treasury

12

of the United States, or shall be presented to the said Treas-

13

ury)for redemption.

14

notes issued through another under penalty of a tax of ten

15

per centum upon the face value of notes so paid out. Notes

bff

Notes so

5?1.44,-4-k444t

afc,,,v.

No Federal reserve bank shall pay out

Paid Prvg

16 (presented for redemption at)the Treasury of the United States
17

shall be(paid and) returned to the Federal reserve banks

18

through which they were originally issued, ankFederal re-

19

serve notes received by the Treasury otherwise than for

20

redemption shall be exchanged for lawful money out of the

21

five per centum redemption fund hereinafter provided and

22

returned as hereinbefore provided to the reserve bank through

23

which they were originally issued.

24

The Federal Reserve Board shall have power, in its dis-

25

cretion, to require Federal reserve banks to maintain on de-

IIPAryrk

32
1

01Av
-1,0A-

6.611

14,414-bur




posit in the Treasury of the United States a sum in

2

gold equal to five per centum of such amount of Fed-

3

eral

4

the provisions of this Act ; but such five per centum

5

shall be counted and included as part of the thirty-three

6

and one-third per centum reserve hereinbefore required.

7

The

8

to grant

9

the application of any Federal reserve bank for Federal

reserve notes as may be

said

board

shall

issued to

have

also

in whole or in

or to

them under

the

s

right

reject entirely
part

but to the extent and in the amount

10

reserve notes ;

11

that such application may be granted the Federal Reserve

12

Board shall, through its locallatAaFedercallrt gesiertrve agent, deposit

13

Federal reserve notes with the bank so applying, and

A

14 such bank shall be charged with the amount of such notes
15

and shall pay such rate of interest on said amount as may be

16

established by the Federal Reserve Board, which rate shall

17

not be less than one-half of one per centum per annum, and

18

the amount of such Federal reserve notes so issued to any

19

such bank shall, upon delivery, become a first and para-

20

mount lien on all the assets of such bank.

21

Any Federal reserve bank may at any time reduce its

22

liability for outstanding Federal reserve notes by the

23

deposit of Federal reserve notes, (whether issued to such

24

bank or to some other reserve bankgor_lawfulmmreF

25

of

the

1i-ted

States.) or

gold

bullion, with

41)




1

Federal reserve agent or with the Treasurer of the -United
A

2

States, and such reduction shall be accompanied by a

3

corresponding reduction in the required reserve fund of

4

lawful money set apart for the redemption of said notes and

5

by the release of a corresponding amount of the collateral

6

secuf3);rdeposited with the local Federal reserve agenti

skg-OAAP6,7 at 4.4441-6, if

rp ry

7

Any Federal reserve bank may at its discretion withdraw

8

collateral deposited with the local Federal reserve agent for

9

the protection of Federal reserve notes deposited with

10

it and shall at the same time substitute other collateral

11

of equal value approved by the Federal reserve agent under 6014 71; -

12

regulations to be prescribed by the Federal Reserve Board.

13

It shall be the duty of every Federal reserve bank to

14

receive on

15

any other depositor andAchecks and drafts drawn by any

18

depositor in any other Federal reserve bank upon funds to the

19

credit of said depositor in said reserve bank last mentioned,

20

nothing herein contained to be construed as prohibiting mem-

21

ber banks from making reasonable charges to cover actual ex-

22

penses incurred in collecting and remitting funds for their

23

patrons.

24

mulgate from time to time regulations governing the transfer

25

of funds at par among Federal reserve banks, and may at its

'If )."'""7"

any of its depositors or by ..adly of its depositors upon

17

PAZ-.

for exchange or collection, checks and drafts drawn upon

16

C41,44

deposit,

461

at

par

and

without

charge

4-eies4furve

The Federal Reserve Board shall make and proCuA4

H. R. 7837

5

u-Wrz44,4cott

34
1

discretion exercise the functions of a clearing house for such

2

Federal reserve banks, or may designate a Federal reserve
1

3

bank to exercise such functions, and may also require each

4

such

5

member banks

bankA

to exercise the functions of a clearing house for its

ait

SEC. 18. That so much of the provisions of section
7
8

section eight of the Act of July twelfth, eighteen hundred

11

and eighty-two, and of any other Provisions of existing stat-

12

utes, as require that before any national banking association

13

'AAA fri

June twentieth, eighteen hundred and seventy-four, and

10

,64

of the United States, and section four of. the Act of

9

frinvouh,

fifty-one hundred and fifty-nine of the Revised Statutes

shall be authorized to commence banking business it shall

14

transfer and deliver to the Treasurer of the United States

15

a stated amount of United States registered bonds be, arid

floctizet 4'1., 16
17/ a. aer

f)

the same is hereby, repealed.
REFUNDING BONDS.

17

th.1

18

SEC. 19. That upon application the Secretary of the

19

Treasury shall exchange the two per centum bonds of the

et 4.4),43

Y. I- fi

ivxa

United States bearing the circulation privilege deposited by
21

any national banking association with the Treasurer of the

6-6tii a I en, .4,- 22

-United States as security for circulating notes for three per

23

centum bonds of the -United States without the circulation

''444(41 fet)'' 24

privilege, payable after twenty years from date of issue, and

.

-4`-eir"(4-

40; / Ve--0
tar, P.A441). ik

4444A.

4,

25

exempt from Federal, State, and municipal taxation both as to







35
1

income and principal.

'2

year, present two per centum bonds for exchange in the manner

3

hereinbefore provided to an amount exceeding five per centum

4

of the total amount of bonds on deposit with the Treasurer by

5

said bank for circulation purposes.

6

fail in any one year to so exchange its full quota of two per cen-

7

turn bonds under the terms of this Act, the Secretary of the

8

Treasury may permit any other national bank or banks to ex-

9

change bonds in excess of the five per centum aforesaid in an

10

amount equal to the deficiency caused by the failure of any one

11

or more banks to make exchange in any one year, allotment to be

12

made to applying banks in proportion to their holdings of bonds.

13

At the expiration of twenty years from the passage of this Act

14

every holder of United States two per centum bonds then out-

15

standing shall receive payment at par and accrued interest.

16

After twenty years from the date of the passage of this Act

17

national-bank notes still remaining outstanding shall be re-

18

called arid redeemed by the national banking associations

19

issuing the same within a period and under regulations to be

20

prescribed by the Federal Reserve Board, and notes still

21

remaining in circulation at the end of such period shall be

22

secured by an equal amount of lawful money to be deposited

23

in the Treasury of the United States by the banking associa-

24

tions originally issuing such notes.

25

tional bank may continue to apply for and receive circulating

No national bank shall, in any one

Should any national bank

Meanwhile every na-

36
1

notes from the Comptroller of the Currency based upon the

2

deposit of two per centum bonds or of any other bonds bearing

3

the circulation privilege; but no national bank shall be per-

4

mated to issue other circulating notes except such as are

5

secured as in this section provided or to issue or to make

6

use of any substitute for such circulating notes in the form of

7

clearing-house loan certificates, cashier's checks, or other

8

obligation.

9

BANK RESERVES.

10

SEC. 20. That from and after the date when the Sec-

11

retary of the Treasury shall have officially announced, in

12

such manner as he may elect, the fact that a Federal reserve

13

bank has been established in any designated district, every

14

banking association within said district which shall have

15

subscribed for stock in such Federal reserve bank shall be

16

required to establish and maintain reserves as follows :

17

(a) If a country bank as defined by existing law, it

18

shall hold and maintain a reserve equal to twelve per centum

19

of the aggregate amount of its deposits, not including savings

20

deposits hereinafter provided for. Five-twelfths of such

21

reserve shall consist of money which national banks may

22

under existing law count as legal reserve, held actually in the

23

bank's own vaults; and for a period of fourteen months from

24

the date aforesaid at least three-twelfths and thereafter at

25

least five-twelfths of such reserve shall consist of a credit







37
1

balance with the Federal reserve bank of its district.

2

remainder of the twelve per centum reserve hereinbefore

3

required may, for a perig

4
5

after the date fixed by thepecretary of the Treasury's here- )14(41 `Irt
inbefore provided, consist of balances due from national 4114-4.

6

banks in reserve or central reserve cities as now defined by

7

law.

8

to the date fixed by th Secretary of the Treasur as herein-

9

before provided the said remainder of the twelve per centum

10

reserve required of each country bank shall consist either in

11

whole or in part of reserve money in the bank's own vaults or

12

of credit balance with the Federal reserve bank of its district.

13

(b) If a reserve city bank as defined by existing law,

14

it shall hold and maintain, for a period of sixty days from the

15

date fixed by the&ecretaryof the Treasury as hereinbefore

16

provided, a reserve equal to twenty per centum of the

17

aggregate amount of its deposits, not including savings

18

deposits hereinafter provided for, and permanently thereafter

19

eighteen per centum. At least one-half of such reserve shall

20

consist of money which national banks may under existing

21

law count as legal reserve, held actually in the bank's own

22

vaults.

23

period of one year, at least three-eighteenths and perm-

24

nently thereafter at least five-eighteenths of such reserve shall

25

consist of a credit balance with the Federal reserve bank of

The

thirty-six months from and
fjC/'elet.t

ClitAVA-1-

f%r

From and after a date thirty-six months subsequent
2,4(0' Liu

Wirt/q

Attu,/

After sixty days from the date aforesaid, and for a

Plc vaittk

38
1

its district. The remainder of the reserve in this paragraph

2

required may, for a period of thirt -six months from and after

3

the date fixed by the(Secretary o t e

4

before provided, consist of balances due from national banks

5

in central reserve cities as now defined by law.

From and

6

after a date thirty-six months subsequent

the date

9-atw

reasury)as herein-

to

°)-c

7

fixed by theMecretary of the Treasury')

8

vided, the said remainder of the eighteen per centum reserve

9

required of each reserve city bank shall consist either in

10

whole or in part of reserve money in the bank's own vaults

11

or of credit balance with the Federal reserve bank of its

12

district.

hereinbefore pro-

13

(c) If a central reserve city bank as defined by exist-

14

ing law, it shall hold and maintain for a period of sixty days

15

from the date fixed by the (Secretary of t eTreasury) as

akku)

ejoitvti 16 hereinbefore provided a reserve equal to twenty per centum
17

of the aggregate amount of its deposits, not including savings

18

deposits hereinafter provided for, and permanently there-

19

after eighteen per centum.

20

shall consist of money which national banks may under

21

existing law count as legal reserve, held actually in the

22

bank's own vaults.

23

said, and thereafter for a period of one year, at least three-

24

eighteenths and permanently thereafter at least five-eight-

25

eenths of stitch reserve shall consist of a credit balance with the

26

Federal reserve bank of its district.




At least one-half of such reserve

After sixty days from the date afore-

The remainder of the

o1

2

city bank shall consist either in whole or in part of reserve

3

money actually held in its own vaults or of credit balance with

4

.

the Federal reserve bank of its district.

39

eighteen per centum reserve required of each central reserve

5
6

providing for a redistribution of the national bank currency,

9

and for other purposes," as provides that the fund deposited

10

by any national banking association with the Treasurer of

11




entitled "An Act fixing the amount of -United States notes,

8

-.

Act of June twentieth, eighteen hundred and seventy-four,

7

,

SEC. 21. That so much of sections two and three of the

the -United States for the redemption of its notes shall be

12

counted as a part of its lawful reserve as provided in the Act

13

aforesaid, be, and the same is hereby, repealed.

14

and after the passage of this Act such fund of five per centum

15

shall in no case be counted by any national banking associa-

16

tion as a part of its lawful reserve.

And from

17

SEC. 22. That every Federal reserve bank shall at

1.8

all times have on hand in its own vaults, in gold or lawful

19

money, a suni equal to not less than thirty-three and one-third

20

per cent= of its outstanding demand liabilities.

21

The Federal Reserve Board may notify any Federal re-

22

serve bank whose lawful reserve shall be below the amount

23

required to be kept on hand, to make good such reserve ; and

24

if such bank shall fail for thirty days thereafter so to make

25

good its lawful reserve, the Federal Reserve Board may

26

appoint a receiver to wind up the business of said bank.

40
BAN K EXAMINATIONS.

SEC. 23. That the examination of the affairs of every

2

associationerethorized-137 existing --I'm)

3

4

shall take place at least twice in each calendar year and as

5

much oftener as the Federal Reserve Board shall con-

044_1; te.4.4_ 6

sider necessary in order to furnish a full and complete know1-

edge of its condition.

8

however, at any time direct the holding of a special examina-

9

0 (Mtaftittv.

7

tion.

The _Secretary of, the Treasury may,

The person assigned to the making of such examina-

10
11

as he may designate ; and from and after the passage of this

15

Act all bank examiners shall receive fixed salaries, the amount

16

whereof shall be determined by the Federal Reserve Board

17

and annually reported to Congress.

18

of the examinations herein provided for shall be assessed by

19

the Federal Reserve Board upon the associations exam-

20

ined in proportion to assets or resources held by such asso-

21

ciations upon a date during the year in which such examina-

22




character and circumstances of such of its loans or discounts

14

4;^ 11jP.'

association, who shall, under oath, state to such examiner the

13

fru)

have power to call together a quorum of the directors of such

12

tifht4AA44

tion of the affairs of any national banking association shall

tions are held to be established by the Federal Reserve

23

Board.

24

the duties of national-ban

25

examinations of any associati n shall be made by the same

26

examiner.

But the expense

The Comptrolleç of the Currency shall so arrange
examiners that no two successive




41
1

In addition to the examinations made and conducted by

2

the Comptroller of the Currency, every Federal reserve bank

3

may, with the approval of the Federal Reserv Board arrange

4

for special or periodical examination of the member banks

5

within its district.

6

as to inform the Federal reserve bank under whose auspices

7

it is carried on of the condition of its member banks and of

8

the lines of credit which are being extended by them.

9

Every Federal reserve bank shall at all times furnish to

10

the Federal Reserve Board such information as may be de-

11

manded by the latter concerning the condition of any national

12

banking association located within th& district of the said

13

Federal reserve bank.

A

Such examination shall be so conducted

14

The Federal Reserve Board shall as often as it deems best,

15

and in any case not less frequently than four times each year,

16

order an examination of national banking associations in

17

reserve cities.

18

total amo'unt of loans made by each bank on demand, on

19

time, and the different classes of collateral held to protect

20

the various loans, and the lines of credit which are being ex-

21

tended by them.

22

once each year, order an examination of each Federal re-

23

serve bank, and upon joint application of ten member banks

24

the Federal Reserve Board shall order a special examination

25

and report of the condition of any Federal reserve bank.

H. R. 7837

Such examinations shall show in detail the

The Federal Reserve Board shall, at least

6

2A-4.;j_c

42

dA1414C---Co?

1114-I IAAAt.

1

SEC. 24. That no national bank shall hereafter make

2

any loan of grant any gratuity to any examiner of such bank.

3

Any

4

guilty of a misdemeanor and shall be fined not more than

5

$5,000, and a further sum equal to the money so loaned or

6

gratuity given ; and the officer or officers of a bank making

7

such loan or granting such gratuity shall be likewise deemed

8

guilty of a misdemeanor and each shall be fined not to exceed

9

$5,000.

r),

bankA

offending against this provision shall be deemed

Any examiner accepting a loan or gratuity from any

10

bank examined by him shall be deemed guilty of a misde-

11

meanor and shall be fined not more than $5,000, and a further

12

sum equal to the money so loaned or gratuity given; and shall

13

forever thereafter be disqualified from holding office as a

14

national-bank examiner. No national-bank examiner shall

15

perform any other service for compensation while holding

16

such office) hin 14.4.1 4 Ire at., efiveStioY

etititik;

14...ut,

17

No officer or director of a national bank shall receive or

18

be beneficiary, either directly or indirectly, of any fee (other

19

than a legitimate fee paid an attorney at law for legal serv-

20

ices), commission, gift, or other consideration for or on account

21

of any loan, purchase, sale, payment, exchange, or transac-

22

tion with respect to stocks, bonds, or other investment

23

securities or notes, bills of exchange, acceptances, bankers'

24

bills, cable transfers or mortgages made by or on behalf of a







43
1

national bank of which he is such officer or director.

2

person violating any provision of this section shall be punished

3

by a fink of not exceeding $5,000 or by imprisonment not

4

exceeding five years, or both such fine and imprisonment, in

5

the discretion of the court having jurisdiction.

6

Except so far as already provided in existing laws this

7

provision shall not take effect until six months after the pas-

8

sage of this Act.

9

SEC. 25. That from and after the passage of this Act the

10

stockholders of every national banking association shall be

11

held individually responsible for all contracts, debts, and

12

engagements of such association, each to the amount of his

13

stock therein, at the par value thereof in addition to the

14

amount invested in such stock. The stockholders in any

15

national banking association who shall have transferred their

16

shares or registered the transfer thereof within sixty days

17

next before the date of the failure of such association to meet

18

its obligations shall be liable to the same extent as if they had

19

made no such transfer; but this provision shall not be con-

20

strued to affect in any way any recourse which such share-

21

holders might otherwise have against those in whose names

22

such shares are registered at the time of such failure.

23

tion fifty-one hundred and fifty-one, Revised Statutes of the

24

'United States, is hereby reenacted except in so far as modi-

25

fled by this section.

Sec-

44
LOANS ON FARM LANDS.

1

2

SEC. 26. That any national banking association not

3

situated in a reserve city or central reserve city may make

4 loans secured by improved and unencumbered farm land,
5
6

WA?'

actual value of the property offered as security, and such
property shall be situated within the Federal reserve district

in which the bank is located. Any such bank may make

10

IAAJ44"Pl'h

7

9

inger"

months, nor for an amount exceeding fifty per centum of the

8

'

but no such loan shall be made for a longer time than twelve

such loans in an aggregate sum equal to twenty-five per

11

centum of its capital and surplus.

..// 12

tAn4J1'

The Federal Reserve Board shall have power from

13

time to time to add to the list of cities in which national

14

banks shall not be permitted to make loans secured upon real

15

estate in the manner described in this section.

16

SAVINGS DEPARTMENT.

17

SEC. 27. That any national banking association may,

18

subsequent to a date one year after the organization of

19

the Federal Reserve Board, make application to the Comp-

20

troller of the Currency for permission to open a savings

21

department.

22

directors of said national bank have by a majority vote appor-

23

tioned a specified percentage of their paid-in capital and sur-

24

plus to said savings department and to that end have segre-




Such application shall set forth that the




45
1

gated specified assets for the uses of said department, or that

2

cash capital for the said savings department has been obtained

3

by subscription to additional issues of the capital stock of

4

said national bank : Provided, That the capital thus set

5

apart for the uses of the proposed savings department 64

6

aforesaid shall in no case be less than $15,000, or than

7

a sum equal to twenty per centum of the paid-up capital and a/2, IA./4k

8

surplus of the said national bank.

9

In making the application aforesaid any national bank-

10

ing association may further apply for power to act as trustee;

11

for mortgage loans subject to the conditions and limitationsi

12

herein prescribed or to be established as hereinafter provided.i

13

Whenever the Comptroller of the Currency shall have

14

approved any such application as hereinbefore provided, he

15

shall so inform the applying bank, and thereafter it shall be

16

authorized to receive savings deposits as so defined, and the

17

organization and business conducted or possessed by said

18

bank at -the time of making said application, except such as

19

has been specifically segregated for the savings department,

20

and subsequent expansions thereof shall be known as the

21

COMTI orcial department of the said bank.

22

ments shall, to all intents and purposes, be separate and

23

distinct institutions save and except as hereinafter expressly

24

provided.

The said depart-

The capital, surplus, deposits, securities, invest-

46
1

ments, and other property, effects, and assets of each of said

2

departments shall, in no event, be mingled with those of

3

the other department, or used, either in whole or in part,

4

to pay any of the deposits of the other department until all

5

of the deposits of its own department have been fully

6

paid and satisfied.

7

diminish their capital stock in the manner now provided

8

by law, but whenever such general increase- or reduction of

9

the capital stock of any national bank operating upon the

10

provisions of this section shall be made such increase or reduc-

11

tion shall be apportioned between the commercial and say-

12

ings departments of the said bank as its board of directors

13

shall prescribe, notice of such increase or reduction, and of the

14

apportionment thereof, being forthwith given to the Comp-

15

troller of the Currency; and any such national bank may

16

increase or diminish the capital already apportioned to either

17

its savings or commercial department to an extent not incon-

18

sistent with the provisions of this section, notifying the

19

Comptroller of the Currency as hereinbefore provided.

20

savings department for which authority has been solicited

21

and granted shall have control of the cash or assets appor-

National banks may increase or

tioned to it as hereinbefore provided, and shall be organized
23

under rules and regulations to be prescribed by the Comp-

24

troller of the Currency.




The




47
1

Both the savings and commercial departments so ore-

2

ated shall, however, be under the control and direction of a

3

single board of directors and of the general officers of said

4

bank.

5

All business transacted by the commercial department

6

of any such national bank shall be in every respect subject

7

to the limitations and requirements provided in the national

8

banking Act as modified by this Act, and such business

9

shall henceforward be known as commercial business.

10

The savings department of each such national bank

11

shall be authorized to accumulate and loan the funds of

12

its

13

to purchase securities authorized by the Federal Reserve

14

Board, to loan any funds in its possession upon real

15

estate or other authorized security, and to collect the same

16

with interest, and to declare and pay dividends or in-

17

terest upon its deposits. The Federal Reserve Board is

18

hereby authorized to exempt the savings departments of

19

national banking associations from any and every restriction

20

upon classes or kinds of business laid down in the national

21

banking Act, and it shall be the duty of the said board within

22

one year after its organization to prepare and publish rules

23

and regulations for the conduct of business by such savings

24

departments.

depositors, to

receive

deposits of current

funds,

The said regulations shall require every na-

Zont,




48
1

tional bank which shall conduct a savings department and a

2

commercial department to segregate in its own vaults the cash

3

and assets belonging to such departments respectively and

4

shall prescribe the general forms of separate books of account

5

to be used by each such department for its exclusive and

6

individual use.

7

specify the period of notice for the withdrawal of deposits

8

made in the said savings department and shall forbid the

9

acceptance of deposits by one department of such national

The regulations aforesaid shall further

10

bank from the other department of such bank.

11

Reserve Board shall make and publish at its discretion lists of

12

securities, paper, bonds, and other forms of investment, which

13

the savings departments of national banks shall be authorized

14

to buy or loan upon; and said lists need not be uniform

15

throughout the -United States, but shall be adapted to the

16

conditions of business in different sections of the country.

The Federal

It shall be the duty of every national bank to main-

17

with respect to

liabilities

its

18

tam,

19

savings department, a reserve in money which may

20

under existing

21

to not less than five per centum of the total deposit

22

liabilities of such department, and every national bank

23

authorized to maintain a savings department is hereby

24

exempted from the reserve requirements of the national

law

all

be

deposit

counted

as

of

reserve,

e




49
1

banking Act and of this Act in respect to the said deposit

2

liabilities of its savings department, except as in this section

3

provided.

4

section shall be duly published and also posted in every

5

member bank having a savings department.

Every regulation made in pursuance of this

6

Every officer, director, or employee of any member

7

bank who shall knowingly or willfully violate any of the

8

provisions of this section, or any of the regulations of the

9

Federal Reserve Board, or of the Comptroller of the Cur-

10

rency, made under and by virtue of the provisions of this

11

section shall be guilty of a felony, and on conviction thereof

12

shall be punished by a fine not exceeding $5,000 or by

13

imprisonment not exceeding two years, or both, in the dis-

14

cretion of the court.
FOREIGN BRANCHES.

15
16

SEC. 28. That any national banking association possess-

17

ing a capital of $1,000,000 or more may file application with

18

the Federal Reserve Board, upon such conditions and under

19

such circumstances as may be prescribed by the said board,

20

for the purpose of securing authority to establish branches

21

in foreign countries for the furtherance of the foreign corn-

22

merce of the -United States and to act, if required to do so,

23

as fiscal agents of the United States.

24

specify, in addition to the name and capital of the banking

H. R. 7837

Such application shall

50
1

2

dependencies of the United States where the banking opera-

3

tions proposed are to be carried on and the amount of capital

4

set aside by the said banking association filing such applica-

5

tion for the conduct of its foreign business at the branches

6

proposed by it to be established in foreign countries.

7

Federal Reserve Board shall have power to approve or to

8

reject such application if, in its judgment; the amount of

9

itr

association filing it, the foreign country or countries or the

capital proposed to be set aside for the conduct of foreign

10

business is inadequate or if for other reasons the granting

11

of such application is deemed inexpedient.

The

Every national banking association which shall receive

12
13

authority to

14

shall be required at all times to furnish information con-

15

cerning the condition of such branches to the Comptroller

16

of the Currency upon demand, and the Federal Reserve

17

Board may order special examinations of the said for-

18

eign branches at such time or times as it may deem

19

best. Every such

20

conduct the accounts of each foreign branch independently

21

of the accounts of other foreign branches established by it

22

and of its home office, and shall at the end of each fiscal period

23

transfer to its general ledger the profit or loss accruing at

24

each such branch as a separate item.

establish branches

LU?47




'44

1C44 )14-).

foreign

countriesin

a4(

national banking association shall

0

t




51
1

SEC. 29. That all provisions of law inconsistent with or

2

superseded by any of the provisions of this Act be, and the

3

same are hereby, repealed : Provided, That nothing in this

4

Act contained shall be construed to repeal the parity pro-

5

vision or provisions contained in an Act approved March

6

fourteenth, nineteen hundred, entitled "An. Act to define

7

and fix the standard of value, to maintain the parity of all

8

forms of money issued or coined by the United States, to

9

refund the public debt, and for other purposes."

10
11

SEC. 30. That the right to amend, alter, or repeal this
Act is hereby expressly reserved.
Passed the House of Representatives September 18,1913.

Attest:

SOUTH TRIMBLE,
Clerk.

63n CONGRESS, 1ry
kl

1ST SESSION.

.1

o

R. 7837.

40




AN ACT
To provide for the establishment of Federal
reserve banks, for furnishing an elastic cur-

rency, affording means of rediscounting
commercial paper, and to establish a more
effective supervision of banking in the
nited States, and for other purposes.
SEPTEmunu 18, 1913.Read twice and referred to the
Committee on Banking and Currency.





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